This is a rush transcript from "The Journal Editorial Report," December 22, 2007.

PAUL GIGOT, HOST: This week on "The Journal Editorial Report," he is crossing party lines to endorse John McCain for president. Senator Joe Lieberman is here to tell us why.

With Rudy Giuliani slipping in the national polls, our panel takes a look at the wide-open Republican race.

The Hollywood writer's strike looms large over the Oscars and Golden Globes. Will celebrities cross the line to get their awards? Who stands to lose the most in the seven-week-old showdown? Our panel weighs in after the headlines.

(NEWSBREAK)

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

The campaign of Republican presidential candidate John McCain is enjoying a resurgence, with two new polls putting him in second place in the all-important state of New Hampshire.

With that primary less than three weeks away, he has gotten a lot of positive buzz and a handful of new endorsements, including one from my guests this week. Independent Democratic Senator Joe Lieberman joins me from Connecticut.

Senator, thank you for being here.

SEN. JOE LIEBERMAN, (I), CONNECTICUT: Good to be with you, Paul. Thank you.

GIGOT: You have endorsed John McCain. What response have you received from your fellow Democrats this week?

LIEBERMAN: Oh, some puzzlement. Some anger. I mean a lot of phone calls. People were angry. But you know, to me, I know it is unusual for a Democrat, even an Independent Democrat to endorse a Republican but there is too much as stake in this presidential election to let the choice be governed solely by what party you are in. And to me, John McCain is simply the best qualified to lead our country forward. I wasn't going to stop from endorsing him because he happens to have an "R" after his name and I have a "D" or an "ID," as it were.

GIGOT: One reason you've cited is the fact that he thinks a President McCain can reach across the aisle and restore bipartisanship to foreign policy. Why would he be able to do that than, say, someone like Senator Obama, one of whose main theme is get beyond this partisan divide and bring the country together?

LIEBERMAN: Right. Look there are two reasons. Two main reasons that I supported and am proud to support John McCain. One is his strong record on national security. He understands the threat of Islamist extremism. He understands how to put together a principled strong American foreign and defense policy. So I am with him on all that.

The second is that he has had a record of working across party lines over a long period of time. John McCain is a proud Republican. But he has a restless desire to get things done and he knows that, to do it, you have to work across party lines. Some more than any of the other candidate I think he has a proven record.

And, look, with all respect to Senator Obama, who is a friend of mine, I simply disagree with him on a lot of positions he is taking on national security with regard to Iraq, Iran, for instances. Whereas, I totally agree with John McCain, worked side-by-side with him. I think he's got the ability from the — day one, to be a strong commander in chief, who will bring us back, Paul, to where we used to be on foreign policy, which was that you had debates here at home. But then, as former Senator Arthur Vandenberg famously said, politics end at the waters edge because we have common enemies.

GIGOT: When Senator McCain saw us last week at the "Wall Street Journal" we asked how he explained the opposition from Nancy Pelosi and Harry Reid to the surge in Iraq and support for more funding. He attributed it to a, quote, "a lack of patriotism," unquote. That's pretty tough. Do you agree with that?

LIEBERMAN: It is tough. John is a straight talker. I agree with him in the sense that I'm afraid too many Democrats put both ideology and partisan interests ahead of the national interests. So even after — it was one thing to say last year — earlier this year, let's say — that people were skeptical about whether we could win the war in Iraq. When General Petraeus and the president came forward with the surge strategy, whether it would work. Now it is working, quite miraculously.

For people to continue to say the war is lost and to fight to cut funding or set deadlines for withdrawal, to me, that's not having partisan politics end at the water's edge.

GIGOT: Let me ask you a question about Iraq. Do you think no matter who's president next year, Democrat or Republican, there will be American troops, maybe tens of thousands of American troops, in Iraq for many years to come?

LIEBERMAN: I believe so. I suppose I would say I think it is important to our security that that is so. Look, here is the good news. Because the surge in Iraq is working, we are now beginning to draw down over 20,000 troops from now until July.

General Petraeus will come back and speak to the Congress and president in April. He will tell us whether he thinks we can withdraw more in the rest of the year. That all has to depend not on some arbitrary formula dictated by Congress but on conditions on the ground.

But no one thinks — unless you want to give you up Iraq and let al- Qaeda and Iran take it over — that all of our troops are going to be out of Iraq in 2009.

It was interesting in one Democratic debate Senator Clinton, Obama and Edwards, much to my surprise, all said if then were president, we would still have troops in Iraq in 2009.

GIGOT: Let me ask you about another bit of news in the Middle East this week. Iran, where the Russians are supplying fuel, announced they would supply nuclear fuel for what they say is a civilian nuclear plant at Bushehr. President Bush said he had no problem with that. Are you as sanguine as the president?

LIEBERMAN: I am not. Frankly, with respect to the president, he was putting a good face on this. In the best of all word, particularly with all of the evidence, the national intelligence estimate notwithstanding, that we have and that the international community has, that Iran is enriching nuclear fuel to get ready to build a bomb that we don't want to encourage them in any way. I think the Russian sale of this fuel does encourage them.

Look, it is great — not great — but it is a better that apparently this fuel will be under the control of the International Atomic Energy Agency. But this is not a time when I would give this fanatical anti- American extremist regime anything that takes them closer to having a nuclear weapon. So I regret what the Russians did.

GIGOT: It sound like there isn't much we can do about it. They will deliver it. What else can the president do?

LIEBERMAN: There isn't much we can do now. We can go forward and try to pass another sanctions program in the United Nations, which we I hope we will do after the first of the year.

I tell you what else. I am really glad that the secretary of state has designated the Iranian Guard Corps and the Quds force there as terrorist organizations, now with capacity to impose economic sanctions on them. I hope after the U.N. resolution, the United States will use the legal powers we have to impose some economic sanctions, both on the Iranians and on some foreign companies that are doing business with them in a way we think makes it easier for them to get nuclear weapons, which everyone here in American politics pretty much says we will not allow it to happen.

So Iran is a menace under this regime. The Iranian people are not. Iran is in this fanatical regime and we have to do everything we can to both contain them, support the reformers in Iran and to stop them from getting nuclear weapons.

GIGOT: All right, Senator Joseph Lieberman. Thank you so much

LIEBERMAN: Paul, great to be with you. Take care.

GIGOT: Still ahead, Rudy Giuliani slips in the national polls and the Hucka-boom continues. With less than two weeks to Iowa, our panel handicaps the Republican race.

(COMMERCIAL BREAK)

GIGOT: With the nation's first primary contest less than two weeks away, the GOP race is wide open. Two new national polls show former New York City mayor, Rudy Giuliani, losing significant ground with the so- called Hucka-boom taking a toll on the one-time frontrunner.

Joining the panel this week, "Wall Street Journal" columnist and deputy editor Dan Henninger, editorial board members Dorothy Rabinowitz and Jason Riley, and in Washington, Steve Moore.

Dan, I have to say this Republican race is as wide open as any in my adult lifetime. Why hasn't a candidate been able to break from the pack?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: As you noted, Paul, there is a feeling out there Rudy Giuliani's candidacy is in decline and others are rising. We, in this business, flatter ourselves on the idea that this campaign has been running since January and the conceit is the whole country is waiting with baited breath day-to-day to see? That's not the way it works. The Iowa caucus is January 3. New Hampshire is just over that. What's going on is people are beginning to pay attention and focus. And they are starting to think about which candidate makes the most sense to them and, as always, the pack is beginning to tighten.

GIGOT: What's the problem with the nature of these candidates, Jason, that there is no Ronald Reagan this time, no George W. Bush from 2000, someone who is really the clear frontrunner?

JASON RILEY, EDITORIAL BOARD MEMBER: True. But at the same time you have to question Giuliani's strategy, which is to ignore Iowa and concentrate on states that will hold primaries in February. And it backfired to some extent.

HENNIGER: To get back to Paul's question. One problems, Paul, is there is no authentic southern conservative or authentic conservative from California or the West. You know, George Allen of Virginia thought he would be that guy. We know what happened to him. Fred Thompson hasn't caught fire.

As a result you have conservatives, like Giuliani, who are economic and national security conservatives, but social-issue moderates. This has recreated confusion for the Republican base.

GIGOT: Go ahead, Steve.

STEVE MOORE, ECONOMIC WRITER: I was going to say, to me, the big story off how this evolved is you have two kind of frontrunners in Giuliani and Romney. The ones with the most money and name recognition. If you look at the polls today, the two of them combined are only getting about one-third of the Republican primary vote. What that suggests to me is that there are a lot of doubts among primary voters about what I call the big two. That's the reason you have this Huckabee boom that you're talking about.

GIGOT: Steve, why haven't they been able to make the sale?

MOORE: Clearly, Rudy Giuliani is culturally too far to the left for Republican voters. He's from New York. Don't forget all of you up in New York, a lot of the people from around the rest of the country have a negative attitude toward New York.

GIGOT: We never forget about that, Steve.

MOORE: Romney, I think, has an authenticity issue.

The other point I would like to make, Paul, is Democrats I talk to — and Kim Strassel talked about this in her column — Democrats are salivating for Mike Huckabee because they know he is the weakest candidate in the general election for the Republicans.

GIGOT: The Huckabee boom is explainable, in part, as a result of social conservatives, particularly in Iowa.

Something else is happening here, Dorothy, and that is something of a mini resurgence for John McCain, who a lot of people have written off. Is this real and how do you explain it?

DOROTHY RABINOWITZ, EDITORIAL BOARD MEMBER: I think it is real. Under the surface, all the time, not just now, people were daunted by the - - uh, he's gone. There was a tremendous bad news over the summer about his gain falling apart.

But underneath it all, if you asked people, what do you think? Well, it was always McCain. In the end, when they thought about it, it was always he ranks better. He is most likely to defeat the Republican candidate, the one can you depend on for security reasons. And it all came together now, magically but not surprisingly.

GIGOT: Particularly, as Giuliani descends and he picks up some of the support from the former Giuliani supporters.

RILEY: Right. He does. And he will definitely benefit from the Huckabee surge in Iowa, that is McCain in New Hampshire. It will take wind out of Romney's sails.

The other thing, remember, about McCain is that he matches well against the Democratic frontrunners, not only Clinton, whom he matches up against better than Romney or Giuliani, but also against Obama. He matches up much better against them in the general election than do Romney and Giuliani.

GIGOT: Steve, let he me ask you a question about Fred Thompson, who was supposed to be the southern conservative Dan talked about. He has not gone anywhere so far. Is there's a chance here at the end, particularly if Huckabee deflates, that he could be in the defacto landing place for some of these conservatives.

MOORE: No, I think he has flat lined. The other big story here has been that where Huckabee is now, Paul, is where Fred Thompson should be. This is where a lot of us, who are prognosticators, thought Thompson would come in as the conservative and rush into first place. The difference between Huckabee and Thompson is Huckabee has energy and charisma. Unfortunately, Thompson falls flat with voters.

GIGOT: All right, Steve, thank you.

Still ahead, would Letterman and Leno be funny with nobody to write their stuff? We may be about to have find out. When we come back, a look at winners and losers in the seven-week-old showdown between Hollywood writers and the studios.

(COMMERCIAL BREAK)

GIGOT: If the jokes seem bad at the upcoming Golden Globes and Oscars, blame the writers. The Writer's Guild of America denied requests to let comedy writers prepare material for both annual award shows. The six-week-old strike is threatening to make attendance at the ceremonies scarce with talk of picket lines sure to spook the union-friendly folks in Hollywood.

Dorothy, this is about downstream revenues for things like DVDs and new technology. Who has the upper hand, the studios or writers?

RABINOWITZ: In my view, I believe the studios have. They have deep pockets. They have a chance now to re-negotiate some very extensive contracts. Don't forget NBC is owned by Westinghouse. These are people who can wait it out. There are writers who have been living for a long time as though — they were in the dot-com era making some money, some making $10 million a year. This is the opportunity.

They are now going to face problems with the Directors Guild, which is about to set to negotiate separately. And they are not going to support the writer's strike.

Somehow or other, the union has put itself in a terrible place. They are not going to win this because the studios can wait. Now can you say that they don't have scripts and they don't have...

GIGOT: I thought content was king here. Isn't that what we in the media have been telling ourselves for a long time?

(CROSSTALK)

RILEY: But it doesn't mean content. First of all, they can negotiate contracts with international studios, for instance. They can bring in writers. They have other channels. As Dorothy said, these are big companies. I mean, Disney owns ABC. GE owns NBC. And these companies would like to see some more efficiencies in the business anyway. So they have an incentive to wait out the large contracts.

MOORE: But that isn't true. But Jason...

(CROSSTALK)

GIGOT: Hold on, Steve. Steve, you are for the working man.

(LAUGHTER)

MOORE: I guess Jason and Dorothy aren't watching evening TV because I am and it is lousy stuff.

Dorothy, have you seen this new game show they have out, "The Duel"? I mean, it's horrible stuff.

The people I talk to in Hollywood they, on both sides, are getting nervous. I call this strike mutually assured destruction. The one question really is, if these shows go on, like Letterman and Leno and the Oscars — you said will they be less funny. I don't think they are funny right now. And the question is, if Leno and Letterman go on and they are pretty funny, people will wonder maybe we done need writers after all.

HENNIGER: Let make one thing clear here. This is not about television. This is about the web. It is about new distribution channels. It's about cell phones. And no one yet understands how that economic model is going to work because most people think what they get on the web should basically be free.

GIGOT: And the writers want a big guaranteed take on that? Is that what they want?

HENNIGER: They want a big guaranteed take. The question is what the take is. Where is it coming from? Nobody knows that yet.

GIGOT: Nobody knows yet. What about the proliferation of reality TV, which is doing well, doesn't cost a lot of money? Can't the studios use that, not have to pay a lot of money for content and ride this out.

RILEY: Well, some can.

RABINOWITZ: They are doing it.

RILEY: FOX's number one show is "American Idol." They are strike proof.

RABINOWITZ: They are strike proof. But that started a long time before the writer's strike. It was cheap stuff and it didn't depend upon the writer's strike.

But the writers learned from the DVD experience, they were getting nothing. And this so enraged them that they have now been catapulted into this adversarial position because they think this world of technology is going to produce that.

GIGOT: Jason, briefly, are those actors and actresses going to cross the picket lines at these award shows to — they've got the glitz and publicity. Will they have to give that up?

RILEY: Some will, some won't. I think they will wait and see who does. No one wants to go first, but someone will go first. Someone will cross it.

MOORE: ... number one.

GIGOT: OK, Steve. Thanks.

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

Item one, Dan Henninger is about to get $25 richer. Congratulations, Dan.

HENNIGER: Thank you. This is a class-action settlement notice I received in the mail last week, and I suspect a few of our viewers did too. Thirty million of them have been sent out. It involves a class-action settlement with Diner's Club, MasterCard and Visa, which came to $336 million. Now it involves some surcharges on foreign transactions, but primarily what this says is, if you take the first easy option, you get a refund of $25.

Now, apparently a lot of people who received this think it is a scam. That it is sort of like a swampland sale in South Carolina and they have been throwing it away. Maybe it is a scam, because the lawyers involved are going to get $86 million. Happy New Year.

GIGOT: OK, Dan.

A hit to the new owner of the Magna Carta — Jason?

RILEY: Yes, this is a big hit for David Rubenstein. We remember this from ninth grade history class, but the Magna Carta, which dates to 1215, is one of the most important documents in the history of democracy. There are only 17 copies in existence and only one here in the United States. It came up for auction a few days ago and Mr. Rubenstein, who made a fortune in private equity, went out and paid $21 million to make sure it stays on display at the U.S. Archives in Washington. That was a very classy move.

GIGOT: It really is. Terrific.

Finally, the reality TV explosion — Dorothy?

RABINOWITZ: Yes, how can I persuade you enough that this started long before any writer's strike? So ask yourself, what happens when your relatives complain to you there is nothing to watch on television. You know what they are talking about? They are talking network TV, and why? It is because of these reality shows, one worse than another.

The worst aspect of them is that everybody is crying and sobbing on them relentlessly and at the drop of the hat. All contestants are doing this whether they have lost 40 pounds or 140 pounds or gained it on this program. They are sobbing.

And I want to ask now, in all honesty, whether if people who are so worried — those political saviors — about our place in the world, our profile to the world, why instead of stopping the administration, don't they pause here first and think about this American image. Can this be the image of America projected around the globe? Can these be the people who will reassure our allies and make our enemies fearful? These sobbing masses? I doubt it.

GIGOT: You know, if you keep this up, you will get an invitation to be on "Dancing with the Stars." They will insist on it.

HENNIGER: I can't wait.

GIGOT: All right, thank you, Dorothy.

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

Thanks to my panel and to all of you for watching.

I'm Paul Gigot. Merry Christmas. We hope to see you right here next week.

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