This is a rush transcript from "The Journal Editorial Report," December 11, 2010. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," former attorney general, Michael Mukasey, on the legal case against WikiLeaks founder, Julian Assange.

Plus, the Obama/Republican tax cut deal that's sold as a second stimulus, but is it?

And a group of California parents pull the trigger in a bid to transform one of the state's worst performing public schools. Could they spark a nationwide education revolution?

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

As WikiLeaks founder, Julian Assange, sits in a London jail facing extradition to Sweden on sex charges, some American officials are demanding he be tried in the United States for the release of thousands of classified documents, including last week's dump of sensitive State Department cables. But could Assange be prosecuted under American law, and should he be?

Michael Mukasey is the former attorney general of the United States. He joins me now.

Judge, welcome back. Great to have you back here.

MICHAEL MUKASEY, FORMER ATTORNEY GENERAL: Good morning.

GIGOT: So your success as attorney general, Eric Holder, said his department is investigating whether to prosecute Assange, and would like to. If you were still attorney general, what statute would you be looking at?

MUKASEY: I'd be looking at two sections of what's called the Espionage Act, one of which criminalizes the circulation of the circulation, the publication of defense-related information, and the other of which criminalizes the publication of classified information.

GIGOT: This is the Espionage Act of 1917, a World War I statute?

MUKASEY: An oldie, but goody.

(LAUGHTER)

GIGOT: OK. What do you have to prove to get a conviction on the Espionage Act? Do you have to prove, for example, that the leaks damaged national security?

MUKASEY: You have to prove that they were done with the intent to damage the United States. You have to prove, in order to get — there is one of those sections that carries the death penalty. If you prove that a result of the leaks was to disclose the identity of a U.S. agent, and that agent lost his life, then a penalty up to death may be imposed.

GIGOT: Now what would the impact on the prosecution be if you get a comment like we had last week by Defense Secretary Robert Gates, who said, well, some of the criticism of this is overwrought, some of the fears about the damage done by the release of these diplomatic cables is overwrought? That would hurt the prosecution potentially?

MUKASEY: It would hurt the prosecution potentially. Presumably, the defense would use it as a government edition (ph). But it would not, certainly would not bar the prosecution.

GIGOT: Now the Espionage Act has never been used before, to my knowledge — and you can correct me if I'm wrong. But as far as I've looked back on it, never been used against a publisher, not even in World War II when The Chicago Tribune disclosed that we had — suggested that we had broken the Japanese code after the battle at Midway. FDR decided, that administration, not to prosecute. Why would you make an exception in this case?

MUKASEY: Well, the reason that they decided not to prosecute in World War II was not because the statute didn't apply, but rather because the Japanese hadn't picked up on the story.

(LAUGHTER)

GIGOT: They hadn't read The Tribune.

(LAUGHTER)

MUKSAEY: Their Tribune circulation —

(LAUGHTER)

MUKASEY: Their Tribune subscription must have lapsed. I don't know. But they didn't pick up on the story. They didn't change their codes and if was felt if they prosecuted Colonel McCormack, that would have made it apparent —

GIGOT: The publisher of The Tribune.

MUKASEY: The publisher of The Tribune. That would have made it apparent that we had broken the code and, therefore, it would have made it worse from a national security standpoint. As a matter of discretion, they stopped the investigation before the return of an indictment. It had nothing to do with the question of whether to prosecute him or not legally.

GIGOT: Well, Assange is going to claim that he's a publisher, just like any other newspaper.

MUKASEY: I would add one more thing. And that is in the — in the disclosures, the Ellsberg disclosures —

GIGOT: Right. The Pentagon Papers.

MUKASEY: The Pentagon Papers case.

GIGOT: In the 1970s.

MUKASEY: Right. The majority of the Supreme Court said that, although they would not stop publication in advance, the question of whether there could be prosecution afterwards was a completely different thing.

GIGOT: So —

MUKASEY: So they left that possibility open.

GIGOT: But a majority of the court has never taken a position on the Espionage Act and whether it actually would violate the First Amendment. That's an open question, I gather.

MUKASEY: It's an open question theoretically. I don't, frankly see the question.

GIGOT: You think it would stand?

MUKASEY: Yes.

GIGOT: Why?

MUKASEY: Because the First Amendment doesn't protect speech that causes certain prescribed, certain defined injury. It doesn't protect prosecution for libel. It doesn't protect prosecution for shouting "fire" in a crowded theater. It doesn't protect prosecution for fraud. It doesn't protect prosecution for sedition.

It's interesting, the formulation of the First Amendment. It says that Congress make no law abridging — not — it doesn't say abridging freedom of speech. It says abridge "the" freedom of speech. And it was "the" free speech of the speech that was known at the time, and that's the known sense, i.e., freedom of speech within rational limits.

GIGOT: A lot of publishers would argue, if you go after Assange, then how do you stop at him, and not go after, say, The New York Times or other newspapers that might have published the cables as well, albeit with a little more responsibility and discretion, sorting them out a little better.

MUKASEY: You exercise discretion. And the answer to that may be that perhaps The New York Times ought to hesitate before doing something like that.

GIGOT: So you would not stop necessarily just at Julian Assange?

MUKASEY: In the abstract, no. I think that, in this case, from what I know, I would stop at Julian Assange, and those who are acting in direct concert with him.

GIGOT: So — and you would say, because the Times is just republishing it, perhaps they're not as culpable, is that the distinction you're drawing?

MUKASEY: The distinction I'm drawing, it's easier, from a policy standpoint, to prosecute Assange. There's a clearer case with respect to Assange. With regard to the Times, I think, just as a matter of discretion, I would hold back.

GIGOT: All right, let me ask you, a related but somewhat different question. You've been in the government. You've seen what is classified. The late Senator Daniel Patrick Moynihan, of New York, just said, "The government just keeps too many secrets." Do you agree with that?

MUKASEY: Yes.

GIGOT: They ought to declassify a lot more things so that we can focus on the secrets — protecting the secrets we really need to protect?

MUKASEY: I think that it would help. I think that it would also help to put some controls in, the same way that you're — when you use your credit card. At some point, if charges start being run up that are unusual, you get a call asking whether your vacationing in the Bahamas or whether you've just bought $10,000 —

(LAUGHTER)

MUKASEY: — worth of stereo equipment.

GIGOT: Right.

MUKASEY: People have access to classified information. And there are controls possible that should show, that somebody in Toledo is dumping 500,000 documents, you ought to ask a question about that.

GIGOT: All right, Judge Mukasey. A fascinating issue and, no doubt, going to be interesting to see how it goes.

Thanks so much for being here.

MUKASEY: Thanks for having me.

GIGOT: When we come back, President Obama's tax cut deal, the White House is selling it to skeptics as a stimulus, but is it?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: This is going to boost the economy. It is going to grow the economy. It is going to increase the likelihood that we can drive down the unemployment rate.

(END VIDEO CLIP)

GIGOT: That was President Barack Obama this week trying to persuade skeptics, mostly in his own party, on his tax deal. The White House says provisions to extend unemployment benefits, temporarily cut payroll taxes and provide tax breaks for investment would help get the economy moving again. But are they overselling the planned stimulative effects?

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

So, Mary, it looks to me like most of this package is an extension of the tax status quo. How much stimulus is in there?

MARY ANASTASIA O'GRADY, COLUMNIST: Well, Paul, usually stimulus is considered government spending. And only in Washington can letting people keep more of their own money be considered government spending.

(LAUGHTER)

It makes you wonder who these people — whose money do they think it is?

GIGOT: Right.

O'GRADY: I think the stimulus effects may come from extending the unemployment benefits. That's government spending. But I think not imposing a tax increase, which is basically what's here, is going to, you know, just extend the status quo. As far as the payroll tax cut goes, I'm skeptical about that because it's temporary and people —

GIGOT: And it's for one year. And it's on the employee side.

O'GRADY: Yes.

GIGOT: So it is the worker who saves the money, that will put more money in their pockets. But does it give the business any more incentive to hire?

O'GRADY: Not only that — I don't think it does. And not only that, I think this is evidence to show that when people see a temporary increase in their income, they don't necessarily go out and spend that. They use that to pay down debt or to get ready where when the income goes back down. And the fact that it's temporary, I don't think necessarily means it's going to go into spending and consumption.

GIGOT: OK, Steve, a lot of people are saying, even some on the right, that this is a real change of intellectual course for the administration. Is it a real supply side, tax cutting strategy?

STEVE MOORE, SENIOR ECONOMICS WRITER: Well, first of all, Paul, I'd like to make a suggestion that we expunge from our vocabulary the term "stimulus," because the term has become so discredited by the Obama administration. The last stimulus we had over a trillion dollars actually lost two million jobs.

GIGOT: Right.

MOORE: So I just — I just hate that word.

(CROSSTALK)

GIGOT: OK, is this what you would call a supply-side pro-growth tax spread?

MOORE: Yes. I really think it will help the economy, quite a bit. In fact, I'm very bullish on this plan. Mary is right. It's only keeping the tax rates where they are. But if we hadn't done this, Paul, we would have been talking about raising the capital gains tax, the dividend tax, income taxes on small businesses. So I do think that this really — I agree with Larry Summers. I believe that this dramatically reduces the chances of a double dip recession. It gives some businesses and individuals and workers some certainty about what taxes will be next year.

GIGOT: OK, but only for two years.

MOORE: That's true.

(CROSSTALK)

GIGOT: And it only avoids the tax increase, Steve. It doesn't cut taxes any further, for the most part, other than —

MOORE: Right.

GIGOT: — the one or two small points.

Dan, is this your idea of a growth policy?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: It's definitely not my idea of a growth policy. I think that's an important distinction. We have a group of politicians in Washington that are sort of presiding over a moribund economy. It's like a patient who is in a coma.

GIGOT: Right.

HENNINGER: And their idea of growth is the patient comes out of the coma and opens his eyes. I don't think that's what we're talking about in terms of real economic growth. And there's nothing in this package that's going to make the economy grow at a strong rate. And I think what the Republicans should do is take this and then say they will build on this, as the basis for growing the economy.

GIGOT: But don't oversell it as —

HENNINGER: Don't oversell it.

(CROSSTALK)

HENNINGER: It's just bringing the economy out of the coma.

MOORE: Hey, Paul, Paul —

O'GRADY: Yes, I think —

MOORE: Paul, can I — can I —

GIGOT: Yes, go ahead, Steve. Go ahead.

MOORE: I just want to add one point I think is so important. You know, everybody in Washington, at least the people on the left, keep describing unemployment insurance extensions as a stimulus to the economy. This will reduce jobs. And it will reduce employment. If you pay people not to work, you don't get more jobs. I don't know where this idea came from. And we've had some good evidence on our page that shows that we probably added one or two percentage points to the unemployment rate because we're giving people so long on unemployment benefits.

GIGOT: They claim it will boost consumption somehow and that will, therefore, help the economy.

Mary, politically, why are the House Democrats so angry about this?

(LAUGHTER)

O'GRADY: Well, this is religion.

(LAUGHTER)

And if you notice —

GIGOT: Taxes on the rich are a religion?

O'GRADY: Yes, they keep repeating over and over again that this is somehow giving the very rich in the country some kind of special break. I mean, I think the question we have to ask, in terms of understanding how good it will be for the economy, is does it put more money in the hands of the private sector. Because the private sector is the —

GIGOT: Engine of growth.

O'GRADY: — place where wealth is created. And —

GIGOT: And that, net on net, means this is actually a deal probably worth taking?

O'GRADY: Yes, I think that that's the positive. The negative is the temporary aspect of it.

GIGOT: Right.

O'GRADY: Businesses do not make decisions based on one year out, and particularly in hiring, because once you hire someone, it's not so easy to get rid of them a year later. And so I think, in terms of, like Dan said, keeping the patient alive, it's all good. But in terms of making the U.S. economy more competitive, which we really need to do, no.

GIGOT: Dan, why would the president — we don't have a lot of time, but why would the president kick this down the road for two years, putting it right in the middle of the 2012 political campaign to re-litigate all of us.

HENNINGER: I believe he is a class warrior and wants to fight the upper-bracket thing. He said that he would repeal it if reelected.

GIGOT: He thinks it's good politics?

HENNINGER: He thinks it's good politics. And he has an alternate idea how the economy gross and it does not include lower tax rates for people in the upper bracket and he believe that and wants to fight on that.

GIGOT: And if he thinks that the — and if he thinks that the economy is better in the 2012, the Republican argument is that raises those taxes would hurt the economy, that trump card will be gone and they can fight on fairness and win.

(CROSSTALK)

HENNINGER: I can't wait to find out.

GIGOT: I don't know. Your taxes may go up as a result.

(LAUGHTER)

When we come back, California parents pull the trigger on school reform, taking the fate of one failing public school out of the hands of the teachers union. Could it spark a nationwide education revolution?

(COMMERCIAL BREAK)

GIGOT: Well, it could be the shot heard around the education world. This week, in Compton, California, more than 260 parents pulled the first- ever parent trigger in a bid to transform their children's failing public schools. Under a state law passed earlier this year, the parents can trigger a change in governance at some 1,300 public schools if they fail to make "adequate" yearly progress four years in a row. If at least 51 percent of the parents sign a petition, they can shut the school down, shake up the administration or invite a charter school to take over.

Compton's McKinley Public School made "adequate" only once since 2003 and it is the bottom 10 percent of schools state wide. On Tuesday, more than 60 percent of parents at McKinley students turned in a petition, exercising that right to take over the school and turn it over to a charter school operator.

For more, I'm joined by Wall Street Journal editorial board member, Jason Riley; and assistant editorial features editor, David Feith.

David, you've been following this. Where did the parent-trigger movement get started?

DAVID FEITH, ASSISTANT EDITORIAL FEATURES EDITOR: It basically began with a liberal Los Angeles parent group called Parent Revolution. And they conceived of the idea and got it passed into law as a package of reforms that tried —

GIGOT: Through the state legislature?

FEITH: Through the state legislature, by one vote, with a liberal Democratic sponsor, Gloria Romero.

GIGOT: This is one of the fascinating things about this to me. Mostly liberal Democrats opposed to the school choice. Yet, this is one of the most ambitious school choice proposals around because the parents can trigger it. You don't have to have elites and public debate on all that, the parents at a school.

FEITH: Exactly, and it doesn't rely on the circumstances that educational proponents have relied on for 10 or more years, where you need the right mayor and the right school chancellor, as with New York with Joel Klein and Mayor Bloomberg, or in Washington —

GIGOT: Right.

FEITH: — with Mayor Fenty and Michelle Rhee, who left her job after Mayor Fenty lost his race.

GIGOT: Now, if the charter school replaces the public school, they have to take all the kids at that school and still educate them. Do they get the same amount of money from the state and the local school board?

FEITH: Yes, what we basically see with this new parent-trigger option is a new way for a charter school to come to be. Once it's been —

GIGOT: Right.

FEITH: — started, it works the same way, except for the crucial difference that you mentioned, which is that, whereas charter schools in other areas have to hold lotteries because they have so many applicants —

GIGOT: That's right, and they don't have to take all comers.

FEITH: Right, because they simply don't have the space. Schools that are — charter schools begun by thus trigger option will take all students. No students from the failing original school will be banished by a lottery.

GIGOT: So what is happening at Compton, what happened this week and do you expect to happen?

FEITH: What happened on Tuesday was 260 parents, about 61 percent of the parent body at McKinley, went down to the superintendent's office in Compton and delivered their signatures and began the charter process. And what they have called for in the petition all along is that the Celerity Educational Group, a charter operator —

GIGOT: Which is already running a couple of charters successfully in L.A.?

FEITH: Three quite successful schools in L.A. And they've petitioned for this. It is a specific petition. You don't petition broadly for a transformation. You petition specifically for the charter to come in this case. What we now expect to happen is lawsuits. There will be challenges.

GIGOT: The unions will challenge this and try to stop it. But ultimately if the law says what it — means what it says, they should be successful since they've got 61 percent of the support.

FEITH: The plain meaning of the law is quite clear.

GIGOT: Jason, you've been following education reform for a long time, school choice, pushing that stone up the mountain for a long time.

(LAUGHTER)

What do you make of this particular reform?

JASON RILEY, EDITORIAL BOARD MEMBER: Well, to the extent that it puts more choices in the hands of parents and kids, it's all good. I mean, the problem with public education today is that the teachers unions have a vice grip on—

GIGOT: On local governance.

RILEY: On local governance. And the balance of power is out of whack here. The system is set up to benefit the adults that run the system versus the kids that are supposed to be — I mean, why are bad schools closing? Because it means fewer jobs, which means fewer members for unions. And the concerns of the kids are secondary.

GIGOT: Right.

RILEY: So to the extent that it gives parents the ability to make choices, it's all good. I mean, a lot of it, I think, will depend on the trigger that they decide to use, and I mean, if they decide to use it. Under No Child Left Behind, parents have had the option of transferring kids out of failing schools since 2002. Very few have done it. So, first, you'll need parents to take the initiative to take advantage of this new law.

GIGOT: Right? So there's going to be an education process involved here.

RILEY: Sure. Sure.

GIGOT: In educating parents.

RILEY: But also the specific trigger they use will matter. A lot of the turn-around models don't have a very good track record here.

(CROSSTALK)

RILEY: But down a school, however, and bringing in one of these high- performing networks to run like a KIPP, or a democracy prep, that has a much more successful track record.

GIGOT: And the charter in this case, David, is a good track record.

FEITH: Right. It's been around for a number of years. It has three schools and they are all are high performing.

GIGOT: OK, thank you both.

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" of the week.

Dan, first to you.

HENNINGER: Paul, this week, the New York Jets football team called former pro safety, Keith Fitzhugh, to come back and play for them. Mr. Fitzhugh said, no thanks, I've got a good job as a train conductor in Georgia. You might say, is the economy so bad that he wouldn't leave the job to play in the NFL. It's a little more complicated than that. Mr. Fitzhugh lives at home with his disabled father. And as he put it, I'd love to play in the Super Bowl, but you you've only got one mom and dad. In the NFL, that's known as a hit.

(LAUGHTER)

GIGOT: Classy.

Alright, Jason?

RILEY: Paul, earlier this week, former President Jimmy Carter gave an interview to PBS where he said, "I have serious doubts we will prevail in Afghanistan and I don't think we have the capability or the will to actually prevail military over the Taliban. That seems to me to be an almost hopeless case." How is that for a holiday message to our troops and their families from the former commander-in-chief? Paul, I think the only hopeless case here might be our former president, whose statements are not only incorrect, but very irresponsible.

GIGOT: All right, Jason.

Steve?

MOORE: After the bombing of Pearl Harbor, Franklin Roosevelt declared December 7, 1941, should be a day that lives in infamy. But this December 7th came along and the media paid almost no attention to it. They paid more attention to Lady Gaga's birthday than this important date. Paul, when we remember December 7, 1941, and we memorialize and pay tribute to the men and women who kept America free and defeated tyranny, I think we do a real service to the people who kept this American country free.

GIGOT: All right, Steve, thanks so much.

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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