JOURNAL EDITORIAL REPORT

2012 campaign enters home stretch

What to expect in the weeks ahead as the candidates hone their closing arguments

 

This is a rush transcript from "Journal Editorial Report," October 20, 2012. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," two debates down, one to go. Where the presidential race stands after Tuesday's town hall faceoff, and a look ahead to Monday night's final showdown on foreign policy.

Plus, the president's plans. He's been mum about his second-term agenda. But we've got some ideas about what to expect.

All that, and the green energy fiasco. Another administration favorite follows Solyndra into bankruptcy and takes millions in taxpayer money with it.

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

The presidential candidates met for their second debate this week with a more spirited President Obama trading jabs with Republican rival, Mitt Romney, on everything from immigration to taxes. National polls show the race still very much a toss-up, and swing state surveys continue to tighten. Both candidates are campaign hard in those key states as they hone their message for the campaigns' closing weeks.

Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; editorial board member, Mary Kissel; assistant editorial page editor, James Freeman; and Washington columnist, Kim Strassel.

So, Kim, I talked to a lot of Democrats this week who were elated by the president's performance. They say the king is back. He's really rocking now.

(LAUGHTER)

Momentum -- the big mo's with him. What do you think about that? Are they right?

KIM STRASSEL, WASHINGTON COLUMNIST: Well, I mean, the president certainly made his base thrilled with his performance at the debate. That was one of the things he needed to do. Look, there's too many questions coming at the president's campaign. He needed to settle and calm those fears. Yes, he succeeded at.

What he did not arguably do at the debate is, in any way, stem the damage that Mitt Romney inflicted in the first debate, which was to expose that he's not really running publicly with a second-term agenda. And that's what Independents and a lot of undecided voters are looking at that. In that, he sounded like someone who was stumbling. He just didn't have a plan, and that was a problem.

GIGOT: Let's roll and add that the -- Obama campaign is rolling out this week following the debate, which they think is a big plus for them. Let's see.

(BEGIN VIDEO CLIP)

(MUSIC)

UNIDENTIFIED FEMALE: In what new ways do you intend to rectify the inequalities in the workplace, specifically regarding females making only 72 percent of what their female counterparts earn?

(MUSIC)

MITT ROMNEY, R - PRESIDENTIAL CANDIDATE: I had the chance to pull together a cabinet and all the applicants seem to be men. I said, well, gosh, can't we find some women that are also qualified? They brought us whole binders full of women.

(END VIDEO CLIP)

GIGOT: So "binders full of women" being the vital -- web viral line of the week. It's clearly a strategy, on Obama's part, aimed at turning out women voters, which they're concerned about where Romney is making inroads.

What do you think of that strategy?

MARY KISSEL, EDITORIAL BOARD MEMBER: Well, Romney's making inroads because he's talking to women like they have a brain.

(LAUGHTER)

He's talking to them from the neck, up.

(LAUGHTER)

Women are just as likely as men to be pro-life. I think the Romney campaign can counter an ad like that by talking about some of the real reasons that women have pay disparities. There are things that could be changed about the tax code. There are things that could be changed about our labor laws. But I think it shows just how desperate the Obama campaign has become if they're seizing something as benign as the phrase "binders of women."

GIGOT: But, Kim, really, the women's vote is crucial for Obama. I mean, they are stressing this. Every Democrat I talk to says this may be where the election -- what it depends on.

STRASSEL: Look, they've got a couple of core subgroups, the Hispanic community, minors, in particularly women and the youth vote. They are going to be -- whether or not Barack Obama wins will be, in part, by hue huge a margin, if he has one at all, that he wins women over Mitt Romney. This is why they're so concerned. It's why they're running this ad. Because what really happened after the first debate in Denver is that Mitt Romney calmed a lot of fears that women had about him and he started to narrow the gap, to the point where, in some polls, he's actually polling evenly with the president among women. That's why they're pursuing this so aggressively.

GIGOT: OK. Dan, I'm going -- go ahead. You want to give some analysis on this subject?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Well, not so much the women. But the one questioner in that debate about whom they will not be running an ad, was the black fellow, who stood up and simply asked the president about what he's doing for every-day lives.

GIGOT: We've got an ad that plays off of that answer.

HENNINGER: All right.

GIGOT: Let's look at it. This is a Romney ad.

(BEGIN VIDEO CLIP)

ROMNEY: His policies haven't worked. Median income's down $4300 a family, and 23 million Americans out of work. He said that he'd cut in half the deficit. He just hasn't been able to put in place reforms for Medicare and Social Security to preserve them. That's what this election is about. It's about who can get the middle class in this country a bright and prosperous future and assure our kids the kind of hope and optimism they deserve.

(END VIDEO CLIP)

GIGOT: This is the big mega theme that Romney is developing, basically say -- it's focused on the economy. It's nationally based, not regionally based. I thought that was his most effective answer in that debate.

HENNINGER: Oh, I did, too. And I think it is the mega issue. I think that fellow put his finger right on it. How can we relate my economic life, my daily life, to what's going on in the larger economy? And President Obama virtually had nothing to say to him. By the time he was done, he was talking about ending the war in Iraq and killing bin Laden.

(LAUGHTER)

GIGOT: Don't forget, but 100,000 --

HENNINGER: Yes.

(LAUGHTER)

(CROSSTALK)

HENNINGER: Yes.

GIGOT: All right, James?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Yes, the Romney critique, the litany of Obama broken promises that he went through, that was the best part of the debate.

I would like to see Romney do a little more explaining why liberating the economy, simplifying the tax code, creates jobs, a little bit more about why freedom works better than the government. In terms of knocking down the Obama's claims -- and he correctly pointed out that the Obama has cut energy production on federal lands, and he scored.

GIGOT: It's interesting, Mary, at least to me, the Romney campaign has this large national theme, the economy isn't working for you, here's how we can fix it. Obama has a much more micro-strategy. It's almost like they're trying to run 10 governors races, so he emerges as Mr. Coal for southeast Ohio --

KISSEL: That must have been a hard one for MSNBC, yes.

GIGOT: -- and Western Virginia. You know, he's got these micro- targeting strategies. It's an interesting distinction.

KISSEL: It is an interesting distinction. What I want to know where is the demand for details on how he will achieve all the things he's promising. They want details on Romney's tax code. We'll the president says he's going to create a million manufacturing jobs. Well, how, with the same strategies the last four years?

One thing on Dan's point. I think another achievement of Romney was that he exposed the president's lack of leadership. He says, where's the plan to fix entitlements? That's a theme he needs to hit on in the next debates in the days to come.

GIGOT: All right, everyone.

When we come back, the president may have been more spirited in this week's debate, but not more specific. So when will he lay out his agenda for the next four years?

(BEGIN VIDEO CLIP)

ROMNEY: I think it's interesting that the president still doesn't have an agenda for a second term.

(SHOUTING)

ROMNEY: Don't you think it's time for him to finally put together a vision for what he would do in the next four years if he were elected? I mean, he has to come up with that over this weekend, because there's only one debate left on Monday.

(CHEERING)

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: The commitments I've made, I've kept. And those I haven't been able to keep, it's not for lack of trying, and we'll get it done in a second term.

ROMNEY: I can tell you that if you were to elect President Obama, you know what you'll get? You'll get a repeat of the last four years. We just can't afford four more years like the last four years.

(END VIDEO CLIP)

GIGOT: A promise from President Obama to make good on past commitments in a second term, something Mitt Romney says America can't afford. But what exactly does the president have in store if he's re- elected?

We're back with Dan Henninger, James Freeman and Kim Strassel. And Wall Street Journal foreign affairs columnist, Bret Stephens, also joins the panel.

So, James, what is the president proposing to do?

FREEMAN: Basically, you heard it in the debates, more teachers, 100,000 more teachers, more infrastructure. We've been hearing that since '09. He still wants more money for infrastructure. And --

(CROSSTALK)

GIGOT: Not so shovel-ready projects, is that it?

FREEMAN: That's another question. These things can take five to 10 years to build if Congress ever gave them more money for it. They're not going to happen in a second term. But then the other thing is, according to him, trillions in deficit reduction. Reduction from what he would like to spend, I guess, is the theoretical number.

GIGOT: Yes, not so much cuts in spending, but reductions in the rate of growth of spending.

FREEMAN: Right.

BRET STEPHENS, FOREIGN AFFAIRS CORRESPONDENT: Paul, it's all about 2014. It's about consolidating Obama-care, making sure that's the law of the land, and it's about a full withdrawal from Afghanistan, nation- building at home, which has been a constant theme of this presidency --

GIGOT: Which I would argue --

(CROSSTALK)

STEPHENS: -- that the tide of war is receding so we can build this new social Democratic state.

GIGOT: I would argue that's going to be closing argument. After a decade of war, now it's time to take that money and invest it at home. Is that a winner?

STEPHENS: Look, it's not -- it's a beguiling argument. I mean, it's very easy to tell Americans, look, we've spent all these hundreds of billions of dollars trying to build countries, Afghanistan, Iraq. It's a fool's errand. We should be investing that money in the United States. Mitt Romney's response ought to be the world security and our security, their prosperity and our prosperity, are entwined. We are part of a global economy.

GIGOT: OK.

Dan, was it's a mistake for the president to leave this opening? I mean, basically he's saying, fundamentally, four more years, just need more time. So if you like what you see, then you're going to say, OK, let's give it some more time. Or if you think maybe he just hasn't had enough time. But if you don't like the direction we're going, then that creates an opening for Romney to chip away and say, you know, all you're going to get is more of the same.

HENNINGER: Well, I think Romney could do a better job of defining and explaining what more of the same means. What more of the same means -- and I don't think Barack Obama would deny this, because he believes it -- is public investing in the economy. In other words, Obama doesn't really think much about the private economy. When the issue of regulation, for instance, comes up, he starts criticizing the private economy for not submitting more to his regulations to make them work better. He personally is going to take enormous amounts of revenue out of the private economy and then he will invest it back in green jobs and teachers.

STEPHENS: But look, I think a point that's important to note is that, you know, we like to think this is a retread of Carter, where the last four years have been absolutely disastrous, and in some ways have been terrible, but they haven't been as disastrous as the Carter years. Romney can't simply say the last four years, we can't afford to repeat, because most Americans are working, most Americans have jobs. The unemployment rate is coming down slightly. He has to provide a vision for what a Romney administration does that radically improves people's lives.

GIGOT: Well, he's trying to do that with his five points, I guess. At this point that's baked in. He'll either do that. And people are either going to buy that or they're not. He's not going to come up with any new policies.

But, James, we had Jeb Hensarling in this week, the Republican from Texas, who said the president doesn't need to propose a lot. He has ObamaCare locked in. The spending on that will increase. He's got the tax cuts, the rates from the Bush years --

FREEMAN: Rates are going to rise.

GIGOT: -- expiring. They're going to go up automatically. All of this is baked in. He just needs to basically preside over it and he gets a huge part of his agenda continuing.

FREEMAN: Well, we'll see. I mean, he ran on -- in 2008, with a message of hope, and hope would really be the theme of a second term. Hope that the world's investors will continue to lend us money, even as he continues to run massive deficits. We've been lucky with rates so low. We're paying $200 billion a year, the government, just in interest. They normalize $600 billion a year. That's basically Medicare, just in interest on the debt every year. So I think hope, hope that the world's markets will continue to fund his spending would be a key issue.

STEPHENS: Fingers crossed.

FREEMAN: Yes.

GIGOT: Kim, what about the prospects of a budget deal if he does when? And let's say Republicans hold the House, which most people expect they'll do. Are we going to get a big grand debt bargain?

STRASSEL: This is going to be ugly. And one of the problems, I don't think Republicans have necessarily thought entirely through, most voters have thought entirely through, that if Barack Obama is re-elected, he holds an incredibly strong hand here on these issues of the Bush tax policy, which are already set to expire on January 2nd --

GIGOT: Right.

STRASSEL: -- and the sequester, which is already set to kick on January 2nd, huge cuts to defense and the domestic budgets. He's going to demand that the Republicans give on something if they want to, for instance, restore money to the Defense Department. It will be probably be demands for some of his tax hikes that he's -- that's the one thing he's been campaigning on in this election season.

GIGOT: All right. Thanks, Kim.

When we come back, a skirmish over Benghazi in this week's debate sets the stage for the candidates' final showdown on foreign policy. What Mitt Romney needs to do Monday night to convince voters he could do better than President Obama.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

PRESIDENT BARACK OBAMA: When it comes to our national security, I mean what I say. I said I'd win the war in Libya -- in Iraq, and I did. I said that we'd go after Al Qaeda and bin Laden. We have. I said we'd transition out of Afghanistan and start making sure that Afghans are responsible for their own security. That's what I'm doing.

ROMNEY: We have Iran four years closer to a nuclear bomb. Syria is not just the tragedy of 30,000 civilians being killed by a military, but also a strategic -- strategically significant player for America. The president's policies throughout the Middle East began with an apology tour, and pursue a strategy of leading from behind, and this strategy is unraveling before our very eyes.

(END VIDEO CLIP)

GIGOT: Barack Obama and Mitt Romney trading shots Tuesday over the president's record abroad. It's just a preview of what's to come Monday night when the two candidates square off in their third and final debate devoted to entirely to the topic of foreign policy.

We're back with Dan Henninger and Bret Stephens. And editorial board member, Matt Kaminski, also joins the panel.

So this is typically the president's strongest area, foreign policy. It plays to his experience. Is this perilous turf for Romney?

MATT KAMINSKI, EDITORIAL BOARD MEMBER: Not at all. It had been his strongest area until last month, the attacks in Benghazi. Since then the White House has been on the defensive, being accused misleading the electoral. There's a Pew poll out this week that says Romney and Obama ever now even on who will handle foreign policy better. And I think what this speaks to is a growing feeling in the American electorate that President Obama has politicized foreign policy. That he doesn't have a great strategy. That everything he's done in foreign policy, especially last year, is driven by his re-election strategy.

GIGOT: But the president scored in the debate by accusing Romney of saying you are getting very upset, because Romney had said -- he implied, said we politicize foreign policy. He said, no, we don't do that, and don't you dare say that. Should he fight on -- on --

(CROSSTALK)

HENNINGER: I think there's an even greater danger, Matt. I do think that -- I have some worries about this debate coming up Monday, because I think the Obama team understands that Romney really hasn't clarified his foreign policy positions, and they'll tell the president to turn to him and say, specifically on Libya, Iran, Syria or Russia, what would you do differently? If he isn't able to do that, and instead speaks platitudes about leadership, at the end of that debate, Obama will look presidential.

STEPHENS: Look, President Obama has a huge ace up his sleeve. That ace is called George W. Bush. The American people think of the Bush administration as a lengthy period in which America was -- became a kind of global pariah. We weren't popular around the world. We've had these wars that seemed to go on without end and without effect. They began on dubious premises. Romney is going to have to --

(CROSSTALK)

GIGOT: We supported all of those things, Bret, I have to say.

(LAUGHTER)

STEPHENS: No, I'm -- I'm telling you, this is the perception that -- this is the perception that President Obama is going play on. And unless Romney is able to say -- to distinguish himself from Bush, Obama is going to have an advantage in this debate. He has to say, when I look to my predecessors, I think of Ronald Reagan and Harry Truman, I think of the idea of peace through strength, American credibility, a strong economy that gives America the credibility it needs in China and elsewhere in the world. If Romney pins him as another Bush, he's in trouble.

KAMINSKI: Well, I think Romney has to be careful not to just go with the platitudes and play the symbolist.

GIGOT: Should he fight on Benghazi?

KAMINSKI: Absolutely.

(CROSSTALK)

KAMINSKI: The problem --

GIGOT: But what argument should he make on Benghazi. Should he --

KAMINSKI: The problem with Benghazi was not that Obama went to Las Vegas the next day for a fundraiser.

GIGOT: So what is it?

KAMINSKI: The problem with Benghazi is that the administration, first of all, misled the country for two weeks about what happened, or apparently misled, or if it didn't mislead, it didn't know what happened for two weeks, which is probably as bad. It didn't come clean about the concerns about security before the attacks that happened on the anniversary of 9/11. Rather it was insisting that the attacks on 9/11 were just caused by a YouTube video.

GIGOT: What other -- where are the other vulnerabilities on foreign policy for the president?

HENNINGER: Well, I think the vulnerabilities -- just to carry on from what we've been saying here, the primary vulnerability is that the president -- as he said, I pulled out of Iraq, we're pulling out of Afghanistan -- his foreign policy has been to stand back on almost all these issues. What we learned in Libya is that if the United States stands back, bad things can happen, because the villains step forward as they are in the Middle East. If Romney goes down that list, he can point out --

(CROSSTALK)

GIGOT: OK, but how does Romney avoid Bret's point, which is the argument that Obama will try to pin on him, which is he wants to get into another war, folks? He won't say that explicitly, but that will be the undercurrent of all his argument. And as Bret says, Americans are war weary.

HENNINGER: I would say what Obama said to Romney in the last debate, Mr. President, that's offensive. Nobody runs for the presidency saying he wants to get into war. Their goal is to prevent war. He should explain why his policies will prevent war.

GIGOT: But does Romney even need to win this debate, Bret? I'm not so sure he does. It seems to me what he needs to do is to seem competent, fluent, knowledgeable, serious, not make a mistake. If he plays on a relatively even playing field and looks good, even if he doesn't win on points, I think that basically is all he needs to do here. And then make the point that foreign policy strength debates on economic revival at home.

STEPHENS: Oh, I think Romney needs to win every debate.

(LAUGHTER)

I think to the extent that this campaign thinks it has it in the bag - -

GIGOT: Oh, no, no. I'm not saying that.

STEPHENS: -- they're making a big mistake. There are large vulnerabilities for the president. Romney should be quick enough to exploit them. Look, if he gets a draw, is that devastating for the campaign? No. But if the president can say about Romney, he would draw you into another war, it's going to be a powerful argument against a Romney administration.

GIGOT: All right, thank you.

Coming up on our second half hour, some bright spots in the U.S. economy as the housing sector shows new signs of life. Is America on the road to recovery or are there more setbacks ahead? We'll ask economist, Art Laffer.

Plus, President Obama's green energy debacle. Yet another administration favorite goes under and takes millions in taxpayer money with it. It turns out Solyndra was just the beginning.

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEO CLIP)

OBAMA: Four years after the worst economic crisis of our lifetimes, we are moving forward again. The unemployment rate's fallen from 10 percent to 7.8 percent. Foreclosures are at their lowest in five years. Home values are on the rise. Stock market's doubled. Manufacturing's coming back. Assembly lines are putting folks back to work.

(END VIDEO CLIP)

GIGOT: Welcome back to "The Journal Editorial Report." I'm Paul Gigot.

That was President Obama this week at a campaign stop in Ohio, painting an optimistic picture of an economy on the upswing. Last month's unemployment numbers no doubt help fuel that narrative, as does news this week that new home construction reached its highest level in four years. So is America on the road to recovery?

Let's ask economist Art Laffer. So Arthur, welcome back. Good to you have here.

ARTHUR LAFFER, ECONOMIST: Thank you very much, Paul.

GIGOT: So we've got housing rebounding. We've got consumer confidence up. We've got the jobs market -- it's still a mediocre jobs recovery, but at least there's some. What's going on? Are we seeing a really -- finally a good rebound?

LAFFER: I don't think so at all, Paul. I mean, honestly, I don't think that's the way to describe this economy. We have the worst recovery in U.S. history. When you look at the employment numbers there, you see the participation rates dropping like a stone.

GIGOT: Right.

LAFFER: That's the reason the unemployment rate's not at 12 percent today. Housing starts are off almost a zero base for the last four years. They're not anywhere near the average of the last 40 or 50 years per 100,000 population.

Now, it's true they aren't falling anymore. It's true it's leveled out.

GIGOT: Right.

LAFFER: But it's far from being a recovery. And you know, sooner or later, we're going to run out of houses, so we're going to have to build something somewhere. But this is -- that is totally an incorrect description of the economy today. It really is.

GIGOT: So -- but we've had a -- we've had three years, really, where we've seen in the end of the year, the economy seemed to be coming back, growth picking up.

LAFFER: Yes, that's right.

GIGOT: And then each time, the next year, it's fallen off. So are you saying that this is another false dawn, basically?

LAFFER: Yes, I do. I think there's a very serious problem on January 1st, 2013, which I call "taxmageddon." I don't think it's a fiscal cliff, it's a tax cliff.

GIGOT: Right.

LAFFER: We're going to see tax rates rise all over the place. And Paul, if you know they're going to raise tax rates next year, what do you do this year? You accelerate all the income you possibly can into 20121. And there are lots and lots of ways of doing this -- I mean, many ways...

GIGOT: How do...

(CROSSTALK)

GIGOT: How do you do that? I'm, obviously...

LAFFER: You can sell your shares.

(CROSSTALK)

GIGOT: You take capital gains...

LAFFER: Sure. Take your IRA, sell it off, and then pay your taxes and go into a Roth IRA. You can bonus yourselves out early. You can buy all of your capital equipment this year and get 100 percent expensing. You can do all those things, postpone all your costs to next year and take all your revenues this year in companies.

I mean, I know some companies that are bonusing all of their family employees, the owners, a huge amount, and then just not going to take income next year. There are lots and lots of ways. And we have lots of evidence how that happened in 2010 to 2011.

GIGOT: Right.

LAFFER: And also, when Reagan did it the other way, it was a huge difference. 1981-'82 was zero real growth. And then 1983 and '84 were enormous Chinese-like growth rates.

So my guess is, Paul, that this year has been inflated way beyond what it should be...

GIGOT: Even though it's mediocre...

(CROSSTALK)

GIGOT: It's still only...

(CROSSTALK)

LAFFER: That's not mediocre, that's terrifying. It is not only terrifying, it should be much worse than it is. And my guess -- and I'm wrong a lot, so forgive me -- but if we go into 2013, I think we're going to see us drop off substantially in the U.S. economy, and it's because of the "taxmageddon."

GIGOT: Now, I...

LAFFER: Which is huge, by the way.

GIGOT: OK, but now, I've talked to a senior Obama administration economic official a couple weeks ago...

LAFFER: Sure.

GIGOT: ... and he said, Look, this tax argument really doesn't work. If you just raise taxes on capital gains, dividends, on the higher incomes, that's going to have almost a negligible impact on the economy.

The big one that really matters is on the middle class, and President Obama wants to extend those, and he'll ask Republicans to help him. So that tax cut -- that tax increase on people like Laffer and Gigot, that doesn't matter.

LAFFER: That's what they say. But you know, to me, you can't -- you can't love jobs and hate job creators. The people in the highest income brackets, Paul, are the job creators! They are the CEOs of companies that allocate the resources. They're working for themselves, just like Gigot and Laffer are. And they're going to make decisions that affect lots and lots of other people.

The guy who's sweeping the street or the guy who's running the press is probably not the guy who determines whether, in fact, they do a capital investment or hire more people at the factory. And that's what worries me the most. You can't take the decision-makers and zap them and then expect the economy to be good. It just doesn't work that way.

GIGOT: Arthur, another subject. You know, there's a big debate over tax reform...

LAFFER: Sure.

GIGOT: -- this time --

LAFFER: Yes.

GIGOT: -- in this campaign. And the -- Mitt Romney basically says in return for lowering the rates, what he's going to do is maybe -- he's used this as illustrative, not as a formal proposal, but saying, I'll put a cap on the amount of deductions that individuals can take, maybe $17,000, maybe $50,000, as high as that.

What do you think of that proposal economically? Does that make sense?

LAFFER: Yes, it does. That's very, very clever of Romney to have done that. Now, obviously, what he's going to do is go through all the little deductions, exemptions, exclusions, and all of those things, and they're going to pick and choose, just like we did in 1986 on the flat broadening the base...

GIGOT: Right.

LAFFER: ... lowering the rates, as we did then. But that really goes through the House committees and the Senate committees to really choose where you get the -- where you get the compromises on that.

But saying that we're going to limit the deductions is the exact thing that Romney should have said. And I have nothing to do with the Romney campaign, by the way.

GIGOT: I know, but that...

LAFFER: I thought that was just brilliant of them.

GIGOT: But that means a big tax increase, frankly, for a lot of people because there are a lot of wealthy individuals who take a heck a lot more than $17,000 in deductions, if you add it all up.

LAFFER: Sure.

GIGOT: That means their taxes overall could go up!

LAFFER: That's true, but he's not talking about taxes, I don't think. What I think he said was he's going to lower tax rates.

GIGOT: Right.

LAFFER: And that's what the key thing is. That's where the -- that's where the marginal decisions are made. That's what you want, lower rates and a broader base. You know, you're going to get someone on a static analysis to pay more in taxes and someone else less.

GIGOT: Right.

LAFFER: That's always the case. What you really want to do is create a tax code that for every dollar of tax you collect, you create more economic growth. And Romney's plan is exactly that plan, just like what we did in 1986, Paul.

GIGOT: Right.

LAFFER: And it really works. It really works like mad. And that's why I love the concept of Simpson-Bowles. That's why I love the concept of Rivlin-Domenici. I mean, I would change little things here and there...

GIGOT: Sure.

LAFFER: ... but the concept is exactly...

GIGOT: All right...

LAFFER: ... where we should go. And I think that's what Romney wants to do.

GIGOT: OK. Art Laffer, thanks so much for being here.

Still ahead, President Obama's latest green jobs fiasco. Another administration favorite goes belly-up, taking millions of taxpayer dollars with it. The details are next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: ... clean energy manufacturer in Michigan that just hired its one thousandth worker as demand has soared for its vehicle components. Companies like these are taking root and putting people to work in every corner of the country.

ROMNEY: I had a friend who said, You don't just pick the winners and losers, you pick the losers, all right? So -- so this is not -- this is not the kind of policy you want to have if you want to get America energy-secure.

(END VIDEO CLIP)

GIGOT: Well, it turns out that A123, the clean energy manufacturer Resident Obama was touting just last year is another one of those losers. The electric car battery-maker and recipient of a $249 million taxpayer- funded grant filed for Chapter 11 this week, joining the bankrupt and government-backed solar panel maker Solyndra as an example of the Obama administration's failed green energy industrial policy.

We're back with Dan Henninger, Mary Kissel and Kim Strassel.

So Mary, why did A123 fail?

KISSEL: A123 failed because you can't just throw money at an industry and expect it to succeed. The technology has to be there.

GIGOT: Well, explain that. I mean, what --

KISSEL: Sure.

GIGOT: -- do you mean "the technology has to be there"? They're making electric batteries for electric cars. People say the technology is there. Is that not right?

KISSEL: No, it's not right. This is basically a house of cards. The government funded the electric car maker Fisker. Fisker was supposed to buy A-13 batteries, which was also funded by the government.

GIGOT: Right.

KISSEL: And as it turns out, you can't make those cars economically efficient enough to sell them, and the batteries -- unfortunately, the technology isn't cheap enough yet to compete with regular cars.

GIGOT: It's there in a sense that you can create an electric battery.

KISSEL: Sure.

GIGOT: The problem is that it's not commercially viable. Is that the issue?

KISSEL: That's correct. Absolutely right.

GIGOT: So this was an attempt, Kim, to try to create, essentially, a whole new industry, the electric car industry, from scratch, whether or not there was a commercial market for it.

STRASSEL: Yes.

GIGOT: Is that -- I mean, is that basically the problem? And it turns out there isn't a market for it!

(LAUGHTER)

STRASSEL: Well, right, because -- I mean, this, by the way, is not just picking a one-off loser, which the Obama administration has done plenty of. This was actually a grander plan to create, as Mary said, an entire industry. They had Detroit, on one hand, you're going to tell them to make electric cars, you're going to fund guys like Fisker, fund the battery-makers, you're going to fund the auto parts makers for these things.

And then all you're missing is anybody who actually wants to buy them because they're expensive and they're impractical. Some of them spontaneously combust. And so there was just nobody out there to get them...

GIGOT: This would be a problem.

(LAUGHTER)

STRASSEL: Yes, it is a problem.

GIGOT: Where's Ralph Nader when you need him! That's what I'd like to know.

(LAUGHTER)

HENNINGER: Well, Paul, you know, the famous phrase about somebody living in an alternative universe -- they have been trying to create an alternative economy. And it gets serious because it is actually a Beltway economy, which is to say a political insiders' economy. All of these environmental companies and so forth are built around political insiders who are able to get the money out of the federal government to invest in it.

And this is where you get the birth of the phrase "crony capitalism." The irony is that they accuse Republicans of it, but what Obama is seeding and fertilizing with this is an entire garden of crony capitalism.

GIGOT: Couple of years ago, I talked to Heinrich Fisker, who was one of the founders of Fisker Automotive. And he made the -- and I made this point to him (INAUDIBLE) I made that -- asked him that question. And he said, Look, we have to decide as a country whether or not we want to participate in these new technologies, this new industry, and that's a political decision. And the government -- we ought to invest in these technologies so they don't go overseas.

What's your response to that, Mary?

KISSEL: Well, look, there's a role for government in basic research, but it's another thing entirely to put $535 million into a Solyndra or $249 million into an A123 Systems. They're taking risks that private sector investors can take with their own money. They're risking my money on Solyndra and A13 solar (SIC). And the irony here, Paul, is that A123 Systems, this solar cell maker, had private backing. You had companies like Sequoia Capital...

GIGOT: (INAUDIBLE) battery maker.

KISSEL: Battery maker. Excuse me, yes. They had companies like General Electric and Sequoia Capital in there. They never turned a profit. Solyndra never turned a profit.

I mean, if you want to go through the record on this, Senate Republican Policy Committee has a list that will make your jaw drop of the number of companies that are distressed or in bankruptcy. This is a disaster for the taxpayer!

GIGOT: The other issue, Kim, here, a larger economic point, is the misallocation of capital. It's not just the money that you misspend on a particular company. That money could have gone -- if it hadn't been directed by government to what turned out to be a loser -- to other purposes. And that has a corrosive effect over time on economic growth and efficiency. But this is -- this is something that Washington doesn't seem to get.

STRASSEL: No, and Mitt Romney made that point very brilliantly in the first debate, when he pointed out that the amount of money that the president has blown, misallocated in funding these now bankrupt companies - - what that could have done for the president's own other stated priorities, for instance, hiring teachers.

GIGOT: Right.

STRASSEL: But this is also important, too, Paul. It's not just a misallocation of taxpayer dollars, but when the government puts its heavy foot out there in a market, it causes private players to rush after these projects, too...

GIGOT: Sure.

STRASSEL: ... to misallocate their own capital because they think that they can live off of the government mandates and money that's coming out, and that's corrosive, too.

GIGOT: OK, Kim.

Still ahead, it's the race that could determine which party controls the U.S. Senate. And with just two weeks to go, things are heating up in Virginia. Our own Kim Strassel has been on the campaign trail there. She'll tell you which candidate has momentum when we come back.

(COMMERCIAL BREAK)

GIGOT: Turning now to the battle for control of the United States Senate, this week we go to Virginia, where Republican George Allen and Democrat Tim Kaine, both former governors, are competing for the seat of retiring Democrat Jim Webb. Both parties consider a win there crucial to their overall Senate strategy, and the Real Clear Politics poll average shows the race is a virtual dead heat.

Our own Kim Strassel spent time on the campaign trail there this week. So Kim, six years ago, George Allen lost this race. He was an incumbent then. What do you -- what is he doing to try to reclaim it?

STRASSEL: Well, he's running this race in a way that the Obama administration was hoping nobody would run a race. He's talking about sequester, which is this thing that came out of the debt deal.

And what it does is it cuts $500 billion from the Defense Department and also from domestic budgets. This is resonating hugely in Virginia, where you have a lot of people who work for defense contractors, work for the federal government, or are active duty military members, so they're very keen to hear about this issue.

Mr. Allen is out there making the argument that you can't trust Democrats to fix it.

GIGOT: Right.

STRASSEL: And it's having some effect out in the electorate.

GIGOT: So George Allen is basically making the case, We want more spending, but it's on defense. How is Kaine responding to that and defending himself?

STRASSEL: Well, he's actually arguing that you need to make cuts, but George Allen is making the case that military is actually the numbering one priority of the federal government. This is not someplace we should be cutting willy-nilly. So there has to be a prioritization process. And his rap against Democrats is that they didn't do it.

Tim Kaine's argument is, Yes, we can't have these cuts in defense done this way, either, but what we need to do is raise taxes on millionaires or on wealthy people in order to cover those cuts.

GIGOT: I want to show an ad that Kaine is running, which is very interesting, as he attempts to distance himself from President Obama somewhat. Let's look.

(BEGIN VIDEO CLIP)

TIM KAINE , D-VA, SENATE CANDIDATE: President Obama wants the Bush tax cuts to expire for people earning over $250,000. George Allen wants to make all the Bush tax cuts permanent. There's a middle ground. Let the tax cuts expire for those earning over $500,000. This reduces the deficit, avoids devastating cuts to defense, education and Medicare, and saves jobs.

I'm Tim Kaine. I approved this message because it's the fiscally responsible thing to do.

(END VIDEO CLIP)

GIGOT: So Kaine has that sweet spot, right in between President Obama's $250,000 -- I'm not sure it's a sweet spot, but that's what he's hoping, you know, half a million versus George Allen, who doesn't want to raise any taxes. Effective?

STRASSEL: I don't think so. I mean, what he doesn't say is that it doesn't actually reduce the deficit. It doesn't say how you're going to grow the economy. And George Allen is jumping all over this and he's saying, Look, Tim Kaine's every solution to every problem is to raise taxes.

GIGOT: Yes, but Kaine raised taxes as a governor of Virginia, and it doesn't seem to be hurting him, Dan. I mean, he's still that close in the polls. Tax issue just not cutting as much as it used to?

HENNINGER: I'm not so sure about that, Paul. I mean, George Allen is also trying to raise the issue of the health of the larger economy. And I think what Allen is interestingly showing is that you can talk about details like the sequester or the budget and relate it to a larger message of economic reform successfully.

And I think that is what he is somehow articulating in a very kind of plainspoken way there, and it's giving Kaine problems with that.

GIGOT: The irony would be that if the Democrats do hold the Senate, it's going to be with a lot of these seats and candidates who are distancing themselves somewhat from President Obama on that or that policy -- Jon Tester in Montana, Tim Kaine, Claire McCaskill in Missouri. They're really, you know, taking certain issues and saying, I'm not Obama. Very interesting.

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. Mr. Stephens?

STEPHENS: Well, this week it was announced that Newsweek magazine, storied title -- it's been around many, many decades -- will stop publishing its printed edition as of this December. And a lot of people are saying that this is really a function of the inevitable digitalization of media, that this is a trend that is unstoppable.

That may or may not be true, I'm not entirely sure it's true in Newsweek's case. I knew Newsweek was going down when they had Stephen Colbert guest edit one of their publications, and then furthermore, when they had Tina Brown become editor. When you want to start a celebrity magazine and pretend it's a news magazine, you're in trouble.

GIGOT: OK, Matt?

KAMINSKI: A positive miss to Army Colonel James Pohl, who's the presiding judge in Guantanamo at the military tribunal for Khalid Sheikh Mohammed and the other 9/11 co-conspirators. This week, in pre- trial hearings, he allowed KSM to wear camouflage, and he also let him speak for five minutes, only to attack U.S. policy, letting him grandstand. It's important for this tribunal to work, but it won't work if they keep letting KSM hijack the proceedings.

GIGOT: OK. Mary?

KISSEL: This is a miss to Taiwan's Ma Ying-jeou government, which week successfully forced media pro-democracy tycoon Jimmy Lai to sell his TV and newspaper assets on the island.

Now, most Americans might not know Mr. Lai, but his outlets are wildly popular because they expose corruption and they're really the only Chinese- language media publications and TV outlets that tell the truth about the brutality, the corruption and the immorality of the Chinese Communist Party. By driving him out, Taipei is sending a message to Beijing it doesn't want a free press.

GIGOT: OK. James?

FREEMAN: This is hit to America's state governments for revealing how fraudulent their lawsuits against the big banks for foreclosure practices were. This week, The Journal reported that less than half of the billions of dollars of this settlement have gone to foreclosure victims. Places like California, they're not spending a nickel on these victims, and that's probably because there aren't any victims! People who paid their bills were not kicked out of their homes, as we've learned.

GIGOT: OK. All right. Thanks to you all. Remember, if you have your own hit or miss, please send it to us at JER@Foxnews.com. And be sure to follow us on Twitter, @jeronfnc.

That's it for this week's edition. Thanks to my panel and to all of you for watching. I'm Paul Gigot. Remember that. We hope to see you right here next week.

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