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

PAUL GIGOT, FOX HOST: This week on "the Journal Editorial Report," new information emerges about the suspects in the London and Glasgow bomb plots as yet another video surfaces from al-Qaeda's number two. We take an in-depth look at the changing nature of the terror threat.

Primary politics. Barack Obama may have out raised Hillary Clinton last quarter but is he a match for Team Clinton. And what about the McCain meltdown? Our panel weigh in on those topics, and our "Hits and Misses" of the week, but first, these headlines.

(NEWSBREAK)

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

As the investigation into the failed terror attacks in London and Glasgow continues new details are emerging about the suspect's rounded up so far, including the alarming fact they all had links to Britain National Health Service.

Melanie Phillips is a columnist for the "Daily Mail" and author of the book "Londonistan." She joins me now from London.

Melanie Phillips, welcome back to the program. Good to have you here.

MELANIE PHILLIPS, COLUMNIST, "DAILY MAIL": Thank you. Good to speak with you again.

GIGOT: What's the most important thing you have learned, Britain has learned from the latest terror plots?

PHILLIPS: Well, the most morning thing is what many of us knew already, which is that Britain remains a principle target for al-Qaeda, that the threats that we face consist of interlinked networks of jihadists, some of whom are British Muslims who until now have preoccupied greatly this phenomenon of British Muslims.

The suspects in this case seem to be from abroad. We don't know yet whether there are any British Muslims also in the plot. But clearly we are in the throes of a fight against an enemy with links around the world and embedded in Britain.

GIGOT: Does it surprise you at all a couple plotters were involved with the National Health Service? And what impact is that having often the British public?

PHILLIPS: Yes. Well, a number of suspects have been involved with the National Health Service. We don't know if they are the plotters. There are something like seven doctors who have been arrested and are being interviewed and others who have connections also with our health service.

We don't know whether the health service was particularly targeted, was a kind of useful umbrella group to bring together these jihadists, whether the health service is particularly vulnerable to foreign doctors without proper checks. And this is a measure of great and growing concern that maybe our checks -- undoubtedly our checks in the health service are too lax as, indeed are immigration controls generally.

But I think what struck me is the shock people have had that doctors, who are in the business of curing people, can be in the business of killing people. And personally I think this is very naive.

We have forgotten, for example, the Nazis had doctors who were involved -- Dr. Mengele did terrible experiments on people, massive killing programs. We've also forgotten the al-Qaeda number two, Ayman Zawahiri, is a doctor, and many jihadists actually have been or are doctors.

If you're brain-washed by a fanatical religious cult, which we are up against, into a belief for various reasons certain people are subhuman, not properly human, then even though you are a doctor trained to cure human beings of suffering, if you don't see certain people as human, then you kill them.

And that's what we don't really understand in Britain. We haven't really got our heads around the fact that what we are all up against in Britain and America and the free world in general is religious fanaticism, which really makes no a lounges for intelligence or whether someone is a member of a caring profession.

GIGOT: On that point, let me read you a quote that surprised me. It was from the new home secretary, Jacqui Smith, who said this week, "Terrorists are criminals who come from all religious backgrounds," end quote. Is that really the consensus view in Britain about the nature of this threat? They come from all religious background?

PHILLIPS: Well, no, it isn't, and unfortunately our new prime minister, Gordon Brown, as you know, recently took over from Tony Blair and almost immediately faced with these terrorist attacks, has given an instruction that had British government should not refer to this terrorist threat that we are facing as Muslim Islamists, or, indeed, that we are in a war on terror.

And instead, our new home secretary, Jacqui Smith, when she made her speech to the House of Commons, spoke as you've just said, about these acts being criminal acts. Instead of the Muslim community of being of particular interest in a particular problem, it was communities in general.

This is a bowdlerization of language, of censorship of the language which bodes ill because the prime minister, Gordon Brown, has talked about -- very properly, I think -- talked about the need to fight and win the battle of ideas. But the principal idea is that we are facing Islamic religious fanaticism. And if we can't even name that in Britain, if our government isn't going to name it, then this is certainly not going to be taking the measures appropriate to deal with it.

GIGOT: Are you saying British officials, senior official, don't want to use the word Islamists to describe the nature of the threat? Is Islamists banned from polite political discourse in the United Kingdom?

PHILLIPS: I'm afraid it is. This is not new. Our police for some years now, in fact, every since 9/11, have refused to speak about Islamic or Islamist terrorism. They used euphemisms such as international terrorism.

This is all because of the great fear of two things. First of all, of giving offense to the Muslim community. That's the principal fear. The subfear from that is if you give offense to the Muslim community in Britain, then you will stop them from cooperating with the police. And you will, at the very worst, incite perhaps civil disorder, rioting and perhaps more terrorism.

I think this is a fundamental mistake, because it enables the Muslim community in Britain to continue in is own self-delusion, its own state of denial, in which it says yes, we abhor these terrible acts. These are monstrous acts, which nobody could possibly support. However, they have got nothing to do with Islam.

Now, while it is true that there are many Muslims in Britain and around the world who do not subscribe to this murderous ideology and who do simply derive from their Islamic faith proper spiritual sustenance, it is also a fact that this thing we face, in Britain and America and the free world, is a war prosecuted in the name of Islam, underpinned by Islamic theology and mandated by the leading religious authorities in the Islamic world.

So to deny that this is an Islamic problem is to enable Muslims to ignore the fact that they have to deal with this. It is for truly moderate Muslims now in Britain and around the world to stand up and say, we renounce unequivocally the logical underpinnings of the jihad, we renounce the jihad.

GIGOT: All right, Melanie Phillips, thank you on that note, again, for being here.

Much more on the unfolding U.K. terror probe when we come back. He has been on the job for just over a week. How is Gordon Brown handling his first test as prime minister? Our panel weighs in when the "Journal Editorial Report" continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GORDON BROWN, BRITISH PRIME MINISTER: We will not yield. We will not be intimidated. And we will not allow anyone to undermine our British way of life.

(END VIDEO CLIP)

GIGOT: He was on the job just one day when the terror plot came to light. How is Gordon Brown doing in his first test as prime minister?

Joining the panel with week, "Wall Street Journal" columnist and editorial page deputy editor Dan Henninger, editorial features editor Rob Pollock, foreign affairs columnist Bret Stevens, and joining us from Washington, columnist Kim Strassel.

Bret, what does this plot tell us about the changing nature of the terror threat?

BRET STEVENS, WSJ FOREIGN AFFAIRS COLUMNIST: One thing that is striking is frankly how amateurish it was. It seems to have been put together hastily. This is the difference between what al-Qaeda was known for -- its signature acts of terror, years in preparation that were very elaborate, very well planned, sometimes very well financed. 9/11, of course, is the great example. But bombings in East Africa is another, the bombing of the USS Cole.

This seems to be much more hastily arranged. It might be -- there are a variety of explanations as to why this might be. One of them is simple a weakening of the al-Qaeda, the actual base, so that these plots have to be more quickly done.

And it might be a question of opportunities that these terrorists find that they can launch a terror spectacular on short notice, very cheaply. They were trying to do this with canisters of propane.

GIGOT: Is this the era of the car bomb, Rob? That's coming -- started in Palestine. Moved to Iraq. Is it moving to London and inevitability to the streets of the United States?

ROB POLLOCK, WSJ EDITORIAL FEATURES EDITOR: I think that's probably true. One thing that surprised me since 9/11 is we have not seen attempts like this in the United States. Why is that?

GIGOT: That's a good question. Do you have a theory?

POLLOCK: Some people think the policies put in place by the administration after 9/11 on surveillance in terms of taking the terror fight abroad may have actually helped, believe it or not.

GIGOT: That's what I tend to believe. Other people believe that maybe al-Qaeda has been into show business, these big extravaganzas, wanting the next to exceed in death toll of the others. But I think they would settle for any damage they could do now.

DAN HENNINGER, COLUMNIST AND EDITORIAL PAGE DEPUTY EDITOR: Well, I think the fact that it is not here is almost immaterial. England clearly has a tremendously serious problem. It is almost as though the poor country is like a laboratory experiment in how one will deal with the presence of a threat like this, in the city of London, in the nation.

And I think the biggest dilemma here is there is a fundamental dilemma between our system of civil liberties, which we regard as a primary value, and they regard it as a primary weapon to be used against us. That freedom, they utilize to do the sort of things they have to do.

The dilemma between those two things has to be resolved. Whether we want to persist with the system of civil liberties that we have now or refine it to deal with this threat.

GIGOT: What are the differences, Bret, between the way the British policies handle things like interrogation and surveillance and what we do? Are they significant?

STEVENS: They are very significant. For one thing, the British home secretary, the equivalent of our attorney general, doesn't have to go to a court to ask for permission to wiretaps. He has his own authority. That authority resides within the executive.

British government can detain someone for 28 days without pressing charges for interrogation purposes. Tony Blair wanted to take it to 90 days. He was rebuffed, but that bill may now moving forward, extending the period of time they can interrogate suspects.

That's very valuable, and it's a much more restrictive tradition in Britain, going back to the days they had to deal with IRA terrorism, and they got used to a world of surveillance cameras that is wholly alien to the United States.

(CROSSTALK)

POLLOCK: And they also make no artificial and increasingly untenable distinction between foreign and domestic wiretapping, which increasingly makes no sense the way data travels around the world these days. They can also do it based on reasonable suspicion rather than probable cause. So all of these things add up to a much more robust system of surveillance, which frankly Congress in the United States said we're not going to follow.

STEVENS: On the other hand, within Britain, unlike the United States, they really have an incubator culture for extremism. They tolerate -- publicly tolerate very extreme, even if not quite violent, Muslim organization, like Hizb ut-Tahrir, which Tony Blair tried to get banned, but was rebuffed.

The entire public culture -- Ken Livingstone, the mayor of London, has engaged with very radical Islamic clerics, so there is -- to one side there are government powers, which are effective, but to the other, there is a culture, as sort of emphasis on multi-culturalism, which provides these kinds of havens for guys like these Iraqi doctors.

(CROSSTALK)

GIGOT: Kim, let me ask you. I was struck by one figure. More than 100 people in the U.K. are either convicted or are going on trial for terrorist acts. That strikes me as an astonishing figure. What marks do you give Gordon Brown so far in his performance?

KIM STRASSEL, WSJ COLUMNIST: Not Gordon Brown, those people that are up for trial are people that were brought under Tony's regime.

GIGOT: Sure.

STRASSEL: We don't know yet what Gordon Brown will do.

One thing I would note though, we should point out, despite the incredible advantages the British have in their intelligence gathering, they nearly missed this plot. They got it by accident. That's something a lot of intelligence officials are looking at and are concerned about. It brings up questions.

Is there so much terror going on in Britain that even with the powers they are missing it? Or is there a question, if you have such sweeping powers is it possible to be hit by so much noise and, as a result miss things as well. This is something the intelligence community will look at trying to figure out why they weren't on top sooner.

GIGOT: All right, Kim, thanks.

We will be back after this short break. Still ahead, new numbers show Barack Obama and Hillary Clinton far ahead of the pack in fund-raising totals. Will the Democrats' cash advantage spell trouble for Republicans come November? We will follow the money when the "Journal Editorial Report" continues.

(COMMERCIAL BREAK)

GIGOT: Presidential candidates from both parties announced their second quarter fund-raising totals this week with Barack Obama at the front of the pack. He raised $32.5 million for his White House bid, more than his Democratic rival Hillary Clinton and more than the top two Republicans combined. Rudy Giuliani was the GOP frontrunner with John McCain coming in a distant third prompting him to announce a major reorganization of his campaign.

Kim, let take up first this Democratic fund-raising advantage over Republicans. I think Obama had more contributors than all main Republicans combined. What does this tell but the mood of the country?

STRASSEL: What it says is it says something about the mood of Democrats in the country. They have been angry since 2000 with President Bush and Republican rule. They really got together in the last election to do something about this. They are very happy with the top two people that they have running at the moment and they are opening their wallets up to show that support. What isn't as clear is what it says about the Republicans and whether it is all doom and gloom.

GIGOT: Doesn't it show they are dispirited, not willing to write big checks?

STRASSEL: I think that's part of it, although part is a wait and see thing. No one is thrilled with the top three guys out there -- Giuliani, McCain or Romney. Everyone is sitting back waiting to see is Fred Thompson going to get in the race. There are high expectation building for him. Once he is in and gets out there, we might get a better sense of how much this is wait and see. How much is truly Republicans very just dispirited in general.

HENNINGER: It is bad news for the Republicans. The Republicans -- the reason they don't like top candidates is we are so bogged down in these triangular arguments over immigration, cultural issues and the like. The Democrats on the other hand are totally united. They want a candidate and an opportunity to vote for him.

GIGOT: We want to win. Just win.

HENNINGER: They want to win. Republicans want to argue.

STRASSEL: Republicans are looking to a leader and we will see -- a lot are hoping that's what they will get in Fred Thompson. And maybe he is what they need to be inspired.

GIGOT: Bret, I want to ask you about John McCain. He was a year ago the undisputed Republican front runner. Now third, maybe even fourth, if you consider that he is behind in many polls, Fred Thompson who hasn't even announced. What has happened to McCain?

STEVENS: He was the security candidate. You now have another security candidate, who is Rudy Giuliani. He has similar credentials, heroic stature. He doesn't come with quite as much of the Washington baggage that McCain comes from in terms of McCain-Feingold and in terms of noises on greenhouse gases and globe pal warming. And also has simply presented himself much more energetically, more youthfully than McCain. There's a very tired quality about McCain's candidacy.

POLLOCK: McCain also had a real substantial weakness in his security portfolio. Yes, he was strong on the Iraq war but he doesn't want to interrogate people. I think people notice that.

GIGOT: Doesn't McCain deserve some credit? Don't you admire McCain for the fact that despite the troubles in Iraq he never abandoned the fight? He has never abandoned President Bush even when it was perhaps politically expedient to do so? Why aren't Republicans giving him more credit for that stand?

HENNINGER: They are tired of John McCain. I agree with that, Paul, entirely. But the media giveth and taketh away. John McCain has been in front of people for over four years. I don't think he had enough star power to sustain that. His star has declined. People have become tired of him.

GIGOT: Kim, do you think McCain can stage a comeback in the next six months?

STRASSEL: It will be hard. Part of it is this money thing. There has been a lot of conversation about the fact he only has about $2 million on hand. Can that get him to the primaries?

One little irony to this is that -- what nobody's talking about is Mitt Romney only has $3 million on hand, not much more. But no one is worried about him because they know he can draw on a huge personal fortune to keep his campaign going forever. That's is interesting to know somewhat Mr. McCain would think about the fact that the very campaign finance laws he supported is now hurting people like him and helping the millionaires who are out there running.

GIGOT: Dan, how solid a front runner is Rudy Giuliani? He's certainly a front runner in the money race, although, as Kim points out, Romney can write his own checks. But is Rudy vulnerable to Fred Thompson coming in and emerging at the new frontrunner.

HENNINGER: Only slightly. To the extent one believes polls, Giuliani's lead in Florida, California and even New Jersey is substantial. It is well over 30 percent. He has a big lead in the big states. Where he is weak is in Iowa and New Hampshire. You know who is leading in Iowa and New Hampshire? Mitt Romney, who has run over 4, 600 television commercials, more than any other candidates combined. There is an interesting tension going on between a candidate who has the ability to overpower the electorate with media and Rudy Giuliani who has a message.

GIGOT: All right, Bret, Obama really doing extremely well, particularly against the Hillary Clinton juggernaut. How do you explain it?

STEVENS: I think he is a continuation of the phenomenon that began with Howard Dean, and angry liberals reacting against the Bush administration. But the different is Obama is a much better vessel than Howard Dean was for capturing those energies. He is more articulate, smooth and better looking.

He seems like the kind of candidate you would like to see as the Democratic nominee. The kind of candidate you would like to see if you are a Democrat and if you're a liberal as president. That explains the power. Whether that can translate into a Democratic majority for him in the primaries, I have no my doubts about that.

GIGOT: Is there any issue component to that, Dan, briefly, the sense that he is the non-Hillary, or is it mostly biographical, personal.

HENNINGER: I think it is biographical and personal. I believe the Clintons have the same problems McCain has. They have been in front of their party so long, people are tired of them.

GIGOT: All right, Dan, thanks.

We have to 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 of calling attention to the best and the worst of the week.

Item one, a big miss to the State Department for its latest green card fiasco -- Dan?

HENNINGER: You recall, Paul, during the immigration debate, just over, how we heard over and over again we must have respect for our laws. Right? Well, let's talk about the immigration law as it exists.

This past June 12, the State Department, which handles visas for immigrants, announced all of the employee-sponsored immigrants who had visas would be able to get green cards. So about 60,000 people had to scramble to arrange their documents and so forth. The law also requires that their families must be present for the filing. So families all over the world got on planes to come and do that.

July 2, the State Department announces, no, it is a mistake. We are not going to issue visas.

We have to have fundamental respect for the laws. If we are going to have laws, the immigration law is not a respectable law.

GIGOT: All right.

Next, a half-hearted hit to President Bush -- Rob?

POLLOCK: I think Bush deserves credit for commuting the 30-month sentence of former vice presidential aide Scooter Libby. This was an honorable public servant. All he did was defend the administration against charges by Joe Wilson that they lied about uranium in Niger. Joe Wilson was eventually discredited by the Senate Intel Committee. The whole investigation flowed from that.

Academics, ranging from Robert Bork to Allen Dershowitz, weighed in saying that Scooter Libby should not go to jail. Bush took their advice. I think he should do the honorable thing, at some point, and give him a full pardon.

GIGOT: All right, Rob.

Finally, why this weekend's Live Earth concerts may hurt the planet more than help -- Kim?

STRASSEL: While most of us are doing unconscionable things, like driving our SUVs, Al Gore is hosting seven rock concerts across the globe to raise awareness of global warming. You would think something as sanctimonious as this would get him credit but, in fact, he is getting slammed by environmentalist. Why? Turns out that hosting big rock concerts wastes energy. The stage lights, the speakers, the private jets to ferry all the performers to their performances.

The Live Earth people are, of course, defending themselves saying this is as green as an event can get. But I think I am with the critics. If you are going to talk the talk, you should walk the walk. In this case, Al Gore might just have wanted to have sent an e-mail.

GIGOT: All right, thanks, Kim.

That's it for this week's edition of the "Journal Editorial Report." Send your e-mails to jer@foxnews.com. And visit on the web at www.foxnews.com/journal.

Thanks to Dan Henninger, Rob Pollock, Bret Stevens and Kim Strassel.

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

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