This is a rush transcript from "The Journal Editorial Report," April 19, 2008.

PAUL GIGOT, HOST: Coming up next on the "Journal Editorial Report," our Pennsylvania preview. The Democrats battle it out in the keystone state with Hillary Clinton hammering Obama on the electability issue. Have his recent missteps hurt him with voters Democrats need in November?

Plus, John McCain lays out his plan to save the sagging economy. We'll sort the good from the bad.

All that, and Pope Benedict's message to American Catholics, but first, these headlines.

(NEWSBREAK)

GIGOT: Welcome to the "Journal Editorial Report." The presidential candidates squared off this week in the Pennsylvania primary in a debate that put Barack Obama on the defensive. Recent missteps have left him reeling and reinforced Hillary Clinton's central argument to undecided superdelegates that Obama will be an inviting target for McCain come November.

But despite what she's been saying behind the scenes, Clinton said in Wednesday's debate that Obama can in fact win in the fall.

(BEGIN VIDEO CLIP)

GEORGE STEPHANOPOULOS, DEBATE MODERATOR: Do you think Senator Obama can do that? Can he win?

SEN. HILLARY CLINTON, PRESIDENTIAL CANDIDATE: Yes, yes, Yes. Now, I think that I can do a better job.

(END VIDEO CLIP)

GIGOT: Joining the panel this week, "Wall Street Journal" columnist and deputy editor Dan Henninger, editorial board member Jason Riley and columnist John Fund.

John, there is a switch. People said Hillary Clinton would be the weaker candidate in the fall. Now she is saying Barack Obama would be the weaker candidate. Is their truth to her argument or is this her last desperate argument to try to prevail?

JOHN FUND, COLUMNIST: Well, the polls show both candidates are even against John McCain but have different coalitions. Hillary Clinton would do much better with the traditional Democratic coalition. The red and blue state divide would largely hold. Barack Obama would have a different coalition. He would do better with better educated upper-income voters but he'd have trouble with working class Democrats that are 40 percent of the primary vote in the Democratic primary in Pennsylvania next week.

JASON RILEY, EDITORIAL BOARD MEMBER: She will use this Pennsylvania primary to try to demonstrate that, I think. We saw this similarly play out in Ohio, a state of similar Democrat make up.

GIGOT: Obama didn't get those crucial working class...

RILEY: Right. Hillary got off to a big lead. Obama close it somewhat but couldn't close the deal in Ohio. In Pennsylvania, same thing. Hillary got out to a big lead. Obama closed it. Whether he will be able to -- what it might reveal is whether he has a ceiling among working class whites. And Hillary will certainly use that to go to the superdelegates and say I will more electable.

FUND: If Obama doesn't get 45 percent of the working class vote in a general election, he probably can't win the White House. And that's the concern of Democratic superdelegates. They like everything about Obama, but the recent missteps make them wonder, can he really connect with the average American voter.

GIGOT: Dan, let's talk about the missteps. We learned about a different Obama. The Obama of Iowa was transcendent, post-partisan, eloquent figure who wanted to transcend normal politics or reform and so on. and now we find out in many weighs he is more conventional with some of the more conventional with more some the more conventional flaws of a Democratic police, particularly his liberal voting record. You have the Jeremiah Wright episode, a church he attended for 0 years. So how much of a problem is this for Obama?

HENNINGER: Well, I think it is reflecting a very significant weakness in his candidacy. These issues are more than nothing, the Reverend Wright problem, now that Bill Ayers, the radical and miss now the missteps in answering questions on capital gains. And when he gets trapped into an issue like this where people have legitimate concerns, he starts to talk. It is almost logorrhea. He keeps talking and then he inevitably says my candidacy is about moving beyond problems like this and uniting the country. And this is basically articulate nonsense.

You can't dodge and weave your way past every serious issue that's put in front of you. That's what he has been doing so far. I think that's a weakness. He is not as strong as he seems to be.

RILEY: Hillary, also opened -- shows she has to be careful how she attacks him. Because she opens herself up to similar attacks. The Bill Ayers comment, the Weather underground activist, radical from the 60's, Obama said your husband pardoned members of the Weather underground, so which is worst? You have the spectacle of these two Democratic candidates arguing who is further left-wing.

HENNINGER: I think they are seriously damaging each other. And Hillary problem going back two years is she is a polarizing figure. That upset Democrats. And she is giving us a case study in polarization.

GIGOT: John, Democrats are furious with Hillary Clinton in bringing up cultural arguments and stressing them because she said you are playing from the Republican play book. They have a point. These are arguments Republicans make that resonate in a general election and Hillary and Bill Clinton used to fight against. Will this line of argument help Hillary in the primary to overtake Obama?

FUND: I think it will make her do better. But the real argument Hillary is making is these arguments are inevitable. They will be raised in the fall, raised by the Republicans. Deal with them now and see if Obama can step up to them. In he can't, you will see what happens to Michael Dukakis 1988 and what happened to John Kerry in 2004. They were whipsawed by cultural contradictions of their campaign. They were seen as out of touch by people and they lost.

GIGOT: Dan, you made a point this week in your column, which is you think this is the week, this last few days has been the week when the Democrats surrendered in the so-called culture wars. What did you mean by that?

HENNINGER: What I meant by that is they had been campaigning on issues like the acceptability of people having guns. They are in these small towns in Pennsylvania. They spoke at a forum the other night at great length about the legitimacy of people having religious faith and participating in politics.

One way or another, these are two presidential candidates moving the cultural issues to the right. And what they are reflecting there is that they have to have those sorts of people in politics for the Democratic Party to win, no matter how often the left wing of the Democratic Party wants to push them to the side. And I think this is one of the most significant things that has happened in the campaign.

GIGOT: Overall is Obama being portrayed, Jason -- we don't have a lot of time -- but is he being unveiled as a conventional liberal politician a la Dukakis and Kerry and therefore would be vulnerable to that line of attack in November?

RILEY: Yes. Yes. Some of us said all along there is no substance here. That he was a very articulate guy, a slick speaker, an eloquent spokesman but not much depth there. It is being revealed.

FUND: There is a lot of depth. He wants to raise taxes for everywhere earning over $97,000 a year and at the same time claim he won't raise taxes on anybody earning under $250,000 a year. That's not substance. that's complete confusion.

GIGOT: All right, John, thanks.

Ahead, John McCain's plan to save the sagging economy. We look at the good, the bad and the ugly, when we come back.

(COMMERCIAL BREAK)

GIGOT: In a wide-ranging speech in Pittsburgh this week, Republican presidential candidate John McCain laid out his plan to save the sagging economy. The proposal includes an optional flat tax for individuals, a cut in corporate tax rate and summer-long suspense of the federal gas tax.

Jason you saw the plan. What did you like about it?

RILEY: Well, some things you mentioned. The corporate tax rate he wants to reduce from 35 percent to 25 percent, which would be a good thing for U.S. competitiveness. We are the highest corporate tax in the world...

GIGOT: After Japan.

RILEY: After Japan, in the developed world, that is. He also called for a phase out of the alternative minimum tax, which everyone knows is creeping into the middle class because it is not indexed to inflation, and called for a voluntary flat tax. Those are good things. Whether they outweigh the bad and ugly. I will refer to my colleagues.

GIGOT: Dan, what didn't you like about the speech?

HENNINGER: I thought he went way over the top in the beginning with class warfare attacking Wall Street, naming individual precisely. And he has also proposed a Justice Department task force to look into mortgage abuse.

This is coming very close to a presidential candidate suggesting that some of the activities in the Market are criminal activities, which I think is totally inappropriate at this point for him to be doing and signaling people out for whom there is no evidence yet that criminal activity occurred.

GIGOT: This populous streak is John McCain though.

HENNINGER: It is like channeling Teddy Roosevelt.

GIGOT: And citing Jimmy Cain of Bear Stearns and Angelo Mazilo of Country-wide, they made a lot of money during the boom but they had their stakes wiped out more or less here in the bust. Is this appropriate, as Dan suggests, for a presidential candidate to single out individuals?

FUND: It is not appropriate for a president. But a presidential candidate can convince themselves this is necessary politics. Look, George Bush tried to redefine conservatives in 2000 saying he was a compassionate conservative. John McCain is playing the maverick conservative card. He is trying to appeal to Independent and Democrats saying, I am not a traditional Republican.

What that leads him into I think is good crusades against earmarks and wasteful spending. It also leads him into I think incoherent populism such as this. So you get both.

RILEY: There are other places in the speech where McCain reveals his populist streak, not for the better when it came to the flip-flop on the government housing bail out. A month ago he gave speeches that said it is not the government's job to bail people out who made bad decisions, took out loans they couldn't repay. Now he supports the government guaranteed restructuring program. So again, McCain has a populist streak and sometimes it gets out of hand.

HENNINGER: Ronald Reagan had a populist streak too but it was a positive populist streak. When he talked about work and growth and productivity, he meant them as good things. And I think John McCain is capable of doing that. The good parts of his economic speech are part of that. But instead of going in the direction John was just describing, I think he has to worry about his conservative base and give a positive vision to the voters out there. Not a purely populist negative vision.

GIGOT: On that point the optional flat tax does seam to be a big step in the right direction of fundamental tax reform, which is a big idea. And of course would be something he could run on as a reformer and not just somebody representing the status quo.

How would that work, John, the optional flat tax?

FUND: It has been done in places like Hong Kong, which is economically booming. What it basically says you is you agree to give up all deductions and get a flat rate, 15 percent.

GIGOT: Presumably lower rate.

FUND: Much lower rate. And you basically solve the paperwork problems. You don't spend time worrying about keeping records on every little bit. And you then can go out and produce knowing exactly what your tax rate will be and not paying an accountant frankly.

GIGOT: Because it is optional it will allow him to deflect the Democrat attacks that he is taking away deductions from all Americans. You make your own choice to give up those deductions.

FUND: The theory is, since we spend so much time complying with tax code and complexity, more Americans would sign on because they don't want the bother of the Bible-sized tax code we have now.

GIGOT: Jason, the 18.4 percent federal gas tax moratorium, how does it make you feel about John McCain, better or worse?

RILEY: That was pretty gimmickry. But again, it's in with the populist streak that he has. It is popular.

GIGOT: It is popular. But it's not going to make that difference.

HENNINGER: That tax goes back to the depression in 1932. Used mostly for deficit reduction. I say good riddance to it.

GIGOT: OK, Dan, thanks.

Next, Pope Benedict's message to American Catholics. Is the cafeteria closed? We'll when "the Journal Editorial Report" continues.

(COMMERCIAL BREAK)

GIGOT: Pope Benedict will wrap up his trip to the U.S. this weekend with a mass at New York Yankees Stadium Sunday afternoon. A key theme throughout the visit, his first as pope, has been the creeping influence of secularism in the lives of Americas 67 million Catholics.

We're back with Dan Henninger and John Fund. And joining the panel, Naomi Schaefer Riley, who edits the "Wall Street Journal" Houses of Worship column.

Naomi, a big, warm welcome in the United States. What is his most significant message he is bringing to American Catholics?

NAOMI SCHAEFER RILEY, HOUSES OF WORSHIP COLUMNIST: To live a more catholic life. I think during his address to the U.S. Conference of Bishops he said we can't have a separation between our faith and our life. And I think what he meant, and he sort of talked about this a bit, is people describe themselves as Catholic but ultimately when it comes to the way they have you -- view medical procedures or business practices or sexual ethics, they don't lead a Catholic life.

GIGOT: This is the phrase the Cafeteria Catholic. You pick and choose the obligations of the fate you want to abide by and discard the others.

SCHAEFER RILEY: Exactly. It is a very American approach to religion. The pope traced history and said, once upon the time, we could depend on the Catholic ghetto. It called it a ghetto. That's been used disparagingly. But once upon a time, we could depend on a culture to inculcate these ethics in American Catholics.

Now there's been a lot of assimilation, which is for the good. The American Catholics and the immigrants have lifted themselves up but the result is they are constantly surrounded by secular values and they adopt some of them and don't adopt others.

GIGOT: He makes the argument from the European culture that he has emerged from where secularism emerged triumphant. And there is no mainstream Catholic culture of any note to speak of. And he wants the United States to avoid that kind of transition. That's what I heard between the lines in the speech.

HENNINGER: Paul we can throw it larger. The pope's constituency is global. He has big problems in the Middle East, in Muslim countries where Christian communities are under pressure. You can read much of what he said this week in the United States as arguing that religion and people of faith ought to be able to participate in the world as it exists. They ought to be able to integrate. He is trying to make the argument that Christians from Islamic countries ought to be able to participate in the lives of those countries.

FUND: The American model is a good one. The other part of the message is to Catholic educators. He said they are doing wonderful work in making sure students in poor areas and inner city schools are educated, but had words of caution for Catholic universities. I have been to some. Sometimes their education isn't all that Catholic.

In fact, the University of St. Thomas in St. Paul just last week tried to prevent a conservative speaker, a former black welfare mom, from speaking. They rescinded that when they knew the pope was coming. But the message in universities often doesn't get through.

GIGOT: Naomi, that point is interesting. He talked about Catholic education as a transmitter of Catholic culture and that it needs to keep with that role.

SCHAEFER RILEY: Yes, he sees a distinctive role for Catholic education and there are a lot of university professors who want Catholic universities to look like any other university. He said -- one thing he specifically addressed was this idea that they keep using academic freedom as justification for anything they want to teach, whether it is having pro- choice speakers on campus or the "Vagina Monologues" or teaching things contrary to Catholic teach. Academic freedom is great, but you can't use it as justification for anything you want to do at a Catholic university.

GIGOT: Naomi, the pope also met with sexual abuse victims. "The New York Times" put that as the main story on the front page. How did he handle that?

SCHAEFER RILEY: He's very adept at this. I think he met with individual victims and didn't make it into a political thing. And I think he handled it very well and will receive credit for that.

GIGOT: 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, Dan Henninger takes on the boss.

HENNINGER: Bruce Springsteen announced on his web site he is endorses Barack Obama. So what else is new?

RILEY: Big surprise.

HENNINGER: But then he says it's because he speaks to the America I have envisioned in my music the past 35 years. This goes back to 1973 in his first album.

Personally, I have long felt that "Born to Run" in 1975 was his last truly great album. Because after that he sort of transformed himself into this rock 'n roll Woody Guthrie, the world's last concerned man.

I don't care what these entertainers do with their politics. But we listen to peel like Bruce Springsteen for fun, not to have our faces rubbed in politics.

GIGOT: All right, Dan, thank you.

Next, a Harlem school's success story -- Jason?

RILEY: I wanted to give a hit to the Harlem Success Academy Charter School in New York City, which led by a woman named Ela Moskowitz (ph), a former city council member.

There are so few decent schools in Harlem that they have to hold lotteries to decide which kids attend them. The average eighth grade Harlem student in the traditional public schools there can't read at grade level. So Harlem Success is having their lottery this week. And something like 4,000 families are expected to show up for just 600 slots. I wanted to give a hit to what Ela Moskowitz (ph) is doing in Harlem. And I hope she continues.

GIGOT: And the school choice success that should be replicated across the country.

RILEY: Yes.

GIGOT: Finally, the Finns fight for more vacation, all in the name of love -- Naomi.

SCHAEFER RILEY: Yes. Well, put this under the category of government can solve any problem. Apparently Finland has a high divorce rate. The Finnish typically European solution to this is people need more vacation. So in addition to the 25 mandated days they already have, the Finnish people, if this bill passes, will be entitled to another ten days of love vacation.

GIGOT: Is this going to work?

SCHAEFER RILEY: It is hard to say. I am not willing to go on a limb on this one.

GIGOT: I thought the Finns were pretty much six months of the year on vacation.

All right, thanks, Naomi.

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 my 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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