'Journal Editorial Report,' March 13, 2010

This is a rush transcript from "The Journal Editorial Report," March 13, 2010. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," charges of McCarthyism are leveled against Liz Cheney for her campaign to identify Justice Department attorneys who once defended Gitmo detainees. Is her group's Al Qaeda seven ad over the top?

And should Eric Holder make the lawyer's records public? We'll debate,

Plus, Democrats are plotting some add-ones to the health care bill that could mean bad news for families struggling with college costs.

And Indiana Governor Mitch Daniels on what Obama-care could mean for cash-strapped states.

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

Charges of McCarthyism are being leveled against former Vice President Dick Cheney's daughter, Liz, over her recent campaign to identify current Justice Department attorneys who represented Gitmo detainees while in private practice. Lawyers from both sides of the political spectrum came out this week to criticize Cheney for this online ad produced by her group, Keep America Safe.

(BEGIN VIDEO CLIP)

AD ANNOUNCER: So who did President Obama's Attorney General Eric Holder hire? Nine lawyers who represented or advocated for terrorists detainees. Who are these government officials? Eric Holder will only name two. Why the secrecy behind the other seven? Whose do they share? Tell Eric Holder, Americans have a right to know the identity of the Al Qaeda seven.

(END VIDEO CLIP)

GIGOT: Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; editorial board member, Dorothy Rabinowitz; and columnist and deputy editor, Bret Stephens.

So, Dorothy, is it fair to attack the Obama administration for hiring lawyers who did represent terrorists in private practice?

DOROTHY RABINOWITZ, EDITORIAL BOARD MEMBER: It's a fair question, and it's fair to attack the people who exaggeratedly accuse these people of McCarthyism, because you can't rule out the element of political sympathy, can you? How can you avoid it? And people —

GIGOT: Sympathy for?

RABINOWITZ: The defendants. People who are —

GIGOT: By the people representing them? You're saying that the people who represented these detainees have a sympathy with them?

RABINOWITZ: Yes, you can — you're sitting alone in your office in the United States and you decide, well, where can I put my talents to work best? Of all the clients you're —

GIGOT: Pro bono work.

(LAUGHTER)

RABINOWITZ: Did you go to pick a U.S. soldier who is accused of something? No, no, you went to pick somebody who was caught on the field of battle and made a terrorist suspect, not only one, but you've made several of these choices. Can you really say that this was done without political sympathy? I remember William Council (ph) spending the last part of his years at absolute joy finding exactly such clients.

GIGOT: He was the famous left wing attorney who defended a lot of the radicals in the '70s and '60s.

RABINOWITZ: Exactly. And it was the joy of his life. But you look anywhere, now you have to say to yourself, there are a barrage of judges and attorneys now saying, of course, this is McCarthyism. Guess what, the last people who should be asked about this question are lawyers. Ask any Americans on the street without a law agree what they think of somebody who volunteered their services to Al Qaeda and you'll get the sensible response.

GIGOT: Should they —

BRET STEPHENS, COLUMNIST AND DEPUTY EDITOR: So by the same token, if you're drawn to defending death penalty cases because you have objections to the death penalty, does that make you sympathetic to murders?

RABINOWITZ: That is exactly the reasoning these judges used. All of these parallels between what — we have special thing called a war going on.

(LAUGHTER)

And there are these people out to destroy us, which is not the same as serving in our popular corporate client. It's not the same as the death penalty. It's people bent on destruction.

GIGOT: Dorothy, should these lawyers, who represented detainees, does that mean you think they should be barred from public service?

RABINOWITZ: No, I do not. What we're asking and what Liz Cheney's group is asking is not barring them. She saying why don't you answer some questions about this, and why is the attorney general of the United States stonewalling on these questions. And by the way, you might ask, what are all of these people doing in the department, not two or three, there are a bunch. Does this mean anything?

DAN HENNINGER, COLUMNIST AND DEPUTY EDITOR: Look, the — these attorneys were doing legal work. To me, and in some ways, this is the same debate we've had for 30 years over the exclusionary rules, searches and seizures, where conservatives would say liberal judges and lawyers were allowing criminals to go free and get out on the street and kill people.

GIGOT: If the evidence is obtained illegally.

HENNINGER: If the evidence is tainted or obtained illegally.

GIGOT: Yes.

HENNINGER: You have justices on the Supreme Court who still argue in front of each other about this. These are political issues. They're legitimate issues, but they have to be resolved politically. I don't think there's anything particular — you know, the ad is a little pretentious. But there's nothing wrong with elevating these issues so people can make some political decisions about whether they want these people running the government.

STEPHENS: Look, there are two separate issues at work. One is the question of transparency and that question a legitimately asked.

GIGOT: Holder should have given the names, that's what you're saying?

STEPHENS: He should have given the names. But there's the suggestion that to be a, quote, "Al Qaeda lawyer" is the same thing as being a mob lawyer. But we all know when you speak of a mob lawyer, you tend to mean someone who isn't just representing a client who happens to be in the mob, but really is somehow implicated in the whole business as a consigliere. I don't think that can be said of these people. And that's what makes the ad and the whole sort of gist of the attack on these people deeply unfair and it actually hardly serves Liz Cheney's case. If you want to talk about transparency, fine. If you want to tar the people, who won cases before the Supreme Court, that's another matter.

GIGOT: Supreme Court.

RABINOWITZ: Bret, I have to tell you that I've known mob lawyers, some of the most famous ones and they don't do it for nothing. They get well-paid. Don't discount that as a motive.

But the other thing is we're talking about sympathies that drive people. We are not talking about mob lawyers wanting to go out there and rip off everybody. Political sympathies are what drives —

STEPHENS: But, Dorothy, the point is not their political sympathy with terrorists. Their point is their views, which I disagree with, but I respect, that the detainees in Gitmo were entitled to certain kinds of constitutional privileges and protections. And we can have a real argument about that, but that's a different question than saying they're sympathetic. These people are not the Lynne Stewarts, that New York City lawyer who was passing on confidential information illegally to a terrorist in prison.

RABINOWITZ: And let's take this up. This is not a legitimate question. This is not the Sixth Amendment right for people who were taken into our system, which is what the Sixth Amendment — who do deserve representation. These are people captured abroad.

GIGOT: So enemy combatants, you're saying, should not have certain representation?

RABINOWITZ: Certainly not. That was not the intent.

GIGOT: But under the military commissions laws that were passed in 2006, which we supported as a newspaper, they would be entitled to representation.

RABINOWITZ: Well, we don't have to agree with everything that we support, do we?

(LAUGHTER)

HENNINGER: Do you folks mind if I think lower, as a colleague of ours used to say? Remember the attack on John Yoo? They were trying to disbar him? That was an attempt to intimidate conservative lawyers and prevent them from serving in the government. I think what this ad does is essentially tit for tat against liberal lawyers.

GIGOT: All right, last word Dan Henninger.

When we come back, the other government takeover. You already know the Democrats are planning to ram the health care through with a reconciliation bill. But wait until you hear what else may be attached to that legislation.

(COMMERCIAL BREAK)

GIGOT: Well, everyone knows Democrats are planning to use the budget reconciliation process to ram Obama-care through Congress, but you may not know what else could wind up attached to that bill. It's a controversial plan to rewrite the Higher Education Act and overhaul the Federal Student Loan Program and, in the end, the changes could wind up costing you money. College is the fastest growing expense for families, outpacing even health care spending, a fact all too familiar to students in the university of California system who took to the streets last week to protest a 32 percent tuition hike.

Assistant editorial page editor, James Freeman; and Alicia Finley, an editor at opinionjournal.com join us with more.

So, James, are they trying to attach this to reconciliation, because it can't pass as a stand alone bill.

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: I think that's the question. I doubt whether it can attract 51 votes, never mind 60, if it had to go on its own.

GIGOT: What does the bill do? Why should people care?

FREEMAN: Well, you're basically taking the $100 billion market in student loans.

GIGOT: Per year, about $100 billion.

FREEMAN: Per year, that is — these loans are originated and serviced by private lenders. And you're replacing them with the Department of Education.

(LAUGHTER)

This is kind of like a lot of the arguments over the last year. Somehow this is supposed to save money by having the government take over functions that private companies used to do.

GIGOT: Right, but they say that because there is an interest rate subsidy that Congress passed that said these lenders do get a break, do get a break, and then they pocket the difference. And they say, look, why not cut out the middle man? And why should these guys get a subsidy? You're not in favor of corporate subsidies.

FREEMAN: The subsidies remaining. The spending is increasing. So the —

GIGOT: But not for the private companies. But if they're cut out, they don't get the subsidy.

FREEMAN: Right. The subsidy will continue to go to the students and the government will take over the function. But this is all driven by a Congressional Budget Office score. It's below what the Obama administration forecast.

GIGOT: That means they claim they're going to be a big savings.

FREEMAN: They claim they're going to save $60, $70 million.

GIGOT: Why isn't that true?

FREEMAN: It's interesting. The head of the CBO says it's not true. When — although that's the official score, when people ask him is that really true, he says, well, government accounting, it doesn't count the risk of default when the government originates the loan. He says the number is bogus basically, but because of the accounting rules, they have to claim it's going to save money.

GIGOT: And there's also going to be other things likely to be attached to this.

FREEMAN: This is the other piece, is the savings, which probably are not going to happen, are offset by more new spending, than even the savings that they claim. So this is a guaranteed loser for taxpayers any way you look at it.

GIGOT: So this is going to add, how much a year, $100 billion a year to the federal balance sheet?

FREEMAN: About a trillion in new —

GIGOT: Over 10 years.

FREEMAN: Over 10 years, that's right. So a $100 billion a year and certainly more than $10 million a year in direct costs.

GIGOT: And colleges are worried — don't really like this. A lot of them are worried because, you know, the service from the Department of Education, would be the same for —

FREEMAN: It's kind of amazing — yes, when you look at the Internet chatter from college financial aid officers, you don't think of this as a right-wing group, but they're talking about a government takeover, about having this plan jammed down their throats, about how they're going to pay more, the service is bad and they don't like it.

GIGOT: So, Alicia, we've got the protests in California with the students in the street and obviously concerned about the growing cost of education, they're going to have to bear. But do they have the right target when they're criticizing the university of California regents?

ALICIA FINLEY, OPINIONJOURNAL.COM: No, I mean, they should be going after the public employees, the same police people that are sent to maintain order, you know.

GIGOT: Because? Why is that?

FINLEY: Well, they're the ones who are swallowing up all the money in their pensions.

GIGOT: Because of deals that were struck that those — they're representing the police, firemen, prison guards. They're represented by government unions and public employee unions. And they struck a deal with the politician to give them big benefits, is that the idea?

FINLEY: Yes, back in 1999, they pretty much expanded pensions and health care benefits. And they extended, actually, in 2002 to billboard inspectors, milk inspectors, of all people. And since then, cost, pension costs have risen by 2,000 percent.

GIGOT: And that means there's less money for things like higher education.

FINLEY: Higher education.

GIGOT: And other liberal —

HENNINGER: Well, the pensions are a legal obligation and they had to make the payments. And they took the money from the higher education budget and now the kids are in the street.

GIGOT: It's a classic example of the way in which, when you get these powerful unions that crowds out other liberal priorities.

Is this sinking at all, do you think, Alicia, with the students? They seem to be aimed at Arnold Schwarzenegger principally, who actually has tried to reform the pensions.

FINLEY: Yes, back in 2005, and we saw where that went, you know? I mean, now he's still proposing reforms. But, you know, the Democratic legislature isn't going for any of them. And it doesn't look like anything's going to happen unless you go to the ballot box and vote them out in November.

GIGOT: Vote the California legislature out? Good luck with that.

(LAUGHTER)

HENNINGER: But I think that they're beginning to find the right target, which is the legislatures, in all of these cases. And by November, they may get there.

GIGOT: All right, thank you all.

When we come back, as the health care battle enters its final stage, governors across the country are keeping an anxious eye on Washington. Can cash-strapped states afford Obama-care? Indiana Governor Mitch Daniels weighs in.

(COMMERCIAL BREAK)

GIGOT: Members of Congress aren't the only elected officials keeping a close eye on the health care debate. As the president crisscrosses the country in the final push, governors in cash-strapped states are anxiously looking at what Obama-care would mean for their citizens and their budgets.

I sat down with Indiana Governor Mitch Daniels earlier this week and asked him what impact the health care overhaul would have on his state.

(BEGIN VIDEOTAPE)

GOVERNOR MITCH DANIELS, R-IND.: Hard to say much good about it honestly.

GIGOT: Really?

DANIELS: Give it credit for good intentions, but I think the bill's very ill-conceived. We'd experienced the same problems that all of America would in higher premiums and taxes and — but in particular, we're a home to the medical device industry.

GIGOT: That will be taxed.

DANIELS: Very heavily taxed and cost us a lot of jobs. The — this year, this month's villain of choice, I guess, WellPoint is headquartered in our state.

GIGOT: The insurance company.

DANIELS: Probably cost us jobs there. And we have a program we're quite proud of for uninsured citizens in our state. It would be wiped out. They'd be thrown into Medicaid along with many, many other citizens. And I'm not certain that's a good outcome either for them or for taxpayers.

GIGOT: Most of those would be put onto Medicaid under this bill, so what, 13, 14 percent of your state on Medicaid now, that would expand that substantially.

DANIELS: We're told to expect maybe a one-third expansion. Might be more in our case.

GIGOT: So that'd put it right over 20 percent. Every citizen in Indiana would then be insured under Medicaid.

DANIELS: It could easily be.

GIGOT: Wow.

DANIELS: And we don't consider Medicaid, as it operates in our state, the best quality of health care and certainly not the best for the money.

GIGOT: So your advice to the legislators, congressmen, Senators from Indiana, would be vote against this bill? And are they going to take your advice?

(LAUGHTER)

DANIELS: They're not known for taking my advice, but to the extent that anyone would listen, I would ask them, yes, don't make this very large mistake. There are some things that could be done of a more incremental nature now. And we really need to have a very different approach to this, in my opinion, in which we individualize the tax benefit. Trust people more with their own decisions about their own health.

GIGOT: Let's talk about state governments. You're one of the few states that hasn't raised taxes. And so many other states have had to do that to balance their budgets. Are you going to have to raise taxes before here, the next year or so, if the economy doesn't turn around? And how have you balanced it so far?

DANIELS: We're determined not to. In fact, our current economic growth strategy is to hang on and stand strong on our very low tax environment while other states fall around —

(CROSSTALK)

GIGOT: So it's a job-recruiting device. It's a job-recruiting device?

DANIELS: Yes, each time another state, now 40-some have done so, raises the tax, it makes Indiana a little bit more competitive for the next job, the next investment. So this is a top priority that we have.

We've made it to a position of solvency and triple-a credit rating, entirely by the reduction of spending and by reforms. We believe in government that's active and government that is very effective, where it should operate at all.

GIGOT: Right.

DANIELS: And we work hard on that, but —

GIGOT: You took some stimulus money, didn't you? Has that helped you?

DANIELS: Yes, no denying we'd have had to make a lot harder decisions without it.

GIGOT: Did it prevent some layoffs?

DANIELS: Yes, I suspect so. We had actually been bringing down the number of state employees long before the recession. We had the fewest employees now since about 1980. And we did that without layoffs, sometimes attrition, sometimes by outsourcing a function where we thought we could hire Hoosiers in the private sector.

GIGOT: OK.

DANIELS: But we protected the employees in each case. And that all pre-dated the recession. We've haven't — we've had very, very few actual layoffs even now.

GIGOT: And you've got — we know a lot of the big states, New York, California, New Jersey are in real fiscal trouble and everybody assumes they're going to be coming back to Washington for more cash, more stimulus, so-called cash. Do you think they ought to get a bailout, another package?

DANIELS: I don't. I think this would be the mother of all bailouts, by the way.

(LAUGHTER)

GIGOT: California would be the Greece of America.

DANIELS: Yes, given the — yes, the numbers, and how far in the hole some of these states have managed to go. But I'm almost certain that there will be an attempt. I don't know what its chances are.

Congress doesn't often get the right answer, but one thing they might hear, because they don't have a lot of — historically, a lot of sympathy for states, they don't get any credit for helping the states.

GIGOT: Well, they get that credit from their home state and California is a very big state, with more than 50 Congressmen. So, is that going to be popular in Indiana if they come to you — if they come to say we've got to rescue California for the good of the country's economy?

DANIELS: Of course, not. We don't think bad behavior should be rewarded. And viewed the other way, we've gone through a lot to balance our budget, pay off some debts we had, put some money in the bank for this very, very rainy day we're experiencing, and keep our taxes low and, thank you, no, we would not like to be taxed further to bail out states who weren't so careful.

GIGOT: Governor Daniels, thanks so much for being with us.

DANIELS: You're welcome.

(END VIDEOTAPE)

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.

Dorothy, first to you.

RABINOWITZ: Yes, well, Sean Penn is a product of the usual Hollywood disease, the dilution that their star power gives them adequate mental capacity to live life.

(LAUGHTER)

Much less, make political judgments — decided that Hugo Chavez is one of the world's great heroes and that, quote, on "The Bill Maher Show," "people who accused him of being a dictator should be put in prison." This violation of the First Amendment eluded Sean Penn. But I'd like to remind people that Hugo Chavez, his hero, was like Adolf Hitler — as he compared Bush to Adolf Hitler at one point — and also loved by his people. And it would, you know, be useful if he —

GIGOT: Would remember.

RABINOWITZ: Would remember this.

GIGOT: All right.

James?

FREEMAN: Well, Paul, this is another dispatch from Hollywood. The L.A. Times reported this week that members of the L.A. city council do not actually have to show up for votes. They've wired the software in their meeting room to automatically vote yes if they don't show up for the vote. So this looks like a miss, but I think it could be a hit if it allows members of Congress ultimately to vote from their home districts and not risk coming to Washington and being lobbied in the shower by Rahm Emanuel.

(LAUGHTER)

GIGOT: All right.

Bret?

STEPHENS: Well, this is one from the annals of Hillary Clinton's smart diplomacy. The State Department recently apologized to Moammar Qaddafi for causing him great offense. What was the offense? Well, the spokesman, P.J. Crowley, basically dismissed Qaddafi's claim of a jihad against the country of Switzerland as being nonsensical. Qaddafi responded by saying we might not be giving you those oil contracts. And he got, from the State Department, the full kowtow. This brings the apology to a new low.

GIGOT: All right, Bret.

Remember, if you have your own "Hit or Miss, please send it to us at jer@FoxNews.com.

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

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

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