This is a rush transcript from "The Journal Editorial Report," September 26, 2009. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: Coming up next...

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: We have sought in word and deed a new era of engagement with the world.

(END VIDEO CLIP)

GIGOT: President Obama's United Nations debut. He reaches out to the world, but he's wavering on Afghanistan.

And the Medicare gag order, Senator Baucus sics federal regulators on an insurer who dares to criticize his health care plan.

The "Journal Editorial Report" starts right now.

(BEGIN VIDEO CLIP)

OBAMA: That we have a clear and focused goal to disrupt, dismantle and defeat Al Qaeda and Pakistan and Afghanistan. To achieve our goals, we need a stronger, smarter, and comprehensive strategy, to focus on the greatest threat to our people, America must no longer deny resources to Afghanistan because of the war in Iraq.

(END VIDEO CLIP)

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

That was President Barack Obama back in March, unveiling a new strategy for the war in Afghanistan. What a difference six months makes. The administration now appears to be having second thoughts just as his top commander there says he needs more troops to avoid defeat.

Joining the panel this week, "Wall Street Journal" columnist and deputy editor, Dan Henninger; columnist, Mary Anastasia O'Grady; deputy editor and foreign affairs columnist, Bret Stephens; and editorial features editor, Rob Pollock.

The last time we talked about Afghanistan here, you predicted that the president would not have the staying power to stick it out in Iraq. Congratulations on your impressions. Why is he second guessing himself now?

ROB POLLOCK, EDITORITAL FEATURES EDITOR: The news isn't exactly good. His commander, Stan McChrystal, says things aren't going well and I need more troops. Obama is saying, I don't know if I have the support out there for this. It's not polling well and the latest poll is 46 percent approval for the war in Afghanistan.

Now it's not surprising that Obama is start to go rethink, but it's certainly makes me think twice about was he sincere when he turned Afghanistan, the good war or the war of necessity, as opposed to the war in Iraq.

GIGOT: Wait, wait, wait, because of a strategy implemented six months ago, the polls have turned against you, and you haven't given a speech in the interim, by the way, on that war explaining what we're doing there, and because the general that you appointed and you told to tell you what you need has come back and now told you what he needs, you're saying, hey, I think we better reconsider this? Is that what you expect from a commander-in-chief?

POLLOCK: It not what I expect. I'm only saying I'm not surprised by it.

GIGOT: OK, well.

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: But that is from a political leader, I mean, they're facing election in 2010. And if the story line then is that Americans are bogged down in Afghanistan with suicide bombers putting American bodies on the front page of the paper every day, this administration is going to blink. That's all there is to it.

BRET STEPHENS, DEPUTY EDITOR & FOREIGN AFFAIRS COLUMNIST: I think although — look, I think the political calculation that the Obama administration is making is a mistaken one. It's already done a lot to alienate centrists with the health care plan. This president needs to show he has the strength, the guts, the persistent to stick it out in a way that you just saw on — on the screen. He's been saying it's a war of necessity, one that we can't lose. It may not be polling well now, but as Americans begin to retreat from Afghanistan, and there's the sense that we're leaving behind another chaotic situation, with the return of the Taliban and Al Qaeda, it will poll worse for him, if not into 2010, but 2012.

GIGOT: Mary, there are a lot of people that think, and some in the military, that the reason the president is doing this is he doesn't want to anger the left while health care debate is going on in Congress. After health care is done, assuming it succeeds, he'll get back and say we need this and now you need to vote this?

MARY ANASTASIA O'GRADY, COLUMNIST: Well, I mean, I think that what's really disturbing here is the president revealing to the enemy his lack of commitment, well, we have troops on the ground over there. Imagine that you have a son, a daughter, a loved one in Afghanistan and that the commander-in-chief is, you know, telling the enemy that he's not really committed to the fight. I mean, that's going to be an extremely expensive — politically expensive to Obama. He could make the argument that we shouldn't be there, I don't agree with him. He could make that argument. We have to get in or get out.

GIGOT: The president — the White House aides, Rob, are whispering in private that the reason we're really doing this is because the election went so badly. We no longer have an ally in Kabul that we can really depend on. I guess my response to that is didn't you know that before? This has never been a Periclesan (ph) government.

STEPHENS: No, but...

GIGOT: And why didn't we sit down and think about the election in advance and make sure it went better?

POLLOCK: That's true, but I don't think that anybody expected Karzai to be so brazen in the amount of fraud committed in the election.

GIGOT: Brazen or his allies, some of his allies?

POLLOCK: Well, the ruling clique. Nobody expected them to be so brazen to be fair. And also to be fair, let's remember the counter- insurgency challenge in Afghanistan is probably a considerably larger one than the counter-insurgency in Iraq. America barely had the staying power for that and that was before the financial crisis. We find ourselves in a very different, more constrained war right now.

GIGOT: I could favor a change of strategy in Afghanistan, Bret, to one that Joe Biden favors, maybe off shore, if t weren't so worried about the impact is would have on Pakistan. Because Pakistan, you know, Holbrooke, the secretary — the person who's dealing with Afghan and Pakistan for the administration, has said — he calls it Af-Pak. You can't think of one without the other. If you bug out of Afghanistan, what happens is you undermine our staying — you tell the Pakistanis, we are going to get out, you better cut your own deal with the Taliban.

STEPHENS: Look, if you talk to Pakistanis, the history of their relationship with the United States is one of the United States bugging out, when it was convenient in Washington, but not convenient in Islamabad. That's exactly what we did in — after, in 1989, after the Soviets left Afghanistan and that turned out to be disastrous for them. So it's absolutely true that it would be very hard for any Pakistani leader in the future to say, let's stick our necks out for Washington in the fight against these Talibs in Swat, because you know that after five or ten years, the Americans are out of there.

GIGOT: Mary, John McCain said this week, generals really have two choices, carry out orders or resign. Should General McChrystal resign, the top commander in Afghanistan, if he doesn't get the troop he needs?

O'GRADY: I think he should.

GIGOT: All right.

When we come back, Obama and the world. The president promises a new era of engagement. We'll take a look at his debut speech before the U.N., as well as the administration's actions on the world stage so far.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

Obama Because the time has come for the world to move in a new direction, we must embrace a new era of engagement based on mutual interest and mutual respect and our work must begin now.

(END VIDEO CLIP)

GIGOT: President Obama calling for a new era of engagement in his debut speech before the United Nations this week.

All right, Bret, so what is an era of engagement mean in practical terms? What is the president trying to do?

STEPHENS: Michael Jackson is dead, but "We Are the World" lives on.

(LAUGHTER)

This is the end of the era of American exceptionalism, at least in the view of this president.

GIGOT: That's the view that America has kind of — the old shining city on a hill, the American global leadership has really been in force since World War II by both presidents and both parties.

STEPHENS: That's right. The question is, who exactly are you engaging with? If we're engaging with our allies in Europe or Asia for common security interests and common values, by all means, that's what presidents of both parties have done for a long time. How then are you going to engage with a Kim Jong-Il or a Mahmoud Ahmadinejad, serial deal breakers living outside this world of engagement? And there's also a world of confrontation and that's what this president's speech failed to recognize.

GIGOT: I guess he would argue that we are going to get new sanctions. We're going to be able to organize. We'll be tougher on these recalcitrants, like Iraq or like Iran or North Korea, when they don't abide by international rules. That seems to be what he's saying. If they don't sign up to new treaties, if they want to abide by the treaties, we'll be tough on them.

HENNINGER: Yeah, that's with a he's saying. But the point is, I think, to pick up Bret's point, beyond that, there's always the possibility or there has been of military action. and that's where they don't want to go. Therefore, in this speech, the president talked repeatedly about his commitment to the United Nations system. And so I believe what he's doing here is taking the United States out of a leadership role and enveloping it within the United Nations system where you have a kind of collective effort to solve these problems, which basically solves your political problem and takes you off the military hook.

GIGOT: Rob?

POLLOCK: Oh, I mean, talk about lack of sanctions, what is president Obama's reaction to the fact that Iran has a second secret nuclear site? Friday morning, he gets up in Pittsburgh and he reiterates Iran's right to have peaceful nuclear power. It's a right to it. That's amazing to me. Why does Iran have a right to it, given how irresponsibly they've behaved otherwise?

GIGOT: It's really interesting listening to the speech, Mary. I didn't quite get this from the president's campaign when he was a candidate, but he really does believe nuclear disarmament is going to be one of the major goals of his administration. He thinks that he can get this global arms control regime and that we can reduce our own stock piles enormously and get pretty close to an era where very few people have nuclear weapons or we all just have a handful.

O'GRADY: Yeah, trust, but verify. I think basically what he's trying to say is that he can make friends with a lot of the world's tyrants and convince them that really the path they've been on for the last 20 years is not a good idea. And you know, there's a question about what it costs to be friends with all of these tyrants. And I think the example on Honduras right now, he's sort of saying to Hugo Chavez, you know what, I can get along with you and here is my trade, you can have Honduras.

GIGOT: He's the Venezuelan dictator.

O'GRADY: Yes, you can have Honduras and, you know, we'll have a better relationship than you had with George Bush.

GIGOT: Well, Bret, the president — the White House is now saying, look, we've got a break through here. The Russians have come around on Iraq. Medvedev said this week, president of Russia, that he's now favorable to sanctions and, look, this is the payoff from the fact we gave up those...

STEPHENS: What Medvedev did, Paul, was he...

GIGOT: The military defenses in Eastern Europe.

STEPHENS: Sure. Medvedev cleared his throat and this administration is acting as if this was an extraordinary breakthrough. But the worrisome thing here is that the time for effective sanctions on Iran is clearly or very nearly past. So we're talking about sanctions when the only thing that's going to stop Iran, as they get this much closer to the goal line, towards which they've been working for more than — more than 20 years, is probably going to be, if not military action, then the threat of military action. And the three leaders, Sarkozy of France, Gordon Brown of Britain, and Obama, in their press conference yesterday made it clear, crystal clear that military action is nowhere near being considered.

GIGOT: One quick question, Mary. The president also announced no longer the G8 group of nations meeting, it's going to be the G-20, and they're going to basically have peer review of economic policies.

O'GRADY: Yes, another sign that he thinks that the problem in the world is that we haven't brought enough people to the table to discuss and assert, in a collective fashion, now, what path we should go on. It's very worrisome for those of us who believe that American leadership is important.

GIGOT: All right, Mary, thank you.

Still ahead, Max Baucus' gag order. The Montana Senator sics federal regulators on a health insurance company for daring to criticize his bill, even though the CBO backs up its claim of Medicare cuts.

(COMMERCIAL BREAK)

GIGOT: Critics better watch what they say about Max Baucus' health care bill. The Senate Finance chairman sicced federal regulators on the health insurance company Humana last week after it sent a letter to customers enrolled in its Medicare Advantage program warning that, quote, "Millions of seniors and disabled individuals could lose many of the important benefits and services that make Medicare Advantage Health Plan so valuable."

The good Senator asked the Centers for Medicare and Medicaid Services, a federal agency, led by a former Baucus aide, to investigate, and that agency ordered Humana to cease and desist, calling the mailer misleading and confusing. But the CBO director, Doug Elmendorf, backed up Humana's claims on Tuesday, telling the Senate Finance Committee that its plan to cut $125 billion from Medicare Advantage will result in lower benefits and some 2.7 million people losing this coverage.

Senior editorial page writer, Joe Rago, joins the panel.

OK, Dan, so what's Max Baucus' political game here?

HENNINGER: His political game is to cram down Obama-care. What this reflects, I think, is the fact that this initiative, this huge — you know, when it began, it was going to be a big entitlement that presumably the American people really needed. Medicare for all. It has so disintegrated over the process that we've reached the point where Senator Baucus now feels compelled to basically threaten and intimidate one of the participants in the bill. They have lost so much political legitimacy around this bill, that the only way they're going to get it passed is by doing this sort of thing or, as we know, that 51-vote reconciliation process that's going to blow up the Senate.

GIGOT: Joe, what is Medicare Advantage and how does it differ from normal Medicare?

JOE RAGO, SENIOR EDITORIAL PAGE WRITER: Well, the private plans administering Medicare for a few decades now, but this was a specific program created in 2003 where, instead of sending seniors into this very decrepit system called fee for service, they would get a benefit from private insurers. And what it's done is it's done a lot of care coordination. It focuses on quality. There's a lot of extra benefits in the program, so seniors don't have to get the wrap-around plans.

GIGOT: About One in four of seniors are on this, about 10.2 million Americans are on Medicare Advantage.

RAGO: That's right.

GIGOT: What Baucus is worried about is that people really like this benefit. They like the extra — the extra bells and whistles and they don't want it give it up. And they don't want people to understand that the — this bill is going to cut that money off.

POLLOCK: And it's important to remember that a lot of the seniors in Medicare Advantage are low-income seniors. The reason they go into the HMO's and accept the restrictions on doctor choice is because they're getting extra benefits that they wouldn't get in cheaper service. So the Baucus bill is directly targeting, strangely enough, low-income seniors.

GIGOT: Mary, I think you have a situation here where some Democrats, Bill Nelson even, the Florida Senator, he's even worried about the fact that he may end up having to vote for Medicare cuts. So he's been saying no cuts in Medicare Advantage.

O'GRADY: Yeah, what happens here with this particular argument is that it reflects more broadly on the plan that President Obama and the Democrats want to impose, which is that the government would become very much like Medicare today and it wouldn't be affordable. What they're proposing does not do anything to create choice in competition, which is what we need, to drive down prices. And you can see that problem, specifically in Medicare, which is why, if we're going to go forward spending more money, we have to cut.

GIGOT: Well, some of the Democrats would say, and some of our own critics would say, you guys are hypocritical. You've been saying for years that Medicare spending is running out of control and now you're saying you don't want to reduce this program?

Don't you really have to, Joe, at some point, cut spending in Medicare?

RAGO: Well, I mean, sure we do, but there's much better way to...

GIGOT: OK, then.

RAGO: Well, there's much better ways to do it than just cramming down on the one program that has a chance to rationalize Medicare. You could very easily see something like Medicare Advantage bringing choice and competition, as Mary discussed, into the health care market for seniors instead of just the brute force of Medicare, price controls, global budgets and the rest of it.

GIGOT: But then the Democrats would say that's the only way you can reduce spending.

POLLOCK: No, no, they are doing this exactly right. What you have in Medicare Advantage is something called a defined contribution model as opposed to the rest of Medicare, which is a defined benefit model. Defined benefit, the only way you can control costs is through rationing. With defined contribution, there are other ways you can do it. For example...

GIGOT: The government makes a contribution into the plan and private insurer kind of molds the plan to the needs of the customers.

POLLOCK: That's right. Say, down the road, costs are out of control. You can start, for example, moving everyone into something like Medicare Advantage and means testing the amounts of subsidies. That's one way...

GIGOT: Means testing by income level?

POLLOCK: Yeah, by income level the amount of subsidy to give people. That's one way, a very good way, in fact, to control Medicare costs down the road.

RAGO: And that's actually the way the prescription drug benefit works. Now, each senior gets a defined contribution and private insurers compete to design a benefit that meets their needs, and anything extra they pay out of pocket. and it's really kept costs down as opposed to what we expected when we passed it in 2003.

GIGOT: All right, Joe, thank you.

We have to take one more break. When we come back, our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Time now for our "Hits and Misses" of the week — Rob?

POLLOCK: Yeah, kudos to Barney Frank, the Massachusetts Congressman, who has been a long-time supporter of ACORN, the community activist organization that President Obama worked with in the 1990's, and which has long been dogged by allegations of the abetting of voter fraud and other kinds of corruption. Recently, there were videos released showing ACORN employees in multiple offices offering to help two film makers posing as a pimp and a prostitute disguise the nature of their businesses and avoid taxes. Now, apparently, Barney Frank has decided now finally enough is enough, or at least that the ACORN organization shouldn't be getting anymore government grants. He says, quote, "I do not believe that ACORN's response has been adequate for an organization that has received public funding." Good for him.

GIGOT: All right.

Mary?

O'GRADY: This is a miss for President Sarkozy of France. He has a proposal to make happiness part of French GDP and he wants the rest of the world to also put happiness into their GDP. The idea here is to forget about financial successes we normally measure as a measurement of progress. Instead, he says, we should look at happiness, a general happiness of the population. Now this is kind of frightening to me because Mr. Sarkozy's happiness might not be my happiness.

(LAUGHTER)

And if government becomes the arbiter of happiness, I think we're all in trouble.

GIGOT: All right.

Joe?

RAGO: Energy Secretary Steven Chu was taking to a "Journal" reporter this week about climate change and he said, "The American public, just like your teenage kids, aren't acting in the way they should act. The American public has to really understand it, in their core, how important this issue is." And now, this sounds like a miss, but it's actually a hit. If, in the new spirit of maturity, the White House starts talking about the tax that it wants to impose on all forms of carbon energy that will make groceries, gas and electricity more expensive, so.

GIGOT: All right, Joe, thanks.

I'd like to give a miss this week to the 53 Senators, including 51 Democrats, who voted down an amendment by Republican Jim DeMint of South Carolina to stop spending federal funds on the airport that Pennsylvania Congressman Jack Murtha built with more than $150 million in federal subsidies and earmarks over the last 20 years. The airport has just three — count them — three daily commercial flights all to Washington D.C. The federal subsidies average $100 for each of the fewer than 30 passengers who use the airport each day. It would be cheaper for taxpayers to buy a train ticket for Congressman Murtha and every other Washington-bound passenger than to keep the airport open. Proving that when it comes to spending, the only change in Washington we've seen is the political party that's doing it.

That's it for this week's edition of the "Journal Editorial Report." Thanks to all of you for watching. We hope to see you right here next week.

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