• With: Dan Henninger, Mary Anastasia O'Grady, Steve Moore, Dorothy Rabinowitz

    This is a rush transcript from "Journal Editorial Report," April 9, 2011. This copy may not be in its final form and may be updated.

    PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," an 11th-hour deal prevents a government shutdown. Both sides are claiming victory, but who really won?

    And the budget that is a much bigger deal. Paul Ryan lays out a plan for 2012 that takes on some very tough issues. How his so-called path to prosperity has changed the debate.

    And Eric Holder strikes a defiant tone as he changes course on civilian trials for 9/11 detainees. Is his reversal a vindication of the Bush anti-terror policies?

    (BEGIN VIDEO CLIP)

    PRESIDENT BARACK OBAMA: This agreement between Democrats and Republicans on behalf of all Americans is on a budget that invests in our future while making the largest annual spending cut in our history. Like any worthwhile compromise, both sides had to make tough decisions and give ground on issues that were important to them.

    (END VIDEO CLIP)

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

    In a deal struck less than an hour before the government was poised to shut down, House Republicans reached a deal with Senate Democrats and the White House last night to fund the government for the rest of the fiscal year. The agreement would cut about $38 billion from the 2010 budget and more than $78 billion from President Obama's 2011 budget proposal. It would also keep intact funding for Planned Parenthood and resist several other Republican policy changes. Who stands to win and lose from the budget showdown?

    Joining us the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; editorial board member, Mary Anastasia O'Grady; and senior economics writer, Steve Moore.

    So, Steve, the president, who proposed no budget cuts, now says that this is historic and wonderful because it cuts $39 billion. Who really won on this -- on this showdown?

    STEVE MOORE, SENIOR ECONOMICS WRITER: Well, I agree with the president it's a historic budget. And it's historic, Paul, because it actually does cut spending for the first time in 20 years. And I have to say that I think it's John Boehner who walked away as the victor here. No, the Republicans didn't get everything that they wanted, but what's really interesting is if you look at the first two years of President Obama's presidency, government spending was going up 12 or 13 percent per year. With this budget, Paul, that trajectory of that spending falls to about negative 3 percent. That's a big difference. And it changes the kind of culture of spending. And I think it's a real jumping off point for next year's budget battle to come.

    GIGOT: All right, Mary, the criticism from some people, conservatives, is that well, $39 billion is only one percent, two percent of federal spending, so, who cares.

    MARY ANASTASIA O'GRADY, EDITORIAL BOARD MEMBER: Yes, I mean, it shows you how hard it's going to be to get Washington turned around at all. It's going to be nearly impossible. But I think what will be important here how the Republicans deliver the message to not just their base, but also to independents. I mean, people know that the government is too big and it has to be cut. And the fact that Steve says that Obama started the position that he didn't want to cut thing, that's a very extreme position, given the numbers in Washington. I think the Republicans have to use that in order to show that they're the ones going in the right direction and they're the ones being grown up.

    GIGOT: Some people are criticizing this, because the Republicans had promised, Dan, that there would be $100 billion cuts in fiscal 2011 and they only got 39. This is only for the last six months because we're already halfway through the year, which ends September 30th.

    DAN HENNINGER, COLUMNIST, DEPUTY EDITOR: Right. Right.

    GIGOT: So $39 billion in one year, I never -- well, in my lifetime that has never happened.

    (LAUGHTER)

    HENNINGER: Right. And it's just the beginning. Ultimately, this was a political exercise, Paul. And one of the things that came out of it was that -- what we learned is that John Boehner outsmarted the strategist on the Democratic side.

    GIGOT: Do you really think that? You think he did? Now, why?

    HENNINGER: I'll explain why.

    GIGOT: Yes.

    HENNINGER: The Democratic attack was it says that the Republicans were extremists, the famous Chuck Schumer line. He said to my caucus we're supposed to brand them as extremists.

    GIGOT: The Tea Party is unreasonable.

    (CROSSTALK)

    HENNINGER: But the way they defined extremism was in the Republican riders, to defund Planned Parenthood, National Public Radio and most importantly, Obamacare.

    GIGOT: Right.

    HENNINGER: That was the extremism. I think that Boehner understood they were bargaining chips for him. And as soon as he took them off the table, all that was left was spending. Spending was what the 2010 election, and even the president of the United States saying we've cut spending. I think he maneuvered them into a corner.

    GIGOT: You think he negotiated these and he intended it take the Planned Parenthood rider off the table before it was over?

    HENNINGER: Yes.

    GIGOT: Steve, do you agree with that?

    MOORE: Yes. First of all, an important rider that was passed, Dan, something that you've written a lot about that I think is a real achievement, they got funding for the school voucher program in D.C., something that liberals hate. The teachers union despises. I was surprised that John Boehner was to get that victory.

    The Republicans did cave on some of the other riders to get the bigger number close to $40 billion of cuts. The one thing that happened to John Boehner insisted upon that my Houses sources are telling me today, is John Boehner wanted to make sure that those were real cuts, Paul, not fictitious cuts.

    GIGOT: Right.

    MOORE: And they got that. And they're not in national security and defense, but real cuts in programs like high speed rail, green energy subsidies and earmarks.

    GIGOT: So, Mary, why did the Democrats go along then? I had suspected -- I think some other people did, too, at least among our staff at the Journal -- that the president wouldn't mind a shutdown, because he thought, with the bully pulpit, it could help him. Why did they go along?

    O'GRADY: I think Dan is right, they were trapped. Again, independents are what is going to matter in 2012 and the independents largely understand that government spending has to be rationalized. They could not look the American voters in the eye and say, we're not going to spend anything.

    But the positions are staked out very clearly here. Obama's speech last night was interesting. What did he say? Now that government -- now that Washington didn't shut down, small businesses can continue, people can pay their mortgage, little Jimmy can keep learning, and the federal employees are going to stay where they are. I mean, that's how the Democrats think about how the world works. They think that if Washington would shut down, then, small businesses can't continue. And in fact, you know, the Republicans and the independents and I think most Americans think they want to be able to operate their business not in the context all the time of the federal government.

    HENNINGER: Now I would say that Democrats need a plan B. They need to come up with a new strategy. And most likely what it will be next year, that the Republicans are extremists, overcutting entitlements like Medicare. I think they're locked into the extremist argument, but beyond that, they really aren't making a strong substantive argument to the American people about the size of the debt, the deficit and the things that people were concerned about in that November election.