This is a rush transcript from "The Journal Editorial Report," June 21, 2008.

PAUL GIGOT, HOST: Up next on "The Journal Editorial Report," the presidential candidates square off over energy with drilling and nuclear power front and center. We'll break down their plans.

And as Midwest flood waters continue to rise, a look at what the damage means for food prices in the months ahead.

Congress finally finds a federal program it wants to cut. Too bad this one actually works. The latest in the battle over school choice.

But first, these headlines.

(NEWS BREAK)

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

With gasoline prices continuing to hover around $4 a gallon, the presidential candidates squared off this week over their energy plans. In a change of course Republican John McCain called for lifting the ban on off-shore oil drilling and exploration and accused Democratic rival Barack Obama of resurrecting the failed policies of the 1970's.

Here is a closer look at what each candidate proposes, Wall Street Journal columnist and deputy editor Dan Henninger, columnist Mary Anastasia O'Grady and Washington columnist Kim Strassel.

Kim, let's start with you.

A month or so ago, the Republicans were on defensive on oil prices. Now, John McCain tried to change that debate by calling for more oil drilling. Is it working?

KIM STRASSEL, WASHINGTON COLUMNIST: I think it is. When you have $4 a gallon gas it focuses the mind out there in the public. What helps him is there is a very clear distinction between what he and Barack Obama are proposing. He says, look, America has a lot of oil resources with huge potential. We don't —supply is tight. We should go in there and drill. It will help with oil prices.

Barack Obama is saying, you know, I am not going to do anything about more drilling. In fact, I want to do is take a lot of tax dollars and spend it on more alternative energy research. A lot of Americans go, how does that help me now?

DAN HENNINGER, COLUMNIST AND DEPUTY EDITOR: Paul, there is tremendous political paradox and dilemma at the center of all of this. Back in the past, when gas prices got to $3, the public would go ballistic. They hate it had. Now it is at $4. They simply refuse to pay those prices for gasoline.

But all these alternative energy ideas have to have gasoline and oil prices at this level to be economically viable. So the alternative really is to go with the energy and the oil that we have got and while we bring markets into some sort of equilibrium that will allow some of these alternatives in. You can't force them down people's throats.

GIGOT: Aren't their a couple of contradictions in John McCain's message? On the one hand, he says I want to increase oil drilling in order to reduce prices. On the other hand, he says, we have to do something about global warming with a cap and trade regime. The goal of which is to raise prices. On one hand he says, yes, I will OK off-shore drilling off the coast, but I don't want to do it in Alaska.

MARY ANASTASIA O'GRADY, COLUMNIST: This is the big tent of Republican politics. He wants to bring in as many people as possible.

GIGOT: It is a big tent and it's a contradictory tent.

O'GRADY: It is contradiction. He hopes no one will notice. Speaking of contradictions, I notice the Democrats are saying that all of these oil companies are sitting on lease and they just don't want to bring the oil up. This is the most preposterous thing...

GIGOT: That's one of the arguments that Democrats are using to say, look, this he drilling thing won't work. What's your response to that?

O'GRADY: It as if our politicians think that the way you find oil is like Jed Clampett found it, go out and shoot a hole in the ground. There is an exploration process that goes on once you bid for a lease. Those years are ten years long. It takes a long time to figure out if there is oil there. You do the seismic research. When you are ready, there is a lot of investment risk there.

So that's why the leases may have been given out but they are not actually producing yet. And some of them are in very difficult terrain like in northwest Alaska. There is a lot of ice and it is very difficult to get it from there.

GIGOT: So your point is, the more land we have to look at, the more likely we are to find some of these supplies.

O'GRADY: Exactly.

GIGOT: Kim?

STRASSEL: Paul, let's put that in perspective. Democrats are out there saying all this land that isn't being used. OK, in the outer continental shelf, currently about 2 percent of the 1.8 billion acres is leased. The on-shore federal lands, about 6 percent of the 700 million acres is leased. We are talking a small proportion of total acreage for discovery.

GIGOT: Dan, another argument that the Democrats are using, that Obama is using is this is not going to answer short-term energy — gasoline price concerns because if you drill today, it will take 8 or 10 years for this to come on stream. This is a gimmick by McCain to pander to middle class concerns.

HENNINGER: Well, I think that's kind of like a high school debating point. What is oil something like water? You just turn on a spigot? Everybody knows it is not a short-term solution.

But the government geologists estimate we have something like 86 billion barrels of undiscovered oil out there. This is the only country on the face of the earth that would have that much energy reserves and refuse, explicitly refuse to explore it.

Energy, gas and oil have become a strategic weapon. Russia uses it that way and Venezuela use it is that way. I think we have to get back in the game and not show that we are unwilling to explore.

GIGOT: It's not going to have a short-term impact on prices.

O'GRADY: There is a short-term impact I think. The fact is we have a tight market and global demand. What you also have is a weak dollar which has caused a lot of speculation. If you start having a lot of drilling activity, that will signal the market that there is more coming on. That will affect the speculative end of the market, which could have a very big effect on oil prices.

GIGOT: Kim, let me ask you about one other thing John McCain is raising and that's nuclear power. He said this week that we should build 45 nuclear plants by the year 2030. Is that good policy, number one? And is that even possible since we haven't built a nuclear plant, started a nuclear plant since the late 70's.

STRASSEL: It is a great policy. He is deal with the other side of this equation, which is not the gas and oil, but electricity. Electricity costs are also set to go up because, in general, the costs of fossil fuels are going up. He is trying to deal with that side. Nuclear energy would help.

You are right. Right now we have an interminable process for getting a nuclear approval. It hasn't happened in a long time. The capital markets are still very wary of giving money to the nuclear industry. It is great, but it would take a huge push and a huge change in policy right now in the bureaucratic mess that's out there in terms of getting the plants online.

GIGOT: Kim, we will watch this debate. It's going to be a good one, right through November.

Still ahead, think you are already paying too much at the grocery store? What the Midwest floods mean for global food prices, when "The Journal Editorial Report" continues.

(COMMERCIAL BREAK)

GIGOT: President Bush toured the water-ravaged Midwest this week amid growing concern the heavy rains and flooding there will push up already soaring food prices. Corn futures hovered near a record high of $8 a bushel on fears more than three millions acres of the crop could be lost.

Mary, I think we have to first praise some of the way some of these Midwest governments have responded. They seem to have responded with generally a lot more competence than New Orleans did, coordination between federal emergency people and on the ground and the volunteers manning those sand bags and keeping the levees up. It has been an impressive performance.

O'GRADY: There is not much you can do about bad weather. There are other bad policies that are driving us under water, but I would call the problem here that's coming about these floods a perfect storm because you have very bad policy with the dollar. You have the ethanol policy. And you have lots of speculation. And you have rising global demand. What do you expect when you dump a lot of water on top of that?

GIGOT: Just so our viewers understand the dollar problem here, you're talking about the weak dollar caused by a Federal Reserve that's inflated the currency. And because these commodities are traded on a global basis in dollars, when you inflate the currency, people want more dollars for the commodity.

O'GRADY: Yes. In fact, if you look at about August of last year, is where corn prices really started to take off. The chart just goes straight up from a little over $3 a bushel to now more than $75 Bushel. And it is hard to deny that that doesn't have to do with the Fed just printing too much money.

GIGOT: Soybeans, Dan, $15 a bushel now, used to be, a year ago, $7.70. Fertilizer has also doubled. How high are we actually going to go here? Could we really see, I mean, a big spurt?

HENNINGER: We could see a big spurt. This was happening even before the floods. It was a very difficult agricultural season for these commodities, but — then also before the food the flood, the University of Missouri's agriculture department released a study on the effect of ethanol subsidies on this. They estimate between 2011 and 2017, corn price does rise 16 percent as a result of ethanol tariffs and subsidies.

This is an enormous distortion to the system now. And people reading the stories about the flood, you're got these corn and hog farmers just screaming about it. And you know what is one of the things they are beginning to recommend? Cutback on what we spend on ethanol right now, which would have an effect of bringing corn prices back. What do you think the chances of Congress are of doing that?

GIGOT: Let me ask ethanol's best friend in Congress, in Washington, Kim Strassel. I know you've been admiring that subsidy for years.

But is the politics of this ethanol changing as a result of this. Chuck Grassley, the senator from Iowa, the state is that suffered much in recent weeks, is probably the biggest supporter he have ethanol subsidies in the senate.

STRASSEL: Oh, yeah. This actually started to changes more than a year ago and it is because of what Dan just mentioned. You have to look at all of the different things that corn feeds out there. It isn't just what goes into our cereal, but it makes corn fructose syrup that goes into soda pop. It is what feeds live stocks and pigs. You started having all of these other constituencies going to Washington saying we can't stand the cost of this anymore. You need to do something.

That made those in Congress wary about — they had been planning, yet, another huge change, more ethanol subsidy as well and a bigger mandate. And they have put the brakes back on this. The legislation they passed last year did call for more ethanol, but they capped the amount that could come from corn. So you have seen a change.

GIGOT: All right, but that's still a modest change.

Mary, bottom line here, are consumers going to see any relief from these food prices any time soon?

O'GRADY: I don't think so. The Fed is very worried about an economic slow down and they are saying, while they are probably not going to cut more, they are not going to do anything to shore up the dollar. You know you have a lot of speculation here also.

On top of this problem, you have another problem brewing which is a bubble in commodities. When that breaks, we will have another flood.

GIGOT: Good news from Mary O'Grady. I am afraid she is probably right though.

Still ahead, think Congress never met a spending program it didn't like? Think again. When we come back, the latest in the fight over funding for school choice.

(COMMERCIAL BREAK)

GIGOT: Democrats in Congress finally found a federal program they want to cut. But before you get too excited it is one that actually works. The Opportunity Scholarship Program provides vouchers to about 2,000 low- income children in Washington, D.C. so they can attend religious or other private schools. It gives parents an alternative to public schools there which are consistently ranked among the worst in the nation.

This week a House subcommittee voted to fund the program for one more year but warned this was probably the last time it would receive full financial support from the government.

Columnist Bill McGurn and editorial board member Jason Riley covered the debate over vouchers and school reform for us. They join me now.

Jason, 2,000 kid in Washington, D.C. A lot of our viewers might say - - might want to know why should we care about this debate?

JASON RILEY, EDITORIAL BOARD MEMBER: We should care about this debate because, as you mentioned, poor minority kids in the country are getting a raw deal from our public school system. This is a ticket out for them. And this program is the first federal voucher program in the country signed into law by President Bush in 2004. And it is a shame Democrats, who claim to represent these folks, politically, are indifferent to its survival.

GIGOT: The families who go to the schools, what average income?

RILEY: You are talking $22,000 for a family of four, is the typical income of a kid in this program.

The shame here is that it is a hugely popular program with the kids and with the parents. They love it. There's something like five applicants for every slot available.

The kids in this program, 80 percent of them or near 90 percent actually, are scoring better in reading than their peers outside of the program. We also know that if this program were to shut down, 86 percent of kids would return to a school that we know if failing.

GIGOT: Bill, there was a recent study coming out of the U.S. Department of Education that says, at least "The Washington Post" headlines on the report, said that there wasn't a lots of progress in reading or math after two years.

BILL MCGURN, COLUMNIST: Right. There's several things to say about it. One, it did show some progress. What it didn't show is statistically significant progress. That's consistent with other studies. So they are showing some progress.

I think the bigger point is, it is not just the school system. A lot of parents, if you talk to them, they are happy there is no drug dealers at the dear, that it is safer in these schools. The parental satisfaction is very high because there is a lot of factors that go into choosing a school.

GIGOT: Let's broaden this beyond D.C. We had voucher experiments in Florida. We've had them in Cleveland and we've had them in Milwaukee. What's the evidence, the educational evidence of improved performance or not in these areas?

MCGURN: It is mixed. Some studies show that there is improved performance. Some studies show there is not. Parents are happy with the choice. If you are looking at it for a vote, there is usually a waiting list wherever there are vouchers for people to get on it. Clearly, moms and dads think the school is doing a better job.

RILEY: But on balance, the evidence is positive. In both Florida and Wisconsin, the evidence is positive. What's also happening though, what doesn't show up in a lot of these studies is the competitive pressure put on the surrounding public school system, who doesn't want to lose kids into these programs. So there are other external effects going on too that a positive.

MCGURN: That's happening in Washington because they appointed a new administrator there who is very good.

GIGOT: Michele Reed, big reformer.

MCGURN: Michelle Reed, big reformer. That would not have happened I believe without the charter schools on the voucher program.

GIGOT: The argument I've always liked about vouchers is this is public money and we are supporting private schools, but they do begin to pressure the public schools. Because if you don't have that competition, you are left with trying to reform the system from within, which we know politically is so difficult to do.

HENNINGER: Yes, let's get political. Then do pressure the public schools. And the Democratic Party and the teachers unions simply refuse to allow any of these alternatives to the establish status quo. It is not as if the schools are a crime against humanity. They are simply trying to find a better way. The Democrats will not allow it to happen. The person pulling the plug in Washington is their congressman, Eleanor Holmes Norton.

GIGOT: Let's talk about this political candidate, Barack Obama, who says he will be transformative and would have a real chance, given his background and who he is, as a Democrat, to really change this debate over school reform in the country.

What does he say about the D.C. program?

MCGURN: He hasn't said anything yet. He is giving a mixed thing on vouchers. He's denounced them in one area. Then he said he would be open if he saw evidence. This is a moment for him to stand up and show courage. This could be a moment for him to stand up. These people, as I say, have change they can believe in. And they want to see the guy stand up for them.

(CROSSTALK)

RILEY: Obama gave an interview to ABC News last week where he says he is opposed to school choice because it creams folks off the top. He has it exactly backwards. I mean, people like Barack Obama don't know school choice. They have it. They don't need voucher programs like what we have in D.C.

GIGOT: His kids go to a lavish school in Chicago.

RILEY: They do. Those are the options. Those are the options that wealthier folks have. They will send their kids to private schools or they'll move to a neighborhood with better public schools.

GIGOT: So you don't expect a lot of change nationally?

RILEY: No. No.

GIGOT: Believe it or not.

We have to take another break. When we come back our, our panel weighs in with their "Hits and Misses" of the week.

And remember, if you have you own "Hit or Miss," please send it to jer@foxnews.com.

(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 miss to Barack Obama and his national security message — Dan?

HENNINGER: Barack Obama this week said Bush and McCain have been weak on the war on terror — Mad Dog George W. Bush. In the space of about 48 hours, his advisor said that if Usama bin Laden was caught and brought to Guantanamo, he would be given habeas corpus rights under the Supreme Court's Gitmo decision. Another advisor said that probably won't happen because there is an outstanding shoot-to-kill order for bin Laden.

Obama himself said he would not let a host nation's unwillingness to act stop us from grabbing bin Laden.

If I understand this correctly, they are willing to hunt this guy down into an alley, put a gun to his head and shoot him. But if he makes it to Guantanamo, he gets his full constitutional rights to beat the rap. This is the pinball logic of the Obama war on terror. And I think we're going to have to get used to it.

GIGOT: All right, Dan.

Next, a miss to the U.S. war on drugs — Mary?

O'GRADY: Yes, a big fat raspberry to the U.S. war on drugs, which is predicated on the idea that all we have do to stop Americans from using is to stomp out the cocoa plants in south America. And our drug warriors have gone at this with great gusto since 2000 spending a billion dollars in Columbia trying to indicate the cocoa plant.

This week, the U.N. released a report that says that 27 percent more land was used to grow cocoa plants last year and only in Washington can this be considered a success, because cocaine production was down 2 percent from Columbia this year. They don't mention how much of the stuff is now coming out of Venezuela, which is not cooperating with us.

GIGOT: All right, Mary, thanks.

Finally, a hit to Tiger Woods — Jason?

RILEY: Yes. I wanted to congratulate Tiger Woods on a great season, albeit an injury-shortened one. This year alone, Tiger Woods has won $2 million more than the second best golfer in the world. And he has done so playing at half as many tournaments as Phil Mickelson, the second-best golfer in the world. And he has done so on a bad leg. A pretty good season so far I think. He's provided us with enough highlights to last for an entire season.

GIGOT: Why do you think he is such a compelling figure? Is it the excellence of sustained excellence?

RILEY: I think so. I think so, yes.

GIGOT: All right, Jason, thanks.

Remember, if you have your own "Hit or Miss, e-mail it to us as jer@foxnews.com.

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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