This is a rush transcript from "The Journal Editorial Report," May 24, 2008.

PAUL GIGOT, HOST: Up next on the "Journal Editorial Report," Hillary may still be in the race but Barack Obama is turning his fire on John McCain and linking the Republican nominee to President Bush. Will the strategy work?

Plus, oil hits a record high as industry execs gets grilled on Capitol Hill. But will congressional hearings ease your pain at the pump?

And the continuing saga of Harvard and the ROTC. Will that school's president use an upcoming ceremony to score political points?

Find out, after these headlines.

(NEWS BREAK)

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

Hillary Clinton may still be in the race but Barack Obama has his sights set on the general election and John McCain, and he is doing his best to link the Republican nominee to an unpopular president.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, PRESIDENTIAL CANDIDATE: This year's Republican primary was a contest to see which candidate could out-Bush the other. That's a contest that John McCain won.

(END VIDEO CLIP)

GIGOT: Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; columnist and former Bush speech writer, Bill McGurn; and Washington columnist, Kim Strassel.

Kim, let me go to you first. With the presidential approval rating at 30, 32 percent it seems like a good strategy to try to link an unpopular president to your opponent. What does John McCain have to do to counter that?

KIM STRASSEL, WASHINGTON COLUMNIST: You know, one of the reasons John McCain continues to do well in national polls is because he already has a reputation as being a bit of a maverick, not being tied to the party. He has been taking a smart policy so far, which is to point out positions where he has always had differences with the party, on earmarks, on pork barrel spending, the conduct of the Iraq war. And so far, this has suitably distanced himself.

Something he needs to be careful of is not just trying to distance himself from President Bush for distance sake to the point where he is actually alienating some core Republicans.

GIGOT: He is. Kim makes an interesting point and he is running, Bill, about 16 points ahead of Republicans nationally in terms of how the House and Senate Republicans are doing. Clearly, doing much better than President Bush. Does he have to do more than Kim says?

BILL MCGURN, COLUMNIST & FORMER BUSH SPEECH WRITER: I think he can't let Obama define it as a Bush third term. However, He can let the Democrats define the issue. I think he has to run against Congress. Congress has an approval rating half the president's.

Whatever it is, John McCain cannot look afraid to be with President Bush. He is a great card to play. He was partly responsible for the surge and the turn around in Iraq, and I think he should play those things. He cannot let the Democrats define it and he cannot look on the defensive.

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: I think, yes, that's right. I think John McCain should probably blow the whistle on this anti-Bush mania that's out there and describe what the successes were and what the failures were. But the country is never well served when it works itself into an anti-presidential mania.

GIGOT: But, Dan, that would look defensive. It would look like he is trying to defend the Bush presidency instead of looking forward to his own. The voters know what they think about George Bush. They want to know what the next four years will be like.

HENNINGER: Yes. He has to offer something. But at the level of raw politics, I would say that do that on one hand. But on the other hand, if Barack Obama is going to hang George Bush around his neck, he should hang Nancy Pelosi and Harry Reid around Barack Obama's neck, just as Bill suggests.

The Democrats in Congress are as responsible as anyone for the non- functioning of Washington right now. and John McCain as well as anyone could run straight at those people.

GIGOT: I'll tell you what, Kim, I wouldn't just run, if I were McCain, against Democrats in Congress. I would run again Republicans in Congress. Half of them are voting for this farm bill this week that is a budget buster and gives money to all kinds of wealthy farmers. Why not run against both parties. That will make awe nontraditional Republican.

STRASSEL: I think he already is. If you listened to his speeches, he talked about the farm bill this week and singled out the pork going to Republican members, that those Republican members are bragging about back in their district. So he's doing it.

Interestingly, I think congressional Republicans are beginning to understand this is a threat to them. That this is a way he may run and he may actually hurt them. Whether or not that actually convinces them to get with the program and try to get closer to him on these issues like earmarks, that's the by question.

GIGOT: Let's change the subject to John McCain's vice presidential picks. We have three Republicans going to meet with John McCain in Arizona this weekend, Bobby Jindal, the governor of Louisiana; Mitt Romney, former governor of Massachusetts; and Charlie Crist, the current governor of Florida. What do you think of those three choices? Would they be good?

MCGURN: There are a lot of other candidates I would like to see. One of my former colleagues, Rob Portman, I'd like to see.

GIGOT: Former director of Office of Management and Budget.

MCGURN: Former Congressman.

GIGOT: Former Congressman from Ohio.

MCGURN: Right. I think very effective. He is looking for governors because of their executive experience.

There is a real chasm between a governor and a congressman because a governor has to take responsibility and it makes you a better campaigner, a much more effective. I think we see that in candidates.

GIGOT: He is also trying to get the age difference, isn't he? John McCain in his young seventies.

HENNINGER: Oh, he has to.

GIGOT: He wants to have somebody like Jindal. Jindal is very young. I think he's still in his 30's.

HENNINGER: 36.

GIGOT: 36, and interesting demographics, an American of Asian-Indian ethnicity, would be a real interesting choice.

HENNINGER: Yes. Jindal is interesting. He would do a lot to neutralize some of the Obama aura because he is not a white man. He is very smart. He is a policy wonk. Very successful. He is the governor of Louisiana, for heaven's sakes. This is someone you would think would never get elected in Louisiana.

GIGOT: Kim, briefly, what do you think John McCain needs?

STRASSEL: In a vice president?

GIGOT: Yes.

STRASSEL: Bobby Jindal — these are the three candidates you've got. You've got a populist in Crist. You've got a young forward-looking conservative in Jindal. You've got a northeast Republican in Mitt Romney. The Jindal issue is interesting. He could be a good one.

GIGOT: Thank you, Kim.

When we come back, oil reaches a new high as industry execs are hauled before the House and Senate. But are congressional hearings really going to ease your pain at the pump?

(COMMERCIAL BREAK)

GIGOT: Gas prices continued to climb this week as crude oil topped $135 a barrel for the first time. Congress' solution? Hold hearings. The executives of the five largest oil companies were hauled before House and Senate committees this week and publicly flogged for their profits and compensation.

(BEGIN VIDEO CLIP)

UNIDENTIFIED CONGRESSMAN: Does it trouble any of you when you see what you are doing to us? The profits you are taking? The costs that you are imposing on working families, small businesses, truckers, farmers?

(END VIDEO CLIP)

GIGOT: We are back with Dan Henninger and Kim Strassel. And also joining the panel is "Wall Street Journal" senior economics writer, Steve Moore.

Steve, did you ever think you would see $135 oil? $4 gasoline? And how long are these prices going to stay this high.

STEVE MOORE, SENIOR ECONOMICS WRITER: Well, I never really — I never thought we would see $100 a barrel oil. $135 is a frightening thing.

Paul, the government is sending out these checks to people in terms of tax rebates. The problem is that when you have high oil prices, it is like a tax on the American consumer.

I just did the calculations. The amount of money, extra money people have to spend on gasoline will eat up all of what they get in these rebate checks. That's a problem.

But when you listen to the tape, the thing that's outrageous is one of the big reasons we have high oil prices is Congress has blocked any effort to have a pro-production policy. If you listen to liberals in Congress, they are against oil, natural gas, coal, nuclear. Where are we going to get our energy sources from?

GIGOT: Steve, I agree with you on that, but all of that is long term, OK?

It's going to take a long time to drill in these areas.

MOORE: Right. Right.

GIGOT: I agree they need to be opened up. What needs to happen short-term to get these prices down or will they fall?

MOORE: Well, you know, this is the market. But the one thing that will almost certainly cause an increase in the price of oil is a windfall profits tax on oil companies. When we tried that in 1980, Paul, what happened is we increased our dependence on foreign oil and the price of oil increased. So the windfall profits tax actually has a negative effect on prices.

GIGOT: Kim, how close are we to getting a windfall profits tax out of Congress? This was passed from 1980 when Jimmy Carter was president. Ronald Reagan repealed it. How close are we?

STRASSEL: They are desperate to show they are doing something because here's the thing...

GIGOT: And raising taxes is doing something?

STRASSEL: Well, they are going to say they are raising taxes. This fits very much in the Democrat's populous theme about rich versus poor and they are pointing at the oil company profits now.

You know, a lot of this has to do with Federal Reserve policy, as interest rates have fallen, we have a weak dollar. This sent commodity prices through the roof.

It is much easier to bash on an oil company than it is to talk about inflation and a need for a stronger dollar and all of these things that would help with bringing down some commodity prices.

GIGOT: Dan, when I see — when you look at the polls it seems to me prices are what really has people anxious about the economy, not jobs, not even the housing recession. They are worried about what they are paying for food and gasoline. About 50 percent of voters say this is their number-one economic concern. This is just killing Republicans.

HENNINGER: Yes. It may kill them in November. It is baked in the cake. We have discussed it many times on this program, Paul. It is probably is related to the Federal Reserve's easy money policies.

Just this week, as a matter of fact, New York Fed governor, Kevin Warsh, gave a speech in which he said it is time for Wall Street to start raising capital again and figuring out ways to make the market function. And he is right. Wall Street has to stop whining for the Fed to give them more cheap money, because that cheap money is feeding right into the price structure. And I am not sure that the Republicans or John McCain can do anything about it between now and November.

GIGOT: Warsh is a Federal Reserve governor, not the New York Fed.

HENNINGER: Right. Right.

GIGOT: Steve, let's talk about another spectacle in Washington this week, which is the farm bill, $300 billion. An enormous pork barrel exercise. Yet, President Bush tried to veto it. It was over ridden by the House and Senate with bipartisan majorities. What explains this spectacle?

MOORE: Another cheery subject.

(LAUGHER)

Well, the thing that's so outrageous about this bill is that it lavishes tens of billions of dollars in the wallets of the farmers. And guess what, Paul? The United States farmers today, American farmers are having their best day ever without any federal support. I mean if you look at what is happening to the price of corn and wheat and rice, they are through the roof. Farm income is way up. This is just a big give away.

As I look at the situation, my goodness, the farmers should be writing us checks. The taxpayers shouldn't be writing them checks.

GIGOT: Kim, why are Republicans signing on to this? About half of the Republicans in the House voted for it. John Boehner, the lead minority leader, opposed it but two other members of the leadership voted for it, Roy Blunt and Adam Putnam. What explains that support?

STRASSEL: In retrospect, Republicans may find this was a blown opportunity to redefine themselves. I know some in the leadership told members before this vote, "This is your shot. This is your opportunity to show the American public we have changed. That we are not all about special interests and doling out money to people."

But a lot of the Republican members looked back and said, hey, I am not going home this fall and not bring home my farm money because it will hurt me in my individual election.

GIGOT: Briefly, John McCain opposes this.

HENNINGER: Yes, and there's a big opportunity her for him. The details of the farm bill are disgusting. It is virtually another earmark scandal. If he went out there and talked about how they are simply pouring money out the door to these farmers, I think it would gain ground.

GIGOT: All right, thanks, Dan.

Still ahead, the continuing saga of Harvard and the ROTC. Will that Ivy's new president use an upcoming commissioning ceremony to score political points?

(COMMERCIAL BREAK)

GIGOT: Just in time for Memorial Day, an update on the continuing saga of Harvard University and the ROTC. That Ivy League school has long had a rocky relationship with the military. ROTC has not been allowed on campus since it was booted off during the Vietnam War. Harvard students wishing to participate in the program have to travel to nearby MIT.

Now the University President Drew Faust says, although she will attend this year's commissioning for Harvard ROTC grads, she may use the venue to express opposition to the military's Don't Ask Don't Tell policy.

We are back with Dan Henninger and Bill McGurn. Also joining the panel, Wall Street Journal deputy taste page editor, Naomi Schaefer Riley.

Bill, what does Harvard have against reserve officer training?

MCGURN: That's the question. They are being clever about it this year. President Faust has said all Harvard students should have the opportunity to serve in the military. The mail that I got suggests most people aren't buying it. They just have a problem with the military.

GIGOT: By all, you mean even gay and openly gay Americans?

MCGURN: Openly gay. Remember, gay Americans can serve. It is just whether you are open or not.

GIGOT: You say this is cover? Political cover for what...?

(CROSSTALK)

MCGURN: They were booted out during the Vietnam War. And people just don't think Harvard is that amendable to people in service.

GIGOT: So this is a proxy for anti-war sentiment? Do you really believe that? Do any of you disagree with that?

SCHAEFER RILEY: No. I think someone should call her bluff. Does she want more Harvard students taking up arms? I would be surprised if she acknowledged that.

There is an interesting question here which is about service. And I think if you talk to a lot of college presidents today, they really emphasize service. They want graduates to go into service. And it's all kinds of service.

GIGOT: Teach for America.

SCHAEFER RILEY: Teach for America had to turn down tens of thousands of kids who wanted to join. But when it comes to military service, there are few elite college presidents willing to stand up for it.

GIGOT: What about this issue of the tension between military culture and civilian culture. It is a very popular issue among military writers. Tom Ricks of "The Washington Post" writes about it. There is a concern there is this big gulf within our society between the culture of the Officer Corp, which is conservative, often, politically, and civilian culture. Wouldn't allowing Harvard grads to join, to become officers, help bridge the difference?

HENNINGER: There would be nothing wrong with having Harvard grads in. But what I think is at the center is the way Harvard thinks about those sorts of cultures. There is such a thing on campus known as identity politics, which is celebrated at places at Harvard. In other words, if you're gay, if you're black, gender, sexually orientation, you are supposed to bring that forward. The military tries to suppress that individual identity because there has to be a unity of command and a cohesion.

GIGOT: There are no Irish Marines.

HENNINGER: There are no Latino Marines or black Marines or gay Marines, but Harvard insists on pushing that idea. And I think the military is resisting letting it inside the door.

GIGOT: Let me ask you a question, Bill. If president Faust believes this sincerely — let's give her the benefit of the doubt — why shouldn't she speak up at a ceremony like this and say this is what I believe and use this opportunity?

MCGURN: I'll tell you why. One is we know her position. We know Harvard's position. There are plenty afforded (ph) to do this. The men and women whom get the gold bars of a lieutenant or ensign there, this is their moment, their first moments as officers. Is that really the occasion? I think it is a perfectly appropriate policy to be debated.

We always hear from the left that they support the troops but they just have a problem with the war. These commissioning ceremonies are a good time to show it. It doesn't mean that ROTC has to be and every campus but people that choose to serve in the military should be honored. It shouldn't be back door, with no one attending, that's sort of thing.

SCHAEFER RILEY: Right. Plus, she is using 22-year-olds to basically make a political point, which I think is inappropriate. The policy can be debated, but for these individuals that worked this hard in their years at Harvard, in addition to their course work, to actually go and do this kind of training. I think it's just something to be praised.

MCGURN: They don't set the policies.

SCHAEFER RILEY: Exactly.

MCGURN: It's not their policy. It is set in Washington.

GIGOT: Well, and she does have a couple of Democratic Senators, John Kerry and Ted Kennedy. She could say you can change this policy if you wanted in Washington.

MCGURN: It is President Clinton's policy.

GIGOT: All right, Bill, 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, American Airlines tells passengers pack light or pay up — Dan?

HENNINGER: We all know American will start charging most people $15 to bring a suitcase. This is really cheesy. But they are saying they have to do it because of the high price of fuel. But the fact is the nickel and diming of passengers predates the rise in the price of oil. We have all been flying across the country these days on a bag of potato chips.

Their problem is essentially high-unionized labor costs. They have had this problem for a long time. The only way for the airline to get under the cost of the structure is to start an entirely new airline.

The bottom line here is you can waive good-bye to the airlines of your youth, like American and Delta, because a lot of new airlines will soon be arriving.

GIGOT: What choice do you have? It costs too much to drive.

All right, thanks.

Next, in a new philanthropy survey, Americans come out on top — Naomi?

RILEY: In 2006, Americans gave $34.8 billion to developing countries. I think it's really worth giving a hit to. It turns out, according to this survey, the Index of Global Philanthropy, $8.8 billion was given from religious groups; more than 60 percent of religious groups in this group gave money to developing countries, an average of $10,000 per group.

For those people around the world who claim Americans can be stingy, this is a rebuke to them. and it is worth pointing out that this is private philanthropy. These are people who really care whether their dollars are being put effectively to use, perhaps more so than the NGO's out there.

GIGOT: All right, thanks, Naomi.

Finally, two more countries hop on the flat tax bandwagon — Steve?

MOORE: Unfortunately, Paul, the United States is not one of them. Poland and Hungary announced plans to adopt a flat tax. Hungary is looking at 1 percent. Poland 15 percent. Both governments are saying they have to do this to make their economies more growth-oriented. This brings to 24 countries now that have flat taxes.

Unfortunately, Paul, the United States is not one of them yet. But I predict within the next five years the U.S. will join the throngs for the flat tax.

GIGOT: Another prediction, Steve, what I think will happen is — I am not sure about the flat tax, but I think the corporate tax in the United States will be cut, even if there is an Obama president.

MOORE: Just like Ireland.

GIGOT: 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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