This is a rush transcript from "The Journal Editorial Report," October 17, 2009. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," the first swine flu vaccines have arrived. But fear may be spreading faster than the virus itself. Why all the confusion?

And Obamacare's big business enablers. What the health care industry hope to get from signing on, and why they're having second thoughts.

Plus, the Dow hits 10,000, even as the dollar continues its decline. What it all means for our fragile economy.

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

The first doses of vaccine for H1N1, commonly known as swine flu have arrived to hospitals and doctor's offices, but confusion and fear are spreading almost as quickly as the virus itself as federal and state health officials began the complicated effort of dispensing the vaccine on a wide scale.

CDC Director Tom Frieden warned it will be a challenging few weeks and that may be an understatement. Confusion abounds about who should be getting the vaccine and the Internet and airways are abuzz with concerns about its safety.

Tevi Troy was the deputy of Health and Human Services from 2007 to 2009, currently a visiting senior fellow at The Hudson Institute, and advises companies on flu preparations.

Tevi Troy, great to have you here. So how prepared are we overall across the country for the swine flu?

TEVI TROY, FORMER DEPUTY OF HEALTH AND HUMAN SERVICES & SENIOR FELLOW, THE HUDSON INSTITUTE: Great. Thanks for having me, Paul. I think we're pretty well prepared. There are really three steps to preparations for any kind of pandemic or any type of bio-event. There's preparation and we've done a good job on that. That's stockpiling the counter measures, that is getting the vaccine, making sure the vaccine is ready to be produced. That's having the things available and knowing how to deploy them and also having exercises so federal officials know what to do if it happens.

Second is messaging. And I think the CDC has been very good at this, sending a calming influence on the airwaves, having Twitter, Facebook YouTube pages. So I think we've been good on the messaging.

And third is execution. Execution is the hardest. That's what the Dr. Frieden was talking about, how it's hard to get it to the hospitals and to the people who need it. It's hard to see how people will react. We also see that some states do better than others in the execution.

GIGOT: But I want to take the issue of vaccine availability. We've seen anecdotal reports of men and women, mothers and fathers, taking their kids into the doctors and hospitals and there not being enough swine flu vaccine to help them. What is the problem there?

TROY: Well, that's a distribution problem and some places haven't ordered enough. Some — in some places, it's hard to get the material there as fast as you need it. So we always would game out the distribution aspects and it's hard to get the material to where you need it in the amounts of time you need to get it there.

GIGOT: Because nobody knows exactly where the really hot spots are going to be, is that the problem?

TROY: That's part of it, but also it's a huge country with 300 million people and you've got to get the materials everywhere and everybody wants it at once.

GIGOT: What about some of the states? We know from some of the states, I think, there are five of them, Colorado, Connecticut, Idaho, Oregon and Montana, which have really only — that have less than 10 percent of the flu stockpile that they're supposed to have. What is the role of the states here and have some of them been dropping the ball?

TROY: When you're talking about the flu stockpile, that's the anti- virals, the vaccine from preventing you from getting it, that's the anti-viral that has a prophylactic effect and diminishes the impact of the virus.

GIGOT: One is Tamiflu?

TROY: And the other is Relenza, so those are the two key ones. When I was in the federal government, we came up with a flu plan where you had 50 million doses, or actually courses — a course is multiple doses. We had 50 million courses in the Strategic National Stockpile. And the states would have enough to serve 10 percent of their populations. And so every state is supposed to hit the 10 percent mark. And those five states that you mentioned are not even close to hitting the 10 percent mark. They're not even at 10 percent of the 10 percent.

GIGOT: But is that a failure by the state government or is that just a failure of coordination between the state and the federal? Who is to blame here?

TROY: Yeah, I mean, it really is on the states. The federal government can bully pulpit and can encourage. It actually has a discount program where they get it at a cheaper rate and also they're subsidized for getting, purchasing the product. So it's not costing the state as much as individuals or businesses. That's it. Some states feel they don't have to do it because they feel the federal government will step up when things happen. That's exactly the opposite of what we're trying to do, or we were trying to do, to promote state responsibility.

GIGOT: All right, now, the federal government's advice, and I assume your advice, too, would be for people, if they can get the vaccine, is that correct?

TROY: I think it's more, if you are in the risk pools, you should get the vaccine, so if you're a woman, if you're under 2, if you have a pre-existing condition. I'm not saying that every healthy adult needs to run out and get the swine flu vaccine.

GIGOT: You should talk to your doctor first and foremost.

TROY: Or go to the CDC web site. The information is pretty available about who they think they're encouraging to get it. I don't think it's a bad thing to get it otherwise, but I think you need to focus on the people who need it the most, pregnant women, young children and people with pre-existing conditions.

GIGOT: You mentioned messaging. There's a lot of fear and anxiety. You hear it on talk shows and particularly some of the ideologically based talk shows on the right and left. When the Bush administration was in office, you had a lot of people on the left who said we can't trust the government. And now, with the Obama administration, you have some conservatives saying, I don't know, I can't trust people for vaccines. Is that a destructive, dangerous message?

TROY: It's absolutely dangerous and it's something we should try to avoid. One thing I try and promote is what I call the neutral zone. It's where you can have responsible federal officials say, yes, I disagree with President Obama on how to do health care, or I disagree with President Bush on the war in Iraq, but on this issue, this issue of public safety and public health, there are scientific facts, and we need to agree on what those facts are in getting the message out to protect the American people.

I would love to see President Obama go out and give a pro-vaccination message along perhaps with Mitch McConnell, from Kentucky, the Senate majority leader. That would, I think, give that bipartisan air about this, that makes people think it's not just, oh, the Obama government is telling me what to do or, in contrast in the past, the Bush government is telling me what to do.

GIGOT: When we had the swine flu scare in the 1970s, some people were inoculated, and there were complications that did make some people very, very sick. How do we know that won't happen again?

TROY: Well, you're talking about the — in the Guillain-Barre Syndrome, which occurred in the '76 vaccination. First of all, the technology improved a great deal. and second of all, the methods by which they're producing this H1N1 vaccine are the same that we use for the seasonal flu, which is known to be not only safe and effective, but also life saving. So they use the same methodology. They just take a different strain and apply it. So I'm not a medical doctor, but doctors and professional scientists, who I trust, tell me that this is a pretty safe vaccine.

GIGOT: All right, thank you, Tevi Troy.

TROY: Thank you, Paul.

GIGOT: When we come back, Obamacare's enablers. The health care industry learns the price of appeasing Congress. But is it too late?

(COMMERCIAL BREAK)

GIGOT: Welcome back. Well, the Senate Finance Committee held its vote on the Baucus bill this week. But what may be the bigger story is that the health care industry may finally be coming to its senses after months of serving as Rose Garden props. Insurers, doctors, and hospitals are discovering they've been taken for a ride on Obama-care and it may be too late to stop the train.

Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; columnist, Mary Anastasia O'Grady; and Washington columnist, Kim Strassel.

Kim, so the insurance industry, after months of supporting reform, now discovers it doesn't like the Baucus bill. Why the change of heart?

KIM STRASSEL, WASHINGTON COLUMNIST: Well, you know, this — again, they're just figuring out that this is not what they signed up for. This was — all of their support was based on the idea of the grand bargain that was formed and the idea was that the government — they said, well, we will take all comers, regardless of their health status.

GIGOT: So a lot more regulation.

STRASSEL: A lot more regulation, they agreed to that.

GIGOT: A lot more price controls.

STRASSEL: A lot more price controls. And in return, the government said we will subsidize the patients that come to you and we will require everybody to tag health insurance, a lot more for customers for insurers. This was the prizes for them.

GIGOT: OK. What changed?

STRASSEL: What changed is that they've changed the bill. So now what they've done is watered down the tax on those who would get hit if they don't sign up for insurance.

GIGOT: So the penalty for not having insurance.

STRASSEL: Because that was politically unpopular.

(LAUGHTER)

We wouldn't actually want to tell people they would be fined if they didn't have health insurance. Now what you'll have is a lot of the healthy Americans out there not signing up for insurance. So the insurance — they'll just pay the tax instead. And insurers are stuck probably with a lot of unhealthy people and no one to pay the bills.

GIGOT: So people still will not get insurance except when they get sick and then come to the insurance companies and say, cover us. And of course, that raises the cost of the insurance industry, reduces their profits, and now they're opposed.

And this is what's happened, Mary, in Massachusetts, similar to Obama- care outlines of reform. It's been in place a couple of years. And that's exactly what's happened.

MARY ANASTASIA O'GRADY, COLUMNIST: Right, and now it's — Massachusetts is finding it's too expensive. So next step, price controls.

GIGOT: Right.

O'GRADY: I think the insurance companies were just tired of getting beat up, because under the existing system, the only users of health insurance that get subsidized are people who get it through their employer. So there was this whole private market, which became very expensive and hard for the insurers to manage, because people came, would sort of come and go, as they got jobs and lost jobs and so forth. And then they got — they had this guaranteed issuance imposed on them in many states, which forced them to take people into the pool that were a high risk.

GIGOT: One of the things that's interesting, Mary, is that guaranteed issuance says you've got to take all comers. And that's only really in a few states, New York, Massachusetts, Maine, the very, very high-cost states. What Obamacare would do is to spread that to all 50 states and really raise costs. And that would really raise costs.

O'GRADY: I'm not saying what they got was a good deal. I think they were feeling a lot of pressure so, as Kim says, they were — first thought this was very appealing, because it was going to take some of the heat off of them. And now it...

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Paul, I think what this conversation reflects is that, overall here, this conversation reflects the fact that these two forces, the government and the insurance industry, are operating in parallel economic universes. National health insurance only makes sense if you have large pools of people participating in the program.

GIGOT: Right.

HENNINGER: Even liberal economists will tell you the more people we get in is the only way you can even talk about reducing costs.

GIGOT: Called a risk pool.

HENNINGER: It's called a risk pool.

GIGOT: Spread the risk over the most people, you get, you know, easier to make it work.

HENNINGER: That's right. The private health insurance industry, which is, you know, operating in the private sector, has always been a fairly complex business at that level. And now, if you try to start pushing it around in different directions, you're going to affect somebody's interest. And the big insurers have been having a hard time protecting their economic interest as this legislation has gone forward.

GIGOT: There is a split here, Kim, is there not, between the big insurers now emerging and some of the smaller insurers. Aetna, for example, CEO Ron Williams said they tend to represent the employer market.

STRASSEL: Yes.

GIGOT: So they wouldn't be as affected by some of the new regulations and people who deal in the individual market would. And they're still a big supporter of this, but some of the smaller insurers say, wait a minute, we didn't sign up for this.

STRASSEL: This is what happened back in 1993. Initially, the big insurers were on board with the Hillary-care attempt, because they saw getting more customers as the ultimate price. And it was the smaller insurers who broke away and came out with the Thelma and Louise commercials, the famous scenes. And we're starting to see this. The question is, is it too late? They only managed to come out with the report talking how worrisome the costs were going to be a day before the vote on the...

GIGOT: Saying the prices of insurance will go up.

STRASSEL: Exactly, a day before the Senate would have a vote on the bill in the Finance Committee.

GIGOT: That's a really good question. Is it too late to stop this? Because now we're getting to the Senate — close to getting to the Senate and the House floor?

HENNINGER: It absolutely is too late to stop it. There's no question, the Democrats have to have a bill. They cannot fail. And they're going to cram this down the insurance industry's throat any way they had to. And so that's just an inevitability, Paul.

GIGOT: Too late, Mary?

O'GRADY: Too late. And, in the end, we're not going to have a private insurance industry because, as we all know, when all of these costs become too high, people will gravitate toward the government's option.

GIGOT: And why did the big pharma sign up to this, the drug companies?

O'GRADY: Well, they thought they could buy off the government. You know, they thought they could basically buy protection by saying, OK, we'll give you certain cuts.

GIGOT: $80 billion in cuts.

O'GRADY: Yeah, and what's going to end up happening is that you're going to have more and more price controls. And unfortunately, for the American people, you're going to have less and less innovation in the business, and that's the real tragedy.

GIGOT: The bottom line is — and we have to go after this. The bottom line, if Obama-care passes, you don't think — the main reason will be? Big business.

O'GRADY: Yes.

GIGOT: What an irony.

When we come back, the Dow hits 10,000, but the dollar continues its decline. What it all means for our fragile economy, next.

(COMMERCIAL BREAK)

GIGOT: Finally this week, the Dow and the dollar, one hit a high, the other the low. The big story is that the Dow Jones Industrial Average closed above 10,000 for the first time in more than a year. But the dollar continued its decline hitting a 14-month low against the Euro after the Federal Reserve indicated it was in no rush to raise interest rates.

We're back with Dan Henninger and Mary O'Grady. And we're joined by Brian Carney, in from London, and the editorial page of Wall Street Journal, Europe, and author of the new book "Freedom, Inc."

Mary, good news, the Dow is up over 10,000. Why?

O'GRADY: Well, to borrow an old cliche, even dead cats bounce if you drop them far enough.

GIGOT: So it's a dead-cat market, is it?

O'GRADY: We did fall pretty far pretty fast. And secondly, I'd say that earnings look better, mostly because companies have cut a lot of employees and they've really cut to the bone. So they're able to get what you would call bottom-line earnings, not top-line earnings, which is that they haven't really had any market improved in the way that — in the productivity, but they've been able to sort of cut any and all bits of waste that might be around. I think also the fed pumping a lot of cash into...

GIGOT: Liquidity, the money has to go somewhere.

O'GRADY: Yeah. and lastly, aids say with a lot of negative sentiment, you probably have room to run here, because there's a lot of people on the sidelines, a lot of nervousness about whether this is sustainable or not.

GIGOT: That's not the same thing, though, Dan, as prosperity or job creation, as we've seen with unemployment almost at 10 percent. So there's almost a two-tier economy. the company's existing companies, that are showing better earnings as the economy recovers, but small business, where the big job creation comes, that's a different story?

HENNINGER: Yes, it is, Paul. And I — I guess my view of this is that I think the market is in, large part, reflecting an inflation hedge. We've talked about inflation a lot on this program.

GIGOT: But if...

HENNINGER: Because big corporations are going to regain pricing power as price goes up. It's been one of the biggest problems is they've not been able to raise prices. Who — it will help them, the sort of people that are in the indexes. It will not help the small companies, who will have the prices passed on to them. So I think what we're seeing is a lot of people getting ready for prices to rise and putting the money in the top categories.

GIGOT: I'll tell you, I lived through the 70s, and stocks did not do well in the inflationary period, Brian.

BRIAN CARNEY, EDITORIAL PAGE, WALL STREET JOURAL, EUROPE & AUTHOR: That's true over the decade, but they had huge runs. And some of the biggest rallies in the history of the stock market have come in what are long-term bear markets. And you know, the market can go up 40 percent and it can come right back down. And if you're keeping score in another currency, right — if the Dow goes up 20 percent, but the dollar falls 20 percent, and you're sitting in Frankfurt or London, you don't feel like you made any money. And that's part of what I think we're seeing here, too, is the weakness of the dollar is counter balancing the stock market gains, if you're an investor overseas looking at our markets.

GIGOT: Let's talk about the dollar. It's falling against other currencies, most other currencies, and it's falling against commodities like oil and gold.

CARNEY: Right.

GIGOT: Why?

CARNEY: It's falling because our currency doesn't — because our treasuries don't yield anything, because the Fed has pumped so much — because there's too much supply of money for the dollar to maintain the demand.

GIGOT: So the Federal Reserve is pumping out too much money and that has a lot of people saying, you know, I don't really know that I want to hold the dollar. Is that the point?

CARNEY: Yeah, to hold treasuries, gets you very little yield these days.

GIGOT: Because of the government debt.

CARNEY: Exactly. If you hold U.S. government debt, you're being paid very little interest to hold that debt. So the attractiveness of that, relative to perhaps either equities, which has been going up, or other currencies that might have higher yields, has gone down.

GIGOT: But the administration says, Mary, just as the Bush administration said, we want a strong dollar, but nobody believes them, why?

O'GRADY: Yeah, they may say that, but I think that the way they behave is...

GIGOT: They don't believe it?

O'GRADY: Yeah. It's more important then. I think, to Brian's point, I think the — if this administration, and you can look at some of these figures going back to the 90s, has always believed that, you know, exports are important, trade balances are important. And the idea behind what they're doing to the dollar is that if you weaken the dollar, American goods are cheaper overseas, so people buy more of them.

GIGOT: What's to worry about?

(LAUGHTER)

O'GRADY: And of course, if you weaken the price of all of your assets, the dollar being one of them, it doesn't make you richer, it makes you poorer.

GIGOT: Well, that's what — should we really worry about the fall of the dollar, Dan? Because a lot of people say, look, it's OK, we've got to get this trade balance back to zero. Let's do it.

HENNINGER: And that's a piece of our previous discussion about health care and big pharma and so forth. The idea here, it's almost a corporatist mentality, the idea that the American economy is only led by big corporations, excuse me, big companies, but it does nothing for innovation and entrepreneurship at the lowest level, which is where this economy has always gotten its vitality.

GIGOT: All right, Dan, last word.

We're going to follow the story as the weeks go ahead.

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

(COMMERCIAL BREAK)

GIGOT: Time now for "Hits and Misses."

Dan, first to you.

HENNINGER: This is a big hit, Paul. It comes by way of our friends at The Washington Post who, in an article this week, discovered there are 20-year-olds out there who are refusing to participate in Facebook or Twitter. I call them Facebook refuseniks.

(LAUGHTER)

A 25-year-old said, "I let my wife do that. She knows my friend in high school and I don't want to have anything to do with it." The fact that we're not going into a population of Twittering zombies means, to me, there's hope.

GIGOT: When mom and dad get on Facebook, that's when some kids check out.

(LAUGHTER)

OK, Brian?

CARNEY: My hit goes to Obama for listening to a group of lobbyists that seem to have persuaded the administration to abandon a very damaging and job-killing tax hike that the — Obama had been calling for back in the spring. The tax was on overseas income earned by U.S. corporations and they want today limit a thing called a deferral, which allows them to put off paying taxes on money that they earn overseas. Obama said that this would help create jobs in the U.S. But a group of executives and lobbyist from Silicon Valley convinced him this was wrong. and this week, we heard that they abandoned it. So, hurray for the lobbyists and hurray for Obama for listening to special interests.

GIGOT: All right.

Kim?

STRASSEL: This is a miss to the Obama administration for its plan to give a one-time $250 check to every senior citizen in America. Now, ostensibly, this is because they are note getting an inflation-adjusted increase in their social security benefits, but has anybody noticed it's happening at the exact same time Congress is about to pass health care and sock it to Medicare and seniors in particular? If this were happening in any other sector of society, we would call it a bribe.

GIGOT: All right, Kim.

That's it for this week's edition of the "Journal Editorial Report." 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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