This is a rush transcript from "The Journal Editorial Report," November 28, 2009. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," a holy war here in America. The domestic Islamic terror threat is real, but are we prepared to fight it?

And as the president gets ready to make his Afghanistan announcement, Democrats say they won't support a troop increase without an even bigger tax increase.

Plus, Congress tees off on Tim Geithner. Some say the treasury secretary should go. But is he really the one making economic policy in this administration?

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

Federal officials this week announce charges against eight people they say helped recruit dozens of young Americans to join an Al Qaeda-linked group in Somalia. The charges are part of an investigation into the disappearance of more than 20 young Somali men from Minneapolis over the last two years. Most of them U.S. citizens who federal authorities say traveled to Somalia to join the terrorist group, Al Fada (ph), which is fighting to establish a Muslim state in Somalia and recently pledged its allegiance to Usama bin Laden. Officials say it's one of the most extensive domestic terror investigations since the September 11 attacks. And coupled with the Fort Hood massacre, it raises the question of how well prepared the U.S. is to deal with home-grown Islam terrorists?

Reuel Marc Gerecht is a former CIA officer and a senior fellow at the Foundation for the Defense of Democracies.

Great to have you back on the program.

REUEL MARC GERECHT, FORMER CIA OFFICER & SENIOR FELLOW, FOUNDATION FOR THE DEFENSE OF DEMOCRACIES: My pleasure.

GIGOT: So how serious, how widespread and significant is this domestic Islamic terror threat?

GERECHT: Well, I think the simple answer to that is we don't know. I mean we know it's less serious than what we've seen in Europe. For example, in Great Britain, the British Domestic Intelligence Service MI-5 literally runs hundreds of surveillance cases against Islamic militants who could go violent. We don't have that type of a threat in the United States. But we do have one. That's pretty obvious. We have taken a little bit too lightly the dangers of Islamic militant propaganda in the United States, the extent to which the mosques in the United States can reinforce these attitudes. So it's something that requires a lot more effort on the part of the bureau, on the FBI.

GIGOT: What are the triggering episodes that inspire a young Muslim American to go over to Al Qaeda? I'm thinking in particular of this recent Somali episode, because it seems that some of them were radicalized, if that is the right word, by the invasion by Ethiopia of Somalia in 2007, which the United States supported. Can it be one event just like that?

GERECHT: Yes. There are many factors that come into play and there have been excellent studies looking at Islamic militants, particularly those affiliated with Al Fada (ph) in Europe. And you do tend to see a pattern. First of all, there tends to be something deeply personal that strikes that believer and it radicalizes him and it makes him believe that the Muslim community writ large, what is almost a virtual ooma (ph), the community of believers, is at risk. And he personally must rise to the challenge and must become a jihadist and fight for the community.

There are other factors that come into play, but usually there are some combination of something of what we call explicitly political and something which is deeply personal. The two go together. The next thing you know you have an individual who, in normal circumstances seems OK, and suddenly is radicalized and is quite willing to kill others or kill himself.

GIGOT: But this suggests that you have a necessity almost for an almost permanent monitoring of elements of the Muslim community in the United States. Is that what the FBI is really going to have to do, monitor mosques and infiltrate these communities? You're saying it could be spontaneous combustion in a way.

GERECHT: What you have in Europe is very close to that, in areas where there have been danger, particularly if Great Britain and France, who both have seen very active militant movements, who both experienced consider violence. You do have a penetration of the Islamic community, which is discreet but pervasive.

GIGOT: By the spy services, by...

GERECHT: I think you're going to have to see something like that in the United States. One hopes that it is discreet. One hopes it doesn't violate civil liberties. But I think you need to have a service — the FBI needs to become better at building relationships with the Islamic community in the United States. Particularly, monitoring any organization which is espousing militant views, receiving money from Saudi Arabia, that is potentially dangerous.

GIGOT: Let me pursue that point on the FBI. You've been critical of the FBI, saying it doesn't take religion seriously enough as a motivator of potential domestic terrorism. What should be the FBI be doing that it's not doing?

GERECHT: Well, I think the FBI has to become a lot more curious. That is it's very difficult for the FBI, which is a law enforcement agency, to actually pursue leads before crimes are committed. In intelligence, you have to make certain assumptions, not nice assumptions, that certain individuals may be guilty even though they haven't committed a crime. You have to engage in surveillance before a crime is committed. I mean, successful counterterrorism is about preemption. You have to do something before the bomb goes off and before people are shot. So it does require the FBI to be a lot more aggressive, to be a lot more curious, to run much more extensive human intelligent networks in the United States. It's difficult because they don't have a tradition of doing this.

GIGOT: It runs against their culture. It runs against the FBI's culture.

GERECHT: Well, no, they definitely don't have this. It's not within their culture. They are not an intelligence service. Also, the United States has a different tradition, a different legal, different ethical tradition. It is very difficult in the United States to run essentially what we're talking about here, a domestic intelligence service.

GIGOT: Well, Gerecht, thank you so much for those observations.

When we come back, as President Obama prepares to announce his Afghanistan decision, Democrats say they won't support a troop increase without a big tax increase.

(COMMERCIAL BREAK)

GIGOT: As President Obama prepares to make an announcement on Afghanistan next week, some Democrats are saying they won't support a troop increase without an even bigger tax increase to go with it. "There ain't going to be no money for nothing if we pour it all into Afghanistan," House Appropriations Committee Chairman David Obey told ABC News recently. "If they ask for an increased troop commitment in Afghanistan, I am going to ask them to pay for it."

Obey and others are floating the idea of a war surtax on all taxpayers, up to a whopping 5 percentage points on the highest income bracket.

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, I'm going to do the math here briefly. If I can. When President Bush's tax cuts expire in 2011, that will take the top income tax rate up to almost 40 percent. Add in the health care surtax if 5.4 percentage points, that gets up to 45 percent. And now you add on the war surtax and you take the top income rate, that's only the federal rate, to 50 percent, which in some states — California, Oregon, New York — over 60 percent. Are Democrats serious about this?

KIM STRASSEL, WASHINGTON COLUMNIST: Look, I think, at this point, if you make more than $200,000 you ought to hand over your paycheck to Washington. I think he is serious about making this case, Chairman Obey. I'm not sure this would actually go through for the reasons you said. With all the things they're putting forward, even some Democrats are getting nervous about the tax burden.

This is mostly being done to inflict a lot of political pain on the president if he decides he's going to put more troops overseas.

GIGOT: Wait a minute, Kim. Whoa! Political pain that the Democrats want to impose on a Democratic president? Is that the motive here?

STRASSEL: Try to get him to back off doing this. This is an anti-war Congress. People like David Obey have never been on board with the Afghanistan war. They were quiet for the most part while the president was on the campaign trail and making the case that Iraq was the bad war and Afghanistan was the good war. They're now in charge and they hold the purse and they want to put these threats out there to try to get him to back off and get out.

GIGOT: This isn't just Obey. You have Carl Levin in the Senate doing this, head of the Armed Services Committee. You've got Jack Murtha, a force in the House. There's a real — there is energy and motivation and momentum behind this.

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Well, I think it's putting the president in a terrible dilemma. He has to make — presumably we'll get the decision next Tuesday about Afghanistan. We assume he will make a commitment of some level of troops. But he is facing the prospect of creating an anti-war movement within his own party, his own people. That is the last thing that the president wants.

Up to now, that's only been an implicit threat. Now it's becoming explicit. When you have the chairman of the Senate Armed Services Committee and Obey saying, we don't want to go there, it makes it difficult for the president to make any kind of significant commitment.

GIGOT: I know you're not old enough to remember this, but I am.

(LAUGHTER)

The 1960s, LBJ put on a Vietnam War surtax, a substantial one. That didn't help the economy.

MARY ANASTASIA O'GRADY, COLUMNIST: And in 1962, defense spending was 9 percent of GDP. Now, it's, for 2009, estimated at 4.7 percent.

GIGOT: Which is amazing. That includes Iraq and Afghanistan.

O'GRADY: Right. To Kim's point about wanting them to back out of the war, another way to look at it is to say that this is a display of the ideology, which is the welfare state is going to grow as big as they can get it. They'll get as many dependents on the government as they can while they have the power. Anything that gets in the way of that, potentially makes the deficits look bad or anything, forget it. They're going to fight every inch of the way over that.

GIGOT: Let me talk about the argument that Obey makes and a lot of liberals make is that what is required is sheer sacrifice. The troops sacrifice clearly. Their families sacrifice clearly in the war on terror. The rest of us aren't asked to do very much. We get to go on with our daily lives. The least we can do is pay more to help with this war effort. What's wrong with that?

HENNINGER: What is wrong with that argument, Paul, is that it's taking Afghanistan and their idea as outside of our political system. We have a federal budget. The federal budget presumably is the result of a political process in which the elected members of Congress decide how much money they want to spend on Medicare, Medicaid, Social Security, the environment and defense.

GIGOT: Right.

HENNINGER: All of that takes place inside that process. They have reached the point now, to do what they want to do on health care, they have to impose a 5.4 percent surtax. Now they're arguing, to conduct national security operations overseas, we have to impose a special tax. I don't think that's shared sacrifice. I think that is a system exploding and coming apart at the seams.

GIGOT: I think what I hear you saying, Mary, is that if you spend so much on butter, by necessity, you won't be able to spend as much on defense. And slowly, by expanding the welfare state, what Obey is saying is, sorry, we're going to be more like Europe where they spend very little on defense.

O'GRADY: That is true if you have an economy not growing. If you put it together with their economic plan, they have to either get out of the war or give up on a lot of their ambitious social agenda.

GIGOT: All right, Mary. Thank you.

When we come back, Tim Geithner on the hot seat. The treasury secretary is under fire from both sides of the aisle. But is he really in charge of Obama's economic policy? And would it make any difference if he resigns?

(COMMERCIAL BREAK)

GIGOT: It looks like some liberals and conservatives may agree on something, that Treasury Secretary Tim Geithner has got to go. Calls for his resignation came last week, first from Democratic Congressman Peter DeFazio of Oregon, and then from Republican Kevin Brady of Texas, who confronted Mr. Geithner during his appearance on Capitol Hill.

(BEGIN VIDEO CLIP)

REP. KEVIN BARDY, R-TEXAS: Mr. Secretary, you are the point man on the economy. The buck, in effect, stops with you. Conservatives agree that, as point person, you failed. Liberals are growing in that consensus as well. Poll after poll shows the public has lost confidence in this president's ability to handle the economy. For the sake of our jobs, will you step down from your post?

(END VIDEO CLIP)

GIGOT: The secretary declined Mr. Brady's invitation, we should tell our viewers.

(LAUGHTER)

Why is he taking the heat, Geithner?

O'GRADY: Well, he's got two problems. One is that he is now the international symbol for crony capitalism.

GIGOT: Whoa! Wait a minute. What do you mean by that? What do you mean by that?

O'GRADY: He was the president of the New York Federal Reserve Bank when Citigroup was a bank that should have been under his supervision and was off-running an off-balance sheet portfolio filled with highly leveraged...

GIGOT: This is about bail-out? Not the current economy?

O'GRADY: This is problem one.

(LAUGHTER)

Then problem two is that he is, as the congressman said, the point man for this economic policy. I do agree that it's unfair to blame him. He is not someone who has a great understanding of economics. He is the guy. And his career has been about being willing to go out there and execute the plan for whoever tells him to do it. That's what he has done his whole life. So he is executing a plan and someone else is telling him about. It's a bad plan. The economy is paralyzed, unemployment is going up and people are angry. He can't say, well, I'm following orders. That doesn't work...

(CROSSTALK)

GIGOT: But is Geithner really — and Larry Summers, the chief White House financial adviser, and Christine Romer, the White House chief economist — I hear they're not the ones — I mean, they have a role in the administration's economic policy, but the political actors in this administration, the people who listen to Capitol Hill, like Rahm Emanuel and David Axelrod, they are as influential on economic policy.

HENNINGER: Well, you know, Tim Geithner did not design the stimulus program.

GIGOT: No, that's what I mean. It was Barney Frank and David Obey and Nancy Pelosi.

HENNINGER: They got to spend trillion dollars to fix the economy. They bought it. They own it. No "cash for clunkers" program will bail them out. They have a 10 percent unemployment and they need a fall guy. It's Tim Geithner.

O'GRADY: Is your treasury secretary a sock puppet? Does he just say whatever somebody is telling him to say? He should throw down his badge. He says it's a bad plan.

GIGOT: Kim, the interesting thing here is — really interesting thing here is the degree to which the left — the Democratic left is very angry at Geithner and Summers and saying they just haven't been tough enough on the bankers, in particular, because they haven't closed some of banks. In that sense, they might agree our Mary O'Grady. What is going on, on the Democratic left against Geithner?

STRASSEL: You had fuel thrown on the fire with the report about AIG, the big insurer, and the fact that — with the New York Fed, when Mr. Geithner was there, decided that all the banks who had the credit default swaps with them, they were going to get paid in full. So that also makes it look like he's looking out for banks. The left is just not done yet beating on Wall Street. They still have a lot there. They feel as though they've got to come out and they have been using Mr. Geithner appearances and the Federal Reserve Chief Ben Bernanke appearances to exorcise demons of populism. This is a problem for the president because it gets in the way of sound economic policy.

GIGOT: I don't think, Mary, it would make a bit of difference if Tim Geithner went, in terms of the actual policy that the administration is pursuing. Some people are floating the name of Jamie Dimon, for example, the head of JPMorgan-Chase, who has done a nice job during the panic in avoiding some of the worst impact that happened to Citigroup or Bank of America. Would he make a difference in policy?

O'GRADY: He would be popular in the provinces, I can tell you than.

(LAUGHTER)

GIGOT: Another Wall Street guy at treasury?

O'GRADY: Yes. Exactly. No, he probably wouldn't. That is my point. Geithner cannot be held responsible for the policy. But at the same time, you need treasury secretary to take responsibility. I'd like to name his successor.

GIGOT: And who would that be? Paul Krugman, the Nobel Prize winner? Is that who you have in mind?

(LAUGHTER)

O'GRADY: No. But he's probably about what we could get confirmed right now.

(LAUGHTER)

GIGOT: I tell you, Dan, as long as unemployment is above 10 percent and we're heading to election year next year where the Democratic majority, if it stays high, unemployment, is in jeopardy. I think they will look for some kind of ritual sacrifice, someone to throw over the side and blame.

HENNINGER: Yes, but the 10 percent unemployment will still be sitting there. The problem is they're not putting in place any policies that would allow economy or businesses to invest or have some confidence they can invest. Look, they're doing the healthcare bill. You've got cap-and- trade, card check, and to be sure, the investment in Afghanistan. The overhang of uncertainty on the investing community is so huge. It's almost unprecedented. They're not doing anything to reverse that.

GIGOT: Kim, do you think after health care passes, assuming it does, that the Afghanistan is going to pivot somehow and focus on jobs and the economy for the whole election year?

STRASSEL: They're already trying to pivot. They're having a jobs summit. The problem they have is that most of this administration's ideas for creating jobs involves spending more money. They have a deficit problems and a climbing unemployment rate. They're in a box.

GIGOT: Kim, last word.

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" — Dan?

HENNINGER: This is a miss to myself. Because I missed Oprah Winfrey. I'm not saying I miss her, I'm saying I missed her completely.

(LAUGHTER)

Here was the most famous person on television for 25 years, and you know what? I basically never watched the show.

GIGOT: You were working for a living.

HENNINGER: I was working. I think I watched it once. But, you know, I'm not knocking Oprah. This woman created an empire. She was a tremendous personality. All I'm saying is that this defines someone who is totally out of it. I have no idea what she did for 25 years.

(LAUGHTER)

But I wish her luck in the future.

GIGOT: All right.

Mary?

O'GRADY: This is a miss for the New York State's charter school cap. By law, there can only be 200 charter schools in New York State, if you can believe it. The state is starting to run up against that cap which means that a lot of charter school managers might go to other jurisdiction to look for work because they can't open schools here. There are 40,000 New York City children waiting to get into charter schools. There is a cap.

GIGOT: What a disgrace.

All right, Kim?

STRASSEL: This is a hit to the leaker or hacker who put some 3,000 e-mails England's Climate Research Unit on the Internet. CREW is the spiritual home of the theory of manmade global warming and the e-mails and documents have shown what many have long suspected, that this is about politics, not science. The e-mails appear to show the scientists manipulating data, trying to keep those who oppose their views out of leading journals and trying to hide some of their work from the public. So this is better sooner than later. Maybe now, we can have an honest discussion about the science behind global warming.

GIGOT: This sure seems to blow a hole in the case for the fact it's somehow a real consensus about manmade global warming.

What are the political impacts?

HENNINGER: I think the ramifications go beyond even global warming, Paul. As Kim said, maybe we can have an honest discussion about the science. The problem is, I've always worried that science was running the risk of discrediting the discipline with the way they were going with global warming.

GIGOT: Getting politicized.

HENNINGER: Getting politicized. Science was kind of the one discipline in American life that people felt was reliable. Here you have them absolutely gaming the numbers. I think the ramifications are terrible.

GIGOT: All right, Dan.

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 all of you right here next week.

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