• With: Dan Henninger, Kim Strassel, James Freeman, Mary Anastasia O'Grady

    This is a rush transcript from "Journal Editorial Report," March 9, 2013. This copy may not be in its final form and may be updated.

    DAVID ASMAN, GUEST HOST: This week on the "Journal Editorial Report," the president's plans revealed. The Washington Post confirms it's all about 2014 and the return of a Pelosi Congress. But is that strategy already starting to backfire?

    Plus, stocks soaring to new highs, but the economy still has a long way to go. Has Ben Bernanke helped create a bubble, and will it go bust?

    Also, former DEA chiefs putting pressure on the Obama administration to block Washington and Colorado's new laws legalizing pot. They've weighed in on other state measures, so why the silence now?

    Welcome to the "Journal Editorial Report." I'm David Asman, in for Paul Gigot.

    Despite his so-called charm offensive to Republican members of Congress this week, The Washington Post confirmed what we already suspected, President Obama's anti-Republican attacks are going to continue, that he's not really in a compromising mood on the budget sequester or pretty much anything else. According to The Post, his aim is not to get along with the GOP but to get them out. "The goal is to flip the Republican-held House back to Democratic control, allowing Obama to push forward with a progressive agenda, gun control, immigration, climate change and the economy during his final two years in office according to Congressional Democrats, strategists and others familiar with Obama's thinking."

    But has that strategist already started to backfire?

    Let's ask Wall Street Journal columnist and deputy editor, Dan Henninger; assistant editorial page editor, James Freeman; and Washington columnist, Kim Strassel.

    Good to see you all here. Thanks for letting me be here.

    Dan, this new charm offensive the president is employing this week, do you believe it?

    DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: I believe it's real, though I believe it's a very difficult strategy, David. On the one hand, he has been trying to marginalize the Republicans and show that they are incapable of governing and, therefore, the American people should be against him and for his people.

    In the past week, his approval dropped from 53 to 47 percent, a pretty big drop in one week. He would have to pick up 17 seats in the House to take control of the House. That would be unprecedented going back through the entire 20th century. Bill Clinton picked up five seats, but his approval rating was 65 percent. In 1933, Franklin Roosevelt, with an approval rating of 60 percent, lost 72 seats in the House. What he's trying to do is extremely difficult. So the charm offensive is part of making Barack Obama seem warm and cuddly again, which is tough for him.

    ASMAN: Kim, so the attacks and the scare tactics and everything we've been hearing for the past three weeks up, until this week, they didn't do so well in the polls, they led to his drop in the polls. Is that why we see the charm offensive this week?

    KIM STRASSEL, WASHINGTON COLUMNIST: Well, I think that's part of it. He's got to do more now to finish his burnish his public image, because the whole point of going out on the bully pulpit, he was going to beat on Republicans. Unfortunately, he got called on that. And he got a lot of questions saying, why aren't you in Washington working with Republicans.

    Here is the upside. Here's what the White House sees. They see that this is a win for them either way. The goal of this outreach is to divide Republicans, to get some of them, peel some of them off and get them on board with his tax hikes, and this will make the Republicans look as though they're not united on the issues. And then he figures if that fails and he doesn't do it, he can say, look, I tried and look at those obstructionist Republicans, they won't work with me. That's how they're game is.

    ASMAN: All right.

    Well, James, in addition to the charm offensive, there is a little bit of substance here. There is this grand offer they brought forward this week that does include some specific spending cuts, partly in response to the criticism that there are no specifics. Is this grand offer for real?

    JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Not a lot of specifics. Not for real, because he wants to get rid of the sequester cuts in return for these largely vague promises of similar cuts going forward. He also wants tax increases. So, you know, when he had this dinner this week with Republicans, there was a lot of reporting about what they ate and who sat where.

    (LAUGHTER)

    What you're not seeing is any kind of policy turn from the president. And I think that's consistent with the Pelosi strategy, to bring her back as speaker. Because he's thinking about, how do I get a Congress that will give me the 25 percent of the economy I want the government to consume.

    ASMAN: But, Dan, you did see $930 billion in cuts that the administration says. Of course, it's over a 10-year period.

    HENNINGER: Right.

    ASMAN: And, in that same 10-year period, I think the total is $42.7 trillion. So, only amounts to about two percent of the budget over 10 years.

    HENNINGER: Well, I keep saying that we have to take Barack Obama at his word and recognize what he believes in. He does not believe in cutting federal spending. Everyone else says, well, we have to reduce the deficit and the debt. He thinks we have to continue to spend because, under his Keynesian economics, spending lifts the economy. So he's going to push back hard against any significant reductions in spending unless perhaps it comes out of the Defense Department.

    ASMAN: By the way, James, do you think he really wants, cares about the debt at all? Is he willing to spend despite the debt continuing to increase?

    FREEMAN: It's hard to see that in any budget he's ever delivered. And I also -- we've had a fairly long discussion of his economic ideas going forward. And that was in the hearing of Jack Lew to become secretary of the treasury. And the answer over and over again, revenue, revenue, revenue, how do we get more tax revenue.

    ASMAN: Kim, I'm interested in The Washington Post. What happened here? This kind of a break in the ranks of the pro-Obama sentiment in the media, is it not?

    STRASSEL: What you actually saw is simple reporting of what everybody knew was to be the case, is that ever since the State of the Union, the president put out this very left of center agenda on taxes and on guns and on climate change. And what was he actually doing? Well, now we know in that the goal here is not to actually pass any of this stuff. The goal is to tee up issues that -- and blame Republicans when they don't pass, and use that to do what, as Dan says, a somewhat unprecedented effort to pick up these and use his last two years to push forward unobstructed, total ownership of Washington with the agenda the way he did his first two years in office.

    ASMAN: And, Dan, the scare tactics just didn't work, particularly when you saw the spending priorities. At the same time that he's talking about furloughing American workers and stopping White House tours, he's giving $200 million to the Muslim Brotherhood in Egypt.

    HENNINGER: This is the contradiction. On one hand, the American people want Washington to govern. He doesn't want to govern. He wants chaos to create the situation that Kim is describing. It's not clear how Barack Obama, over two years, can sustain this strategy and still remain popular.

    ASMAN: He's a marathon runner. Maybe he can do it. Who knows?

    When we come back, the Dow hitting new highs even as the economy continues to struggle. That means the stock pop is a bubble. And can it last?

    (COMMERCIAL BREAK)

    ASMAN: If investors are jittery about the budget trauma playing out in Washington, they certainly didn't show it this week. Your 401Ks got a lot fatter as the Dow Jones Industrial Average climbed to new highs. But how can the market rally with an economy that is still struggling?

    We're back now with Dan Henninger and James Freeman. Editorial board member, Mary Anastasia O'Grady, also joining the panel.

    So, James, when the market pops in a weak economy, isn't that the definition of a bubble?

    FREEMAN: You do wonder what's driving stocks higher. We've had a slow, basically almost zero-growth economy last quarter. Friday we got another kind of mediocre jobs report.

    ASMAN: Well, I wouldn't say that. We did see the unemployment rate go down two ticks.

    FREEMAN: Went down a little. But basically, you still 12 million people unemployed. The labor force participation rate, historically low, basically unchanged. A lot of people have dropped out of the labor force because they can't find a job. So --