This is a rush transcript from "The Journal Editorial Report," June 2, 2007.

PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report." President Bush meets with Vladimir Putin in Germany amid talk of a new Cold War, as Bush chastises Russia for its crackdown on democracy and Putin threatens the U.S. over its missile shield plans. Can the two patch things up?

And cover your ears, and appeals court strikes down the FCC's rules on decency. Is your summer TV about to get a whole lot raunchier? Our panel debates after these headlines.

(NEWSBREAK)

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

President Bush and Vladimir Putin met this week at the G-8 summit in Germany amid what many see as the worse political tensions between Russia and the U.S. since the Cold War.

At issue, the Bush administration's plan to install a missile defense shield in Eastern Europe, a move Russia sees as a threat to its security.

Putin, who earlier vowed to aim missiles at the region in response, promised to drop his objection if the system was built in the former Soviet Republic of Azerbaijan.

David Satter is the former Moscow correspondent for the "Financial Times of London." And he is now at both the Hoover Institution and the Hudson Institute and the author of the book "Darkness at Dawn: The Rise of the Russian Criminal State."

David Satter, welcome.

DAVID SATTER, AUTHOR OF "DARKNESS AT DAWN": I am glad to be here, Paul.

GIGOT: It was a startling remark by Putin earlier in the week about re-aiming missiles at Europe. What was he trying to accomplish.

SATTER: Well, it is a little friendly intimidation. Obviously, he understands that that will get a response in Europe and with public opinion in Europe. And he is hoping to create problems for the United States.

He doesn't want those antiballistic missile systems stationed in Poland and the Czech Republic. And he is tempting to use traditional Russian or Soviet methods to prevent it.

GIGOT: But those missile defenses are not aimed at Russian missiles. Russia has more than enough missiles to hit Europe if it wants to anyway and they can be re-aimed obviously re-targeted very quickly.

They are supposed to be — the defenses are supposed to be for Iran. Why is Putin so concerned about them?

SATTER: Well, I think it is a mistake to look for a rational explanation. The Russians are trying to assert themselves. In fact, the issue of the missiles is insignificant for Russia. Russia has hundred of missiles and thousands of warheads. We are talking about 10 interceptor missiles in Poland. So it makes no sense at all for them to object.

And in fact, they are contributing to the very threat that we are trying to guard against, because they are aiding in the nuclear development of Iran.

But this is a very effective way of distracting Russian public opinion. Of creating the impression that Russia is a kind of besiege fortress, that it's surrounded by enemies, and that makes it that much easier for the people who are in charge in Russia to eliminate what is left of the Democratic liberties in the country.

GIGOT: So Putin it playing to domestic national sentiments, trying to rouse up public opinion to do what? To consolidate his rule inside Russia or to get the domestic support to be able to reassert Russian power in the near abroad or both?

SATTER: We have a situation in Russia where a small group of people who benefited from the criminal privatization that took place there, not only run the country, they actually own it. And they — they are concerned about the ethical standards of the outside world because they don't have any themselves.

But they are also concerned about the attitude of their own people. There is a growing gap between the conspicuous consumption of a small moneyed elite and the poverty of the mass of the population, which hasn't improved much despite the increase in oil prices.

So the best answer to that situation, the solution to strengthening the grip on power of this small, bureaucratic elite, if you want to use the word "elite" — probably not appropriate — is to create the impression of an external threat. That's what they are doing.

GIGOT: Some people in the West who say, look, this is partly the fault of the United States and Europe, because they moved NATO right up to the edge of the former Soviet Union to Russia. They have insisted upon these missile defenses and they've given Putin a pretext for behaving this way. What's your response to that?

SATTER: There will always be people in the West who make statements like that. Any reasonable measures that are taken by the West in its own defense can be interpreted in a paranoid mind as being directed against Russia or against the Soviet Union.

The soviet authorities were past masters of this. Every reasonable attempt we made to guarantee our security, they would try to impress upon us with was a threat to them.

In fact there is no threat. And we have to base our assessment on what a rational person would think and the way in which an ethical person would react. We can't constantly re-figure our defense arrangements in order to account for other nation's paranoia.

GIGOT: Now the president, in speaking in Germany, was tough on Russia. He criticized Putin's domestic crackdown and pushed back some. Did you think his response was forceful enough?

SATTER: Well, by comparison with the way in which the Bush administration approached this question in the past, it was more forceful than what we have seen hither too.

But the fact is that I don't even understand what Russia is doing in the G-8. We have some outstanding issues with Russia. For example, they are thumbing their nose at us on the question of the extradition of Andrei Lugovoy for the murder of Alexander Litvinenko.

GIGOT: In London.

SATTER: In London. Now Britain is a member of the G-8. The point is this is a group of industrial democracies supposedly guided by certain ethical standards.

GIGOT: That decision was made in the late 1990's though by the Clinton administration. Are you saying that they should be ousted from the G-8 now?

SATTER: They have no place there. Absolutely. If they are not going to cooperate in the investigation of the Litvinenko murder, they have absolutely no business even meeting with the other members of the G-8.

And I bring up the Litvinenko murder when we have begun talking missile defense because actually they are connected. The point is trust and being able to rely on the good will of the person who is talking to you.

If this is a person who is not sincere, who is not revealing his true motives and, in fact, in fact while on the surface pretending to be a responsible member of the world community, is, in other areas, behaving in a way that's diametrically opposed to civilized values, then that has to be taken into account.

GIGOT: All right, David Satter, thanks very much for being here.

SATTER: Thank you, Paul.

GIGOT: When me come back, standing up to Vladimir Putin. President Bush takes the Russian leader to task for his crackdown on democracy. Was he tough enough? Our panel weighs in when the "Journal Editorial Report" continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: In Russia, reforms that were once promised to empower citizens have been derailed, with troubling implications for democratic development.

(END VIDEO CLIP)

GIGOT: Though he sought to soothe tensions with Russia at the G-8 summit in Germany, President Bush had some harsh word for Vladimir Putin earlier in the week in a pro-democracy conference in Prague.

Foreign affairs columnist Bret Stephens was there and he joins the panel this week, along with editorial page editor Dan Henninger and editorial board member Jason Riley.

Bret, what I heard is the State Department didn't want the president to go to this meeting in Prague. He went because Natan Sharansky called him up personally and invited him to meet with these dissidents. You were there. How'd it go?

BRET STEPHENS, WSJ FOREIGN AFFAIRS COLUMNIST: I think a lot of people were surprised that he arrived. And what was remarkable is, after he gave the speech, which you just saw, he met privately with these guys. There were people from Sudan, from Belarus, from China. Garry Kasparov from Russia was there. There were Iranians. There were Syrians. There was really an extraordinary collection of people.

He met privately with them so we don't know what was said.

But as they came out some of them were visibly moved to tears that the president of the United States had come — flown to the Czech Republic to meet with these guys, all who have spent, often, years in jail.

GIGOT: At least in the president's mind the democracy agenda is not dead. Maybe in the State Department's mind, but not in the president's.

STEPHENS: No. People talked about his obvious sincerity, his knowledge, his command of the issues. But they also said that there is a wide gap between what the president thinks and what his advisors think. And it is whether that gap can be bridged that will determine whether there is any freedom agenda to move forward with.

GIGOT: Dan, let's move to the Russia speech by the president. He was tough as I think I can remember him, talking about Putin. And yet they did meet at the G-8. Where is this U.S.-Russian relationship going?

DAN HENNINGER, WSJ COLUMNIST AND EDITORIAL PAGE EDITOR: I think it is going to become very difficult, quite frankly. You know the big event that we have to keep on eye on is going to be what they're calling a presidential election in March of next year. That's coming up fast.

GIGOT: You are not sure it's going to be an actual election?

HENNINGER: Well, I think it'll be kind of a — this is the point of what Putin and the rest of them are doing in Russia now. There is going to be power transition there.

And as David Satter was suggesting — and Garry Kasparov said the same thing, Vladimir Putin is what holds together what's essentially a mafia operation in Russia right now.

The feeling is if Putin leaves the scene, these guys will fall on each other in long knives and Russia will become a dangerous place. So what we are trying to do is figure out how to have a normal relationship with a very unstable situation inside the Russian political system.

GIGOT: The president wants Russia's help, wants Putin's help on things.

HENNINGER: He does.

GIGOT: For example, the Iranian nuclear program. For example, the Kosovo motion for independence from the former Yugoslavia.

JASON RILEY, WSJ EDITORIAL BOARD MEMBER: That's why I think he tried to watch his response to Putin's bluster earlier in the week. I would second David Satter's remark that Putin gave us another reason the G-8 should be the G-7.

He claims that the U.S. putting a radar station in the Czech Republic worries him because we might monitor Russian air space. If Putin is worried about us monitoring Russian airspace we probably should be, would be my response to that. But we are in this — Russia is in this situation because they haven't helped us contain Iran's nuclear program. And Bush is mindful of that. So frankly, I hope we stand our ground and don't back off.

STEPHENS: I think what you saw at this particular event, first, the threats and then the appearance of conciliation is evidence of this kind of Kabuki that the Russian government has been performing for some years.

They want two things. They want to assert Russian power but they want respectability with the West. I think it must have occurred to Putin after he made those remarks, threatening to target Europe with Russian missiles, really talk from the Cold War, that he was risking his place in the West.

And that countries like Germany, countries like France, which had previously been his allies during the Iraq war, were looking at Russia and getting really cold feet about the direction of the regime.

GIGOT: One of the ironic consequences of this Putin bluster may be that he is uniting Europe, the French and the German's with the United States in a way they haven't been for a long time. Because these Europeans, Sarkozy and Merkel are tougher, first of all, these new leaders. But secondly, they don't want to be bullied by Russia. And they want America's help.

HENNINGER: I think that's a good thing. The last thing the West should be doing is in anyway ratifying or legitimizing the political model that Russia is evolving toward, which is truly anti-democratic. And to allow that to sit at the table would be a big mistake for the world.

GIGOT: All right, Dan, last word.

When we come back, an appeals court says sends the FCC back to the drawing board in its efforts to regulate obscenity on TV. Should we brace for more primetime profanity? Our panel debates after the break.

(COMMERCIAL BREAK)

GIGOT: A federal appeals court in New York this week tossed out a key FCC indecency ruling, which said even a slip of the tongue could bring big fines for broadcasters. The court ruled that the FCC cannot penalize networks for accidentally airing an expletive, calling it an arbitrary and capricious policy that would likely not stand up to First Amendment scrutiny.

We're back with Dan Henninger and Jason Riley. And also joining the debate is deputy taste page editor Naomi Schaefer Riley.

Jason, does this mean that the networks can now let anybody say anything at any time?

J. RILEY: No. Although I think FCC chairman, Kevin Martin, would like to give that impression.

The Second Circuit Court of Appeals said that inadvertently airing profanity does not violate decency standards. There is a big difference here.

But the court went a lot further than that. And this is what might worry Kevin Martin at the FCC. The court said that the FCC's indecency test was, quote, "undefined, indiscernible, inconsistent and consequentially unconstitutionally vague."

That is what is really worrying Kevin Martin. Because this ruling has dovetailed a report issued by the FCC a couple months ago in which the FCC wanted to expand governments regulation of, not only broadcast, but cable and satellite programming as well. And this puts up a big stop sign.

GIGOT: Naomi, does this mean we're going to have to rely on the good judgment, such as it is, of the network broadcasters because they seem to want to push the envelope on whatever they can get away with whenever they have the chance?

NAOMI SCHAEFER RILEY, WSJ DEPUTY TASTE PAGE EDITOR: They certainly do. There is an interesting term that people who market things to kids use now. It is called KGOY, Kids Getting Older Younger. It basically means that there are all these 11-year-old out there now, who are basically operating in terms of thinking about sex, particularly at the level where, say, 15 years olds were operating, or 17-year-olds were operating 10 or 15 years ago.

GIGOT: Just what we need.

N. RILEY: Exactly. And I think there are a lot of parents, families out there worried about it. And you could certainly say, look, this is the parent's job to be monitoring this. But, you know, our culture is so pervasive. I mean billboards, everything. You send your kid to a friend's house and they turn on MTV. And that's pretty much the end of any of their innocence.

(LAUGHTER)

HENNINGER: Let me give you Henninger's Theory of how we reached this point. The court in this ruling said, "How can we get upset about fleeting expletives on television when children are engulfed with this stuff all across society. Why should we single out television?" And I think they have a point.

But the problem is I believe that the courts, since the 1960's, because they eroded the ability of schools to impose discipline inside grade schools and high schools, allow this kind of teen culture to run wild. And it has bubbled up into the mainstream culture.

If you let kids do and say what they want, they're going to dress this way, they're going to talk this way.

Now, because of those court rulings, we have a situation that is impossible to control.

GIGOT: OK. But then you are talking about the FCC rule here as being basically a finger in the dike.

HENNINGER: Absolutely.

GIGOT: I mean, it can't really change the culture by itself. It is a bureaucracy. It's a government bureaucracy. It's a blunt instrument.

N. RILEY: And not only can it change the culture, it can't even really change TV. When you think about the hundred of channels that the FCC cannot regulate — even though, of course, they want to now — it is beyond that. It is simply not pragmatic for the FCC to regulate what they want to regulate.

A lot of what's out there on TV is not even the nudity or the four letter words, which were the subject of this ruling. It is the innuendo. If you can't turn on a prime time sitcom without having innuendo that's just totally inappropriate for kids, but there is really no way of regulating that. You can't say you can't imply that sort of thing.

HENNINGER: So you have a situation in which the networks won't push back. The courts won't push back. And you are left with only the FCC standing up for anything reasonable.

J. RILEY: No, you're also left with parents. And there is some indication that Kevin Martin and the FCC might want people to be more worried about this than they actually are. I mean, everyone...

GIGOT: Parents are not as worried about it as Kevin Martin says they are.

J. RILEY: And the proof of that might be in the fact that something like 70 percent of children has televisions in their bedrooms.

GIGOT: There is technology, on cable for sure, if you don't want certain channels to come in, you can call up your cable operator and say, "How can I block them?" And you can block them.

J. RILEY: And it is getting better all the time on that front. I mean, new gadgets and new devices are coming out all the time. New cable set top boxes can blocks channels certain times of day. You can control what's coming into your home right now, which is something you couldn't do 30 years ago.

GIGOT: All right, quickly, where does this go from here in terms of the FCC?

J. RILEY: Well, I think the decision was so decisive in striking down the standard that the FCC has set up that I don't think Kevin Martin is going to want to push this to the Supreme Court. I think he's going to go back and try to start over.

GIGOT: So defining decency down?

N. RILEY: Well, there is a lot of popular support for this kind of censorship. The liberals want to ban the violence and the conservatives want to ban the sex. So you get them together, maybe you have a coalition.

GIGOT: OK. All right, we will watch this.

We will take one more break. When we come back, our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Winners and losers, picks and pans, "Hits and Misses," it's our way to calling attention to the best and the worst of the week.

Item one, what the Scooter Libby sentencing says about Washington's political culture — Dan?

HENNINGER: Well, Scooter Libby was sentenced in the Plame affair to 30 months in prison. This was quintessentially a policy play, a political fight of this sort that takes place in Washington everyday. Public officials talk to reporters. They have hundreds of conversations. They assemble the bits and pieces of this story.

Essentially, what we have had here is the criminalization of politics. There is the old saying, "Politics ain't bean bag, but it is not a crime either."

And Patrick Fitzgerald ended up convicting Scooter Libby for nothing that occurred anywhere along the line in the Plame affair. It was essentially a process crime for which he has been convicted.

And I think the entire Washington establishment stood back and allowed this to happen. Some even contributed to it.

Now if you're a man or woman out there watching and deciding whether you wanted to come to Washington, the answer has to be no. The risks have become too great.

GIGOT: All right, Dan.

Next, the top Democratic presidential candidates hold forth in a forum on faith and values. Naomi, how did they do?

N. RILEY: Well, you've got to give them points for trying, I guess, but I don't think well. Essentially, the Democrats want to get the religious vote. And they did pretty badly, I would say. The Catholics had one segment, the Protestants had another. None of the Catholics could come out with homosexuality being a sin. All of them were pro-legalized abortion.

Bill Richardson thinks abortion is an issue between a woman and her god, whatever that meanings. I think Chris Dodd said he takes no joy in abortions being performed.

Meanwhile, Obama and Hillary, in the Protestant segment, both explain that they really like people who wore religion on their sleeves.

These are people who are trying to get the evangelical vote. You kind of wonder where they are going with this.

GIGOT: All right, Naomi.

Finally, the New York Yankees are near the bottom of their division. And at least one baseball fan is enjoying every minute of it — Jason?

J. RILEY: Yes. This is a miss for George Steinbrenner. We are about one-third of the way through the baseball season now. The Yankees, which have the highest payroll in baseball, are one game out of last place in the American League East.

Now, Steinbrenner — oh, what's more is that they are one game ahead of the team, the Tampa Bay Devil Rays, with the lowest payroll in baseball. So this baseball fan will enjoy watching George Steinbrenner stew over this for a while.

GIGOT: I'm with you on that one.

All right, that's it for this week's edition of the "Journal Editorial Report." Send you are your e-mails to jer@foxnews.com and visit us on the web at www.foxnews.com/journal.

Thanks to Dan Henninger, Jason Riley and Naomi Schaefer Riley.

I'm Paul Gigot. Thanks to all of you for watching. And we hope to see you right here next week.

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