This is a rush transcript from "The Journal Editorial Report," January 30, 2010. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST (voice-over): This week on the "Journal Editorial Report"...

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: Jobs must be our number-one focus in 2010. And that's why I'm calling for a new jobs bill tonight.

(APPLAUSE)

(END VIDEO CLIP)

GIGOT: President Obama retools his agenda, putting just jobs front and center. But will his proposals do anything to get Americans back to work.

And Ben Bernanke gets the green light for another four years at the Fed, but what did he promise Harry Reid in return?

All that, and the growing political backlash over trying terrorists in civilian courts, especially in New York City.

(BEGIN VIDEO CLIP)

OBAMA: People are out of work. They're hurting. They need our help. And I want a jobs bill on my desk without delay.

(END VIDEO CLIP)

GIGOT (on camera): Welcome to the "Journal Editorial Report." I'm Paul Gigot.

That was President Obama in his State of the Union address Wednesday night promising to make jobs his number-one priority in the coming year, but will the policies he's proposing really put Americans back to work?

Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; columnist, Mary Anastasia O'Grady; assistant editorial page editor, James Freeman; and senior economics writer, Steve Moore.

So, Steve, president down playing a little bit health care and cap-and-trade on the agenda from a year ago, pressing jobs. You must be happy. What do you think of his jobs agenda?

STEVE MOORE, SENIOR ECONOMICS WRITER: Well, look, I thought we were going to see an Obama 2.0 in this State of the Union speech with a kind of new message that was more moderated, that was more oriented towards reaching out across the aisle to the Republicans. But that's not exactly what I heard. I heard a lot of blaming George Bush for the problems over the last eight years. I think that the president did say, look, we're going to move forward with health care and a lot of the other jobs initiatives, the spending initiatives that were the hall mark of his first year. So I would say that I didn't see the change agenda that you might have thought after what might have happened in Massachusetts.

GIGOT: Wait a minute. Wait a minute. He proposed a capital gains tax cut for small businesses. He also said — you've been telling me that small business can't get credit. And he proposed $30 billion from TARP to go to community banks for lending. Don't you think those will make a difference?

MOORE: No, I really don't. I think if you look at those tax cuts, they're all small ball, Paul. We've always believed that the way it get growth going is to cut marshal tax rates for small businesses and investors. The one thing that the Barack Obama administration will not do is cut tax rates, which is probably what the economy needs most right now.

GIGOT: Well, Mary, fourth quarter GDP came in and the economy grew 5.7 percent after only 2.2 percent in the third quarter, but that suggests we really do have a recovery here that's underway. Good news, no?

MARY ANASTASIA O'GRADY, COLUMNIST: Well, I don't — I don't know if you can suggest that it's a recovery. I mean, what you know is...

GIGOT: 5.7 percent, that says — it's growing. The economy is at least growing.

O'GRADY: The economy grew in the fourth quarter because inventories were drawn down and there was the holiday season.

GIGOT: Ah.

O'GRADY: But we don't know if the business sector of the economy is actually, you know, getting up on its feet and ready to go again.

And I agree with Steve that there was something disappointing in that — that speech, especially because, look, we have to give him credit for acknowledging that taxes are a burden for business and that's a big gain for the Obama administration. But targeted tax cuts have never been a good thing. I mean, I looked at the speech and said, well, let's see, what do we have here? A more complex tax code and more government programs. How can, if you're a — trying to run a business, how can that be positive? I mean, you have to live with the fear that they're going to be more mandates coming from government in health care, more mandates coming, for example, in this idea he has of mandatory IRA, individual retirement account. That would add...

GIGOT: Those are burdens on small businesses?

O'GRADY: Yes, and taxes and regulations are a problem for business.

GIGOT: I was struck, James, the president was really at pains to say, I didn't raise taxes, I cut taxes. I cut taxes on this, this and this, which is technically true in the first year. He's promising to raise taxes on 2011, but so far, he hasn't. There's a recognition there at least of a political vulnerability.

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Yes. And I've got to say I'm more optimistic on fourth quarter GDP. I think 5.7 percent is it great. And really, I don't think he needs a jobs bill on his desk. He just needs a memo dropped on his desk saying, announce Obama care is dead and cap-and-trade is dead.

(LAUGHTER)

The economy's natural healing powers are asserting themselves. And I think if Washington would get out of the way, this would work out great.

GIGOT: There is, Dan, this push-me, pull-me message. On the one hand, he really needs the private sector to grow and he wants to — and on the other hand — he's saying, I want you to grow and invest. On the other hand, he's still saying I want to pass health care. That's going to put new costs. I want to put cap-and-trade. That's going to raise energy prices. I still want to have — make it earlier to unionize. That's going to raise your labor costs. So if you're a business man or woman and you hear that speech, what message are you getting?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: A mixed message at best, I think. And you know, his primary responsibility is Washington, and the federal budget is now — spending is now up to nearly 25 percent of GDP. It's just almost a historic high in our time. Revenue is down to 14 percent of GDP, in part, because of the recession. But between that, you have a massive deficit, pushed by all the spending in the past year. And that is something that the Congress is very, very nervous about, because of the Massachusetts vote. The public is nervous about the size of the deficit.

He wanted Congress to create a commission. Congress refused to do that. He's going to do it on his own. And I think that probably what he's going to do is get some wise men together to suggest something like revenue triggers, tax increase triggers at certain points in the deficit. There's got to be a tax increase in the future somewhere.

GIGOT: Steve, one of the president's goals here with this jobs agenda they're saying at the White House is to get Republican votes, to get off the Democratic-only governance that happened in the first year, and see if they can get Republicans to join them. Isn't he putting Republicans in a pretty difficult spot, because Republicans have been criticizing him the whole first year for lacking a jobs agenda?

MOORE: I thought the most striking thing about that speech was that, if the goal was to reach across the aisle and get the Republicans into the fold, I'm not sure he accomplished that. Some of the initiatives are things that the Republicans will go for, some of the tax credits for small businesses and for hiring, but it strikes me that the big issue, of course, for the next couple of weeks is what the president will do on health care. There's a lot of talk, as you know, right now, about the Democrats trying to ram this same bill through...

GIGOT: Steve, they're forgetting to do that.

MOORE: ... with 51 votes. They may try to do that.

GIGOT: Steve, they're going to push that off for a few weeks to focus on the jobs bill. What did the Republicans do though? Are they going to vote for the jobs agenda?

MOORE: I think the — if I were advising the Republicans, what I'd say is come forward with your own alternative agenda, which would be cutting the corporate and personal income tax rates to 25 percent. Let's be competitive on tax rates. That's been proven over the last 40 years to be the most successful jobs stimulus bill of all.

GIGOT: All right, and I assume vote against the jobs bill.

All right, when we come back, Ben Bernanke gets confirmed for another four years, but what did he promise Harry Reid in return? Find out, next.

(COMMERCIAL BREAK)

GIGOT: It was the most votes ever against a president's pick for Federal Reserve chairman, but Ben Bernanke was confirmed on Thursday for a second term at the Central Bank. Amid a political revolt from Republicans and some Democrats, Bernanke's future was in question a week ago when Senate Majority Leader Harry Reid finally declared support not before extracting what he said were concessions about future Fed policy. Reid said in a statement last Friday, quote, "I made it clear that to merit confirmation Chairman Bernanke must redouble his efforts to make sure that families can access the credit they need to buy or keep their homes, send their children to college or start a small business. He has assured me he will soon outline plans for making that happen, and I eagerly await them."

Now, I called the Fed, Mary, and asked what's the quid pro quo, is there one? They said no, no plan forth coming, not going to happen. But can you remember an incident like this where a Senator claimed to exert such political control over the fed?

O'GRADY: Really, Paul, you're telling me that the Fed is denying that? I'm surprised.

(LAUGHTER)

GIGOT: Yes.

O'GRADY: I'm a little surprised.

You know, this so overtly, probably not. But let's face it, the politicians are always pressuring the Fed and that's why the independence of the Fed is considered such an important thing. I mean, the problem with Bernanke here is that the markets are going to be wondering does this guy have the stomach, the guts, the intestinal fortitude to take the punch bowl away when he sees that inflation could be a problem. And I think a lot of people are worried about that. And if the Fed chairman does not have that credibility, a fiat currency could be in a lot of trouble.

GIGOT: Especially with the interest rates having been near zero now for over a year, the question is — that is the question on the markets.

But how do you explain this revolt against Bernanke in the Senate? He got 30 votes against him, the most ever. Volcker in 1984 had only 16. That was the second most, and that was after a really, really brutal recession. So what is this? Is this a rank political opportunism by the Senators? Is that right?

FREEMAN: Well, if there's a political move to interfere with the Fed, which will not be healthy, the Fed has brought this on itself and in part. There is a big problem with the bailouts beginning in '08 not being transparent to the American people. And there are a lot of Senators who were not — before this vote, who were not able to see the memos going back and forth at the Fed prior to the decision to bail out AIG.

GIGOT: So this is about transparency and the lack of being able to see what the Fed did when and how?

O'GRADY: Well, I don't think...

HENNINGER: Well, Paul, Senator John McCain himself used that word explicitly. He said if the Fed is going to involve itself this deeply in the economy, we're going to need more transparency. We have to understand that looking at some history, from 1933 to 1951, the Fed was subordinate to the executive branch.

GIGOT: It was a wholly owned subsidiary.

HENNINGER: It was a wholly owned subsidiary. And you had this huge battle in the 1950s between Harry Truman and the Fed. Truman wanted them to keep monetizing the debt. And William Machesney Martin brokered something called the Accord, which established Fed independence. He only got that because Harry Truman was politically weakened at the time he was about to fire MacArthur. We are at the same point right now with the executive branch and the legislative branch moving in on the Fed's independence.

GIGOT: But everybody was saying only a month ago or two months ago that Bernanke and the Fed had saved the world from Great Depression, that they'd intervened when they had to. They had to ease money — that was the claim. And some of the Senators made that argument.

O'GRADY: First of all, everybody wasn't saying that.

(LAUGHTER)

GIGOT: Not, Mary, that's true. That's true. Not us, but, the popular view.

O'GRADY: But I think one thing that concerned some Senators is the fact that Ben Bernanke had never acknowledged the Fed's role in 2003 and 2004 in creating the asset bubble. He has never acknowledged the failure of the Fed to do its supervisory job. And now he wants more regulation and he blames the whole crisis on regulation rather than on monetary policy. So this brings up the question of, is he the right person because he has so much discretion. I mean, the Fed really operates in a very discretionary manner, so that people making those judgments are important. Is he the right guy to make those judgments?

GIGOT: And the politicians...

MOORE: But there's another...

GIGOT: Go ahead, Steve.

MOORE: There's another issue here. I guess I kind of thought more on the side of wanting more transparency at the Fed, especially because if we look at the mission creep of the Fed over the last 18 months, the Fed now owns more than a trillion dollars of mortgage-backed securities. It is buying up assets. I think the fact that it's taken on such a bigger mission may be suggestive that there should be more congressional oversight. And that there should be more transparency about the decisions that they're making that affects every aspect of the economy.

GIGOT: Yes, Steve, just what we need. We need Harry Reid and Barney Frank telling the Fed how to run monetary policy.

(LAUGHTER)

Is that the way to run a railroad or is that the fast train to Argentina?

MOORE: Look, the Fed should have more accountability. Maybe we disagree on that. The fact that they've become such an all-powerful organization in Washington suggests to me that the public should know more about how it operates.

GIGOT: How about if we have the Fed back out of fiscal policy and credit allocation...

MOORE: Yes. Absolutely.

GIGOT: And go back to its mission that it did before the last 18 months and focus on monetary policy rather than...

MOORE: I just think...

GIGOT: ... rather than have Congress...

MOORE: I just think the genie is out of the bottle, Paul. Now that they've taken on the powers, I'm not sure they'll ever go back to the way they used to be.

GIGOT: The genie back out of the bottle.

(LAUGHTER)

I mean, if this is the case, you covered Latin America, but that's the main problem. The political...

O'GRADY: I'm in favor of stuffing the genie back in the bottle.

(LAUGHTER)

GIGOT: Me, too.

O'GRADY: I don't think there's anything to say that we can't tell the Fed, you know, this is your job. And, in fact, as you know, I mean, I think that we should get rid of the dual mandate that the Fed has. How can the Fed...

GIGOT: The dual mandate, let's explain what that is. The monetary policy and full employment.

O'GRADY: Yes. How can the Fed — exactly. And how can the Fed do both? There are times when — we had stagflation in the '70s. There are times when pumping more money into the economy is going to create inflation, even if you think it's going to solve your jobs problem short- term.

GIGOT: All right, we'll watch the genie.

All right, when we come back, the growing backlash against New York City terror trials. Republicans and an increasing number of Democrats are speaking out against the administration's decision to try 9/11 conspirators in Manhattan. Will the president change his mind?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MAYOR MICHAEL BLOOMBERG, D-N.Y.: My hope is that the attorney general and the president decide to change their mind. But if they don't, we will provide the security that will keep everybody safe.

(END VIDEO CLIP)

GIGOT: That was New York City Mayor Michael Bloomberg backing off his initial support for holding the terror trial of Khalid Sheikh Mohammed and the other September 11th conspirators in lower Manhattan. A political backlash has been growing among Republicans and an increasing number of Democrats since Attorney General Eric Holder announced the decision late last year. There was word late this week that President Obama has asked Holder to look for alternative locations.

This week, New York Congressman Peter King introduced a bill that would prohibit the use of Justice Department funds to try the detainees in federal civilian courts. Mr. King is the ranking Republican on the House Committee on Homeland Security. He joins me now.

Congressman, welcome.

REP. PETER KING, R-N.Y.: Thank you, Paul.

GIGOT: So we got word that the White House is reconsidering holding this trial in Manhattan. How do you explain the reversal?

KING: I think the most honest appraisal is they read the election results in Massachusetts. Scott Brown's own polling showed over 70 percent of people in Massachusetts were opposed to trials being held in the United States, to have the terrorist trials to be held in civilian court. That, plus the Detroit bombing on Christmas Day, which the administration totally mishandled and has continued to mishandle. I think the Democrats in the Congress, you know, are genuinely getting nervous.

Listen, I thought from day one, I said, this was the most irresponsible decision any president ever made to hold these trials in New York City. And Democrats were lined up behind the president almost 100 percent. It's only in the last week to two weeks that they started to really feel the heat, and they've started to read the political tea leaves. So whatever the reason is, I'm glad it's coming out of New York, but I don't think it should be in any civilian court anywhere in the United States.

GIGOT: That's a question I want to ask, because the president — the White House spokesman let it be known that they still want this to be a civilian terror trial, maybe not in Manhattan with the Mayor opposed to it and some of the Democratic senators, but maybe somewhere else. You're saying, no way, you don't want them to be tried as civilians at all.

KING: I think it's wrong as a matter of policy. I think it's wrong as a matter of law. But also, I just think it's unfair to impose this burden on any community. I mean, you know, the terror threat, the threats that will accompany these trials are almost impossible to gauge. That wherever the trial is held, it will end up becoming the main terrorist target in the world. To impose that on a community is totally irresponsible when we have the mechanism in place to try them in a military tribunal, either in a military base in the United States, in some remote area, or I believe try them in Guantanamo, which is where they really belong.

GIGOT: Well, you have introduced a bill to cut off funds for these civilian trials. Lindsey Graham, Republican senator from South Carolina, had an amendment on precisely that in the past. It got fewer than 50 votes. Do you have any Democrats who are joining in your effort?

KING: Yes, there's a number of Democrats. And that bill that that went down — the amendment by Senator Graham, that went down in November, I believe. The political climate has changed dramatically since then. In those days, the Democrats, whether at national level or in New York City, were marching in lock step with the president and the attorney general. Things have changed dramatically since then.

I have no doubt that if Nancy Pelosi and Harry Reid, and certainly Nancy Pelosi in the House, allows it to come to a vote, it will pass overwhelmingly, probably, every Republican and a large number of Democrats.

GIGOT: How do you respond to the charge that some would make, this would be an unconstitutional infringement on the president's war powers, because he has the right under the Constitution to name enemy combatants, and he needs to be able to decide where and when to try these. Congress can't cut off funds.

KING: You know, it's really ironic for a president, who was so reluctant to use the term war, and an administration, which has been so reluctant to use the word terrorism, that they would be trying to invoke war powers to justify this policy. I believe that's a debate worth having.

I believe that when it involves — if it's overseas, that's one thing, but we're talking about imposing this type of risk on local governments, on the people of this country. Then I believe the Congress has the right to speak up and be heard. The same as you would in a declaration of war.

GIGOT: So it's basically the Congress's power of the purse, you think, that gives the right to do that?

KING: I think the power of the purse supersedes the power of the president in that regard, even the president's ability to wage war. If Congress cut off funding, he couldn't do it.

GIGOT: So you would say that Democrats could have cut off funding for Iraq if they had the votes to do it?

KING: They certainly tried. We had a number of votes where they were trying to cut off funding, and we defeated them. And so, yes, I think they have the right. It's an extreme right to use. But I think, in a case such as this, especially where it involves using civilian courts on American territory, that Congress has the right to assert itself.

GIGOT: Let me shift briefly to the Christmas bomber. What has the White House told you about the interrogation of Abdulmutallab, which was only 50 minutes, and the decision to give him Mirandize him, after which he decided to go quiet. Have they told you anything more than we've read in the press?

KING: Let me just say, this White House is reluctant to tell you anything involving the Detroit bombing or anything involving terrorism. It's impossible to get information out. I've been very critical of them, very critical of John Brennan in the White House and the intelligence structure.

As best we can determine, it was the attorney general, the attorney general himself or someone below him, who made the decision to Mirandize. No one sought the input of the direction of national intelligence, the director of the National Counterterrorism Center, the FBI. This was a decision made by — and certainly nobody asked Janet Napolitano in Homeland Security. This was a decision made by the attorney general's office and it's a decision which really unfortunately is consistent with administration policy.

GIGOT: All right. Congressman, thanks so much for being here. We'll be following this debate.

KING: Thank you.

GIGOT: 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 — Dan?

HENNINGER: Paul, a hit to Apple computer. Other than Obama's State of the Union speech this week, far and away, the biggest news was the news about the introduction of Apple's new gadget, the iPad. Now, I'm less interested in whether this thing sells than the absolute craziness that surrounded its introduction. Apple has become a kind of cult. It really has. People were lying in the streets of New York to buy the iPhone several years ago. It's a combination of clever design, neat marketing. And I think it's Steve Jobs himself, the turtle neck, the jeans, the guy is starting to look like a Jedi knight. I mean, he's like Obi-wan Kenobi.

(LAUGHTER)

It's amazing that a company can achieve this status. My hat's off to them. It's a cult.

GIGOT: A brilliant marketer.

James?

FREEMAN: This is a miss to government high-speed rail programs, which President Obama spent a lot of time this week promoting. And as it turns out, I've been participating in an ongoing trial of government railroad projects. As a disgruntled passenger on New Jersey transit, I can tell you, you don't want this nationwide.

(LAUGHTER)

GIGOT: All right, James.

Steve?

MOORE: You know, America's always blamed for being a stingy country when it comes to foreign aid. And that's something that foreigners always say about us. But if you look what's happened in Haiti, and I'm not talking about government aid, but aid by American — the American people and American companies, Paul, over 60 million dollars already in terms of things like flea markets and garage sales and bake sales and dedicating profits. It's going to be over $100 million in the next month. It just goes to prove that Americans are the most generous people in the world. And I hope those donations keep coming in, because Haiti sure needs it.

GIGOT: All right, thanks, Steve.

That's it for this week's edition of the "Journal Editorial Report." Thanks to my panel and to all of you.

I'm Paul Gigot. We hope to see you right here next week.

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