• With: Kim Strassel, James Freeman, Dan Henninger, Bret Stephens

    This is a rush transcript from "Journal Editorial Report," December 27, 2014. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on the "Journal Editorial Report," from the Republican midterm sweep and President Obama's rule by regulation, to the rise of Islamic State and decline of America's global influence, we'll take a look back at the biggest stories of 2014.

    And from an embattled Washington bureaucrat to a Silicon Valley CEO, our panel's pick for the winners and losers of the year.

    Welcome to this special edition of the "Journal Editorial Report," our look back at the biggest stories of 2014. I'm Paul Gigot.

    And joining our final panel of the year is Wall Street Journal columnist and deputy editor, Dan Henninger; foreign affairs columnist, Bret Stephens; Washington columnist, Kim Strassel; and assistant editorial page editor, James Freeman.

    Let's get right to it with the biggest political story of 2014, the Republican Party's historic midterm gains, not just in the House and Senate but in statehouses across the country.

    Kim, why do you think this is the big story of the year?

    KIM STRASSEL, WASHINGTON COLUMNIST: Think of this as the revolt against the president's agenda. The American public remains deeply unhappy with a lackluster economy, the president's handling of foreign affairs and regulations that are destroying the economy, ObamaCare. And it was his members who took the hit for it. Republicans now have a bigger majority in the House since they have had since 1929. They hold more state legislative streets since prior to the Great Depression and they picked up nine Senate seats. We're going to see now what they can do with that. But this was a big one for the history books.

    GIGOT: Kim, I keep reading that now and the end of the year here that President Obama actually had a great year. In certain public prints, the columnists think this has all turned out splendidly. What --

    (LAUGHTER)

    STRASSEL: When you get pummeled that bad, you have to have some sort of answer for it. Look, they are going to pretend this didn't happen because the president will segue right into the next strategy, which is to keep ruling by regulation and move on. He has never really thought he needed Congress anyway.

    GIGOT: James, you wanted to jump in here, I could tell.

    JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR:  It definitely was the vote of no confidence in the president from the American people, absolutely.

    I think also for particularly in the Senate, this was kind of the no- excuses election for the Republican establishment, they got the candidates they wanted in the places they wanted to run, and to their credit, they nearly ran the table. Other than New Hampshire, and I guess there was hope of maybe stealing a seat in Virginia, it was a real blowout. And I think now the question is how can they govern.

    GIGOT: Is you look at the post-election polls, Republicans have popped up in terms of public approval. Democrats have gone down. Now you have them at 26 percent of the public identifying themselves as Democrat, the lowest level in recent poll --

    (CROSSTALK)

    DAN HENNINGER, COLUMNIST AND DEPUTY EDITOR: Paul, it could potentially be a big shift. The Republicans now control 68 of 98 partisan legislators around the states. Through entire second half of the last century, Democrats controlled most of those chambers. Now Republicans are beginning to take control of them. I think the Democrats could be looking at a generational period in the minority if they don't get their act together.

    BRET STEPHENS, FOREIGN AFFAIRS COLUMNIST: If this becomes the party of Elizabeth Warren, the --

    GIGOT: The senator from Massachusetts.

    STEPHENS: Right -- and we should only be so lucky, which is a return to what the Democratic Party was before Bill Clinton, the unreformed, unreconstructed party of wealth redistribution, of envy, of hating the rich. That's not a party the Americans are going to like.

    GIGOT: Yeah, but they have to deliver now. This is the challenge to Republicans. They have to make the most of that opportunity. They can't do everything with the president still having a veto, but they better deliver something.

    FREEMAN: Also, they need to work on the turnout and social media game if they want to win next time as well.

    GIGOT: All right.

    Let's talk about our second big story in 2014, President Obama's attempt to govern by regulation, with the administration bypassing Congress and issuing enormous and sweeping new rules on carbon emissions, an executive order on immigration among other things -- James?

    FREEMAN: I think the big theme of the year is related to the first theme, the pounding that the president took at the polls. You see a president looking to do, with his executive authority or beyond his executive authority, things that he cannot get the Congress and most of Americans to agree with. The fight with Congress has been well publicized. You mentioned immigration and other executive orders. He's also increasingly got a problem in the courts. The Supreme Court knocking down his effort to determine for himself when the Senate is in recess, for example. Also, the Supreme Court agreeing here next year the big challenge to ObamaCare, which is the King v. Burwell case, and this is really saying whether the government can unilaterally rewrite the law to suit its policy --

    (CROSSTALK)

    GIGOT: This concerns the subsidies on ObamaCare.

    But here's what I wonder about, Kim. Is the president getting away with this, despite the fact that some of the challenges are taken up in court? The truth is he's pushing boundaries of executive power. And Congress is limited on what it can do because it only has the power of the purse really, and if he's willing to use the veto, he can stop them, for example, probably from doing anything to stop his immigration order, for example.

    STRASSEL: Yeah, this is what the president has learned in office is that that there isn't much anyone can do. Congress, for instance, it does have the power of the purse. It also has things like the Congressional Review Act, which is a rule -- a law that allows them to override federal legislation. But they -- again, he has veto power over that too. Congress is also -- for instance, the House filed a lawsuit against him to go to court. Really they are very limited. I think what you're going to see is, instead, the Republicans pushing a more restrictive restrained attempt to roll him back and some places like getting Democrats to come on with them and perhaps try to pressure him to roll back some of this stuff.

    HENNINGER: I think that last point is very important that Kim has made. President Obama is essentially reducing the Democratic Party to a nullity. In other words --

    GIGOT: What do you mean by that?

    HENNINGER: What are they going to do in the next term to contribute to -- I mean, the American people could not rate Congress lower. These are politicians who want something to show. And to show something, they are going to start doing deals with the Republicans because Barack Obama is running the party from the Oval Office, and they are not participants.

    (CROSSTALK)

    GIGOT: What else is the president going to do, Bret, in the next year, the next two years. He could push a lot -- I think I think he's going to do a unilateral deal with Iran, if he can all get away with it. I wouldn't be surprised if he unilaterally closes down Guantanamo, the prison there. And I wouldn't be surprised if he really pushes a climate deal in 2016 as well. He's going to keep pushing the boundaries of this.

    STEPHENS: Right. I think we're going to see the most unbound executive that we've had possibly since a war time president. You might have to go back to Franklin Roosevelt to look for a precedent. Look, he knows he's not going to be impeached. He's going to run out the clock. There's no support in Congress. Frankly, it's very, very difficult to stop a sitting president by any other means other than either Supreme Court decisions or by impeachment. So he really has a tremendous opportunity politically from his point of view.

    GIGOT: Try to use the power of the purse to the extent he can, get unified approach in the House and Senate, but, again, that has limits here as well.

    Much more to come as we look back at the biggest stories of 2014. We'll turn our attention to events around the world right after this break.

    (COMMERCIAL BREAK)

    GIGOT: Welcome back to this special editorial of the "Journal Editorial Report," as we look back at the biggest stories of the year.