This is a rush transcript from "The Journal Editorial Report," April 5, 2008.

PAUL GIGOT, HOST: Up next on the "Journal Editorial Report," the war of words over Iraq escalates as President Bush says he will follow his top general's recommendation on troop withdrawals. Former Pentagon insider Doug Feith is here with reaction.

Filing your taxes this weekend? Think you already pay enough? Hold on to the wallet. The biggest tax increase since World War II may be coming your way.

All of that, and a preview of Pope Benedict's U.S. trip, but first, these headlines.

(NEWSBREAK)

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

President Bush said late this week he would follow the recommendations of his top general in Iraq and continue the draw down of surge forces through July. But he would also give General Petraeus, quote, "all the time he needs," after that to determine when future withdrawals would come.

Petraeus, testifying this week on Capitol Hill, told lawmakers he would use that time to evaluate conditions on the ground before making any decision on further troop cuts.

Douglas Feith, the former undersecretary of defense, was a chief strategist on Donald Rumsfeld's policy team in the run up to the Iraq war. He is the author the new book "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism."

Doug Feith, thank you for being here.

DOUGLAS FEITH, FORMER UNDERSECRETARY OF DEFENSE: Glad to be with you.

GIGOT: The fascinating thing with your book is the way it disagrees with the conventional wisdom we've read about decision-making in the Bush administration. For example, it is said the president discouraged different points of view leading up to the war. Your book says, quote, "he encouraged an excessive tolerance sometimes in discipline even disloyalty from his own officials," unquote. Can you give me an example where that was the case?

FEITH: Well, what I am talking about in there is that one of the principle problems I think this administration had was divided government. When I reviewed the debates in my book that occurred about Iraq policy, what struck me was how the president did not have the whole hearted support of the State Department and the CIA.

And the point I make is that Secretary Powell I think would have done the country a much greater service if he -- since he didn't quite agree with the president's policy, as he made clear, if he actually debated it had and put forward an alternative strategy, but he didn't do that, nor after the president made his decision did he wholeheartedly support it.

I think that the country would have been better off if he had either thrown in completely behind the policy or stepped aside in favor of somebody who would have.

GIGOT: So in a season, not the administration was entirely behind it as we got into the occupation period and the war in Iraq -- and after the Saddam Hussein was deposed in trying to develop a government there. Is that what you are saying? And that lack of support undermined the evident?

FEITH: I think that's true. It is true, after Saddam Hussein was overthrown there was -- it was actually a reversal of the policy that the president had adopted to put Iraqis in charge of their own government early on and we wound up having a 14-month occupation where we ran the country. And I think that was a costly error.

Then also before the war -- we actually lost ground diplomatically in the six months or so before the war, even though we took Secretary Powell's suggestion to go to the U.N. as the main vehicle for diplomacy.

GIGOT: Do you think the president -- because what you are describing is really a failure of leadership at the top, not being able to impose discipline on his team. Do you think the president should have fired a couple people to send a message?

FEITH: Well that's -- those are very hard judgments. What I'm mainly interested, in my book, is providing information. I go through and I provide the nature of the debate based on notes I took at the meetings and the actual memoranda we exchanged among each other between Secretary Rumsfeld and the vice president and president and Secretary Powell and Condi Rice and others.

It is a hard thing to know but what does come out of the story is it is clear there were many problems that derived from the divided nature of the government.

GIGOT: One of the lessons I draw from your book and the experience in Iraq is that we are not very good as a country as nation building. We don't do it very well. We don't have patience for it. That's what this exercise is. Because Saddam was deposed and because the army melted away, we really did have to -- we have had to supervise a nation building exercise. It has been painful for us. Do you agree with that?

FEITH: I do. And one of the things that is remarkable is we have had to do exercises that are referred to in the government as stabilization and reconstruction, for decades. And every time we have done them for decades, we have done them ad hoc. We put together new teams. There is a lot of civilians that are required for efforts like this. Yet we have never, as a government, set up on official whose responsibility it is to do this to learn the lessons of past actions, to hire on the basis actual requirements, to capture the legislation on and educate people about what we learned in the past. So on the civilian side, we have don't get better and better.

On the military side though, where they do capture lessons learned, educate their people about them, our military tends to get better from operation to operation. We need to have some civilians who have that responsibility, and who can learn from past efforts.

GIGOT: You were the undersecretary for strategy. Let me ask you a strategic question, a criticism of the Iraq exercise that's often made by so-called realists who say that by invading Iraq and having the power we have had, what we have really done is we have empowered Iran in the region and it is stronger than it would have been if we had not invaded Iraq. What is your response?

FEITH: I think it is worth worrying about Iran. Iran is a very dangerous country. It is clear that when we removed Saddam there would be certain opportunities for Iran to play a role in Iraq that it didn't have before. But whether that actually winds up netting outpost for Iran or not is not clear. It depends on things go in Iraq.

If the Iraqis can create a political system where the Shiites have the ability to choose their own leaders and play a major political role, they could wind up creating a government that shows the Iranian people that it is very much in the Iranian people's advantage to have a democracy in their own country and to get rid of the clerics who have been ruing their country for decades.

GIGOT: Doug Feith thanks. And we can hold out for that opening. And thanks very much the book and the addition to the historic record.

FEITH: Thank you.

GIGOT: When we come back, the coming tax bomb. But you may be about to see a much higher tax rate and what can be done to stop that hike.

(COMMERCIAL BREAK)

GIGOT: Filing taxes this weekend? Think you already pay enough? Hold on to your wallets because the biggest tax increase since World War II may be coming your way. Our panel is here to tell you about it.

I am joined by "Wall Street Journal" columnist and deputy editor Dan Henninger, assistant editorial page editor James Freeman and Washington columnist Kim Strassel.

James, it looks like this year we will avoid a tax increase because President Bush will veto anything, but the Bush tax cuts from 2001 and 2003 both expire after 2010. That means in 2009 Congress has to face up to it. What are the taxes that might rise?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: That's right. You're going to see income tax rates will rise across-the-board, higher taxes on investment. That means on cap gains it's going from 15 percent to 20 percent, on dividends from 15 percent to 39.6 percent. What you would not learn watching any other network probably is that the biggest losers with the repealed Bush tax cuts will be people in the lowest income tax bracket, 50 percent hiked in their rate.

GIGOT: Because the 10 percent bracket created in 2001 goes away.

FREEMAN: That's right, moves up to 15 percent.

GIGOT: What are the chances, Kim Strassel, that many happen? Less assume that we have a Democratic president. I think, if that case, we will have a Democratic Senate and House. If that happening, what is the chance that these tax cuts owe tax increases will take place.

KIM STRASSEL, WASHINGTON COLUMNIST: Oh, I would say about 100 percent.

GIGOT: Really? Even if there is a recession?

STRASSEL: No. That is the number one factor. Look, one thing that's remarkable about Hillary Clinton and Barack Obama is how openly and aggressively they are pushing for tax hikes.

In the case of Barack Obama, we're even more beyond the reversal of the Bush tax cuts, things like extending the cap on payroll taxes on the amount of money you pay payroll taxes on.

GIGOT: Just to explain that, that's has 6.2 levy. And right now it is capped at $102,000 of wages. If you make more than that, you don't pay the 6.2 percent. It stops. But Barack Obama wants to eliminate the cap.

STRASSEL: He would raise that. Here is the thing, as you said, if you have a Democratic president, there is a high chance you will have a Democratic Senate and House. Given how much they have invested in this and how much their own spending own agenda, their spending agenda depends on -- is built in on having these tax cuts expire, they will push hard to make sure it happening.

If you have John McCain, you have one person holding out, but still, you could you have a Democratic House and Senate an all they have to do is wait for them to expire.

GIGOT: There's also one other tax that will expire for one year. If you are fortunate no die in 2010, you won't pay an estate tax or death tax. But in 2011, it reverts all the way back to what the estate rates were in 2001, which is, I think -- it is 55 percent the top margin rate?

FREEMAN: That's right, 55 percent after a 600k exemption.

DAN HENNINGER, COLUMNIST AND DEPUTY EDITOR: Now, consider what the result of all this is going to be. The aggregate would be a much higher level of taxation. And usually what happens under those conditions is -- the economy really can't function very well at that level of taxation. So what they do is create a whole series of loopholes. This is the tax system we had in the 1960's and 1970's. It's precisely the opposite of tax simplification. It is tax complexity. And it is the only way they can make it work, which means they will start passing tax credit after tax credit after tax credit, which is precisely what Obama and Hillary have been proposing.

GIGOT: Tax loophole after tax loophole after tax loophole, for who? The people who can afford -- the lobbyists, who they send from these big corporations and some of the rich?

HENNINGER: Exactly.

GIGOT: I want to ask you about a point Kim raised, which is, if John McCain becomes president, you end up with a Democratic Congress -- we expect that many happen -- is there a possibility here that because this is a looming tax increase that John McCain and Charlie Rangel, the head of the Weighs and Means Committee, the tax writing committee, could sit down and maybe do a tax reform, a la Reagan and Dan Rostenkowski in 1986?

FREEMAN: There is hope for that. McCain staked out the right ground coming into this debate. He said let's extend the Bush tax cuts but let's go further and work that corporate rate down from 35-25. You might see Charlie Rangel amenable to that. He understands our tax system is making America uncompetitive.

GIGOT: Rangel, Kim, has already endorsed the idea of reducing the corporate rate to 32 percent from 35 percent. He has talked tax reform. He seems willing to play. Do you see this possibility here?

STRASSEL: Absolutely. This is John McCain's best shot if he does become president. But he will have to start talking. Maybe the way to do this is to make, on the campaign trail, the idea of fundamental tax reform and, on that mark, he has to start talking about entitlement reform, for instance, because people are arguing you need to raise tax to take care of future Social Security and Medicare benefits. He has to talk about the need for fiscal restraint and for changing those programs to help make his case.

GIGOT: Kim, thank you very much.

Ahead, Pope Benedict is headed to the U.S. with a stern message for America's Catholic colleges. We have a preview when the "Journal Editorial Report" continues.

(COMMERCIAL BREAK)

GIGOT: Pope Benedict XVI arrives next week for his first papal visit. On his agenda, a meeting with the presidents of America's 213 Catholic colleges, and the first address on papal Catholic education in this country for more than 20 years.

We are back with Dan Henninger and also joining us is Naomi Schaefer Riley, who edits the "Wall Street Journal's Houses of Worship" column.

Naomi, the pope is coming, a big deal for American Catholics. What do you think the message will be?

NAOMI SCHAEFER RILEY, HOUSES OF WORSHIP COLUMN EDITOR: You can tell a lot by the stops he is making along the way. He will be praying at Ground Zero. He will address the U.N. He will talk to Catholic higher-education leaders.

I think he is coming here to introduce himself to American Catholics but also to talk about the important issues that face the church. He will be talking about the conflicts between Catholicism and Islam. He will talk of where the American Catholics stand in the world.

There have been a lot of changes in the Catholic Church over the years. A lot of growth in the southern hemisphere. And a lot of Catholics in the U.S. are, at least native-born Catholics, have been leaving the church recently and the pope is here to reinforce the message and vigor of Catholicism.

GIGOT: He is a scholar himself and he's going to Notre Dame. And you were just at Notre Dame and interviewed the president of Notre Dame. There is an address the pope will make to heads of the Catholic colleges. What do you think they will talk about?

RILEY: He will speak at the Catholic University of America. But all of the Catholic college presidents have been invited. I think he is not going to be scolding bluntly let's just say. I think he is a subtle person.

But, you know, this is 20 years after the release of that document called "Ex Corde Ecclesiae," which the church saying two major things. Catholic colleges need to have a more faithful Catholic environment on campus. They need to stop doing things like having coed dorms or sort of encouraging gay marriage or having pro-choice demonstrations on campus. And the second thing is to have is mandatum, which meant that Catholic theologians on campus should have the stamp of approval from the bishop.

GIGOT: They should teach Catholic theology. What do you know?

RILEY: Surprise. Surprise. Well, 20 years later, what's happened, the weird compromise they've achieved is only the bishop and the theologian know whether the theologian has achieved the stamp of approval. If you were a Catholic parent trying to decide where to send your child to Catholic school, you don't know if your child will be taught Catholic theology.

GIGOT: Dan, you've followed this pope, written about him. Will he deliver a bracing message to our Catholic educators?

HENNINGER: I don't know that it will be so bracing as clarifying. Benedict is, in fact, a very serious intellectual, a very smart man. I think what he's going to talk about is what he calls moral reason. What he is trying to do, in effect, is protect his franchise, which is to say, you know, we here live in a world that is beset by modernist pressures, secular pressures in this very complex world in which to live. What he tries to argue is that faith and secular reason should coexist, that faith and religious tradition can inform the world in which we live. It has something to teach the modern world.

And I think he will do a very good job of explaining how that works. So it fortifies Catholics or just religious people generally who feel beset by the modern world. He will defend where they stand.

GIGOT: And he will, I suppose, suggest that American institutions of higher education have a special obligation to defend that message of faith and reason.

RILEY: That's right. I think American Catholic universities really have or in a great position to do this. They have some brilliant more scholars both of secular subjects and of theology. And they could be a great place for bringing these two together. I think unfortunately often the messages the students get at the Catholic colleges is these are two separate things and you don't have to bring them together. So we'll have to see.

GIGOT: All right, we'll be watching. Thank you, Naomi.

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, the FAA plays politics with your travel planks -- Dan?

HENNINGER: Paul, by the end of the week, American Airlines cancelled over 2,500 flights. We're talking about upwards of 500,000 travelers stranded around the country.

The FAA said they will continue these audits right through the summer. There is no safety problem. What is going on is Congressman James Oberstar held a hearing where he accused the FAA of being incapable of protecting airline safety. He pistol whipped the bureau because they said you want inspections, we will give you inspections. And that's what we are getting.

The regulatory state run amuck. It is the only way the House Democrats know to conceive of the world around them. This summer, as travelers are sleeping on the floorings of airports, they ought to think a little bit about it.

GIGOT: All right, Dan, thanks.

Next, a hit to authorities in Texas for the raid this week on a polygamist compound, Naomi?

RILEY: This is a better late than never hit. This has been going on for a few years in Texas compound. They removed over 400 children who had been victims probably of sexual abuse, child marriage, all sort of things. People have the attitude that polygamy is sort of adult consensual behavior, in our modern lingo. But, in fact, it leads to all sort of these problems and has done so over the American West. Tens of thousands of people are affected by this. It's about time law enforcement cracked down.

GIGOT: All right, thanks, Naomi.

Finally, the presidential candidates do some Olympic posturing. Imagine that, Kim Strassel.

STRASSEL: Both Barack Obama and Hillary Clinton made, as cornerstones of their foreign policy promises, the idea that they will make nice with countries, restore America's reputation, engage in more diplomacy. Let's look at what they did this week. First they suggested the president boycott the Olympics, thereby, humiliating the Chinese on the...

GIGOT: The opening ceremony.

STRASSEL: The opening ceremony of the Olympics. So they condemned the Colombia trade deal, which will be with one of our strongest allies in South America. And in addition, they came back, and once again in Washington, suggested we leave Iraq and, one of our only democratic friends there. So they are running through the list of people they can be diplomatic with pretty quick. And so this is something that we are going to have to figure out if they really -- how they view this.

GIGOT: All right, Kim, thanks.

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 www.foxnews.com/journal .

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

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

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