This is a rush transcript from "Journal Editorial Report," September 6, 2014. This copy may not be in its final form and may be updated.
PAUL GIGOT, FOX NEWS HOST: This week on "The Journal Editorial Report."
NATO leaders meet as the threat of war in Europe grows. Will Russia's next move be against a member state?
Plus, destroying ISIS or managing it? The president is under fire for his mixed message on the terror group, with criticism now coming from fellow Democrats.
And, running on the recovery. The White House is touting an improving economy, but Americans don't seem convinced. Is it a winning issue for the president's party in November?
Welcome to "The Journal Editorial Report." I'm Paul Gigot.
NATO leaders met this week in Wales amid growing signs that Russia's ambitions may go well beyond its annexation of Crimea in March and its recent incursion into eastern Ukraine, now talking openly about a new Russia.
President Vladimir Putin reportedly told a European Union official that Russia could, quote, "take Kiev in two weeks."
So, what's Russia's next move? And could it be against a NATO member state?
Let's ask "Wall Street Journal" columnist and deputy editor, Dan Henninger, foreign affairs columnist Bret Stephens, and editorial board member, Matt Kaminski.
So, Matt, looking at where we stand right now, do you -- does it look to you as if NATO, the U.S. and Europe have essentially written off Ukraine?
MATTHEW KAMINSKI, THE WALL STREET JOURNAL: Well, that's been the story for the last six months. The U.S. and the E.U. did not react forcefully to the taking of Crimea in March, and Vladimir Putin saw a green light to move forward. He has moved forward.
Every step, we've been late in imposing hard sanctions. We've always tried to give Russia a way out, which Putin has taken as an indication to move forward.
But most importantly, we've abandoned Ukraine but not helping it defend itself. Even though Ukraine is not a member of NATO, it's worked closely NATO for years, it's served in Afghanistan and Iraq. They deserved arms and they haven't gotten it.
GIGOT: What about those who say that -- you know, look, Ukraine has historically always been part of Russia's sphere of influence, it's not part of NATO, we really don't have an obligation to defend it, we're not going to war against Russia, what else can we do, it's going to be there for Russia to take anyway?
KAMINSKI: But we made a commitment over the last 25 years since the fall of Soviet Union with Ukraine, both in treaties, we signed a treaty in '94 in Budapest, when Ukraine gave up its nuclear weapons, that we are going to not guarantee fully, but we're going to secure Ukraine's independence.
GIGOT: Russia was part of that --
GIGOT: They repudiated that lock, stock and barrel.
KAMINSKI: But we've also worked, you know, Ukraine has been an ally, a de facto ally of the U.S. for much of its independent history. And it deserves that support.
GIGOT: What are the consequences, Dan, of abandoning Ukraine as Matt talks about? I mean, strategically, as you look at the European map?
DANIEL HENNINGER, THE WALL STREET JOURNAL: Well, I think the biggest consequence is it will tell Putin he doesn't have to stop at Ukraine. I mean, the president of the United States was in Estonia earlier this week giving them his unqualified support.
GIGOT: He said an attack on Tallinn is an attack on London, New York.
HENNINGER: There was no daylight in what he said. Having said that, I doubt that that's really what NATO intends to do.
Sure, if Russian troops rolled into Tallinn, the capital of Estonia, that might be one thing. But most likely, Putin will start to destabilize the Baltics because they have ethnic Russian populations in there the same way he did in Ukraine.
If he does that, is NATO likely to act? I doubt it very much. I suspect that's where he's going next, in the Baltic.
GIGOT: You agree with that, Bret?
BRET STEPHENS, THE WALL STREET JOURNAL: Yes, I do. And remember, 20 years ago, Zbigniew Brzezinski, who had been Jimmy Carter's national security adviser, warned in a very prescient essay in foreign affairs, Russia without Ukraine is a normal state. Russia with Ukraine becomes an empire.
That's important for us to understand. This is changing the character of the Russian state as we have known it since the end the Cold War. It is bringing it back to something very much like what it was before.
And once it's Ukraine, it doesn't need to be the Baltic States. There are lots of targets of opportunity for Vladimir Putin, northern Kazakhstan, huge country, very empty, there's a large Russian population.
GIGOT: That's not a NATO state.
STEPHENS: No, of course not. But it means that he is going to begin piece by piece to reconstitute aspect of the old Soviet Union. And that is dangerous for the kind of order we have in the world because it sends a signal to other countries that might want to revise the global order that they can do that as well.
GIGOT: Right. But NATO is crucial because as a defense alliance it helped to unify Europe and keep the Soviet Union out of Western Europe.
Do you think, Matt, that one of Putin's goals here is to essentially show that NATO is a hollow promise, and do what Dan and Bret suggest, which is to attempt, basically, to destabilize one of the Baltic States and when we don't respond, NATO will be shown to be essentially a nullity.
KAMINSKI: But Putin does what he usually says. Putin has said that he wants to divide the West, that NATO is a threat to Russia, but the thinks he can weaken NATO, that it's really a paper tiger.
GIGOT: Yes. And you think he wants to do that and will do that?
KAMINSKI: I think he clearly is moving on, because he I mean, the ultimate reason why Putin --
GIGOT: Moving in that direction.
KAMINSKI: Moving in that direction, he has to keep moving because he has - - to survive in power, he's beating these nationalist drums in Russia and he needs to keep beating them to keep control in Moscow itself.
GIGOT: Was the NATO response this week adequate to all of this?
HENNINGER: It was not, because they have made clear, even Ben Rhodes, national security adviser to the president, said, we are not focusing on lethal things to send in. It's nonlethal support they're sending to Ukraine. The Europeans are saying the same thing.
In other words, they're not going to help Ukrainians fight to defend themselves.
GIGOT: What about the response on NATO? They created this rapid response force, 4,000, about brigade size, but no forward deployments.
STEPHENS: No forward deployments and no real urgency about massively increasing NATO military budgets. You know, there are only about four countries in NATO out of the 28, including the U.S., Britain and two smaller countries, that actually meet the 2 percent --
GIGOT: Estonia and Poland.
STEPHENS: Right, 2 percent per GDP of defense spending.
So, you have -- you have a very weak alliance and real reluctance for economic reasons on part of all of our European allies to really meet the threat that we face. You know, Russia may be a weak country in many ways, but its military is very large, very capable and nuclear armed.
GIGOT: By forward deployments I mean moving troops. We have close to 100,000 troops in Germany, NATO does, U.S. does, moving those to Poland or in the Baltic States, where they would be a trip wire.
STEPHENS: About 70,000.
GIGOT: Seventy thousand, we didn't do that.
OK. When we come back, destroying ISIS or managing it? The president is under fire for his mixed message on the terror group with members of his own party now joining critics, urging him to do more. Is it a sign of the role the issue may play in the midterm elections?
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Our objective is clear. And that is to degrade and destroy ISIL, so that it's no longer a threat, not just to Iraq but also the region and to the United States, and continue to shrink ISIL's sphere of influence, its effectiveness, its financing, its military capabilities, to the point where it is a manageable problem.
(END VIDEO CLIP)
GIGOT: Destroying ISIS or managing it.
That was President Obama in Estonia this week, after news broke of a second American journalist beheaded at the hands of ISIS.
The president is drawing criticism for his mixed message about his plans for dealing with the terror group, with some members of his own party urging the administration to take a tougher stance and lay out a comprehensive strategy.
We're back with Dan Henninger, Bret Stephens and Matt Kaminski.
So, Bret, the president does seem to be toughening his rhetoric somewhat, it's no longer the jayvee team ISIS, the junior varsity, like he said in January. But what about the -- his message? What do you hear? What do you hear about his intentions from what he's saying now?
STEPHENS: Well, you hear when the president talks about turning ISIS into a manageable problem, I think you hear the real president, the way this president thinks. When he talks about destroying it, you're hearing Joe Biden, his political advisers who are telling him, Americans are furious about this because we are seeing helpless American journalists being beheaded.
But this is clearly a president who is loath, reluctant to put boots on the ground, to really take the kinds of steps that you need to destroy this organization. That's why the administration is talking about a two or three-year time frame, which is insane given the actual resources that ISIS has.
GIGOT: But you would agree, I think, that we need to put a coalition together to take an ISIS. You're hearing leaks from the White House saying, we're putting that coalition together, France, Britain are going to help us. And, of course, we got the Saudis and the Iraqis and some people in the region.
So, isn't that a good idea?
HENNINGER: It's a good idea if that's what they're doing. I don't think they're quite doing it yet. King Abdullah of Jordan was at the NATO meeting this week, more or less begging them to put a coalition together, suggesting it isn't there yet. GIGOT: Because he's next in ISIS' sights.
HENNINGER: He's next.
But, you know, the president said he's trying to control ISIS' sphere of influence. This is a very important phrase because that sphere of influence extends into Syria. And Syria is where Barack Obama and NATO does not want to go, which is interesting is, you're right, Senate Democrats like Senator Nelson of Florida have introduced a bill to say that the president is authorized to strike inside Syria -- in other words, they're trying to untie his own hands.
GIGOT: By the way, I believe he already has the power as commander-in- chief to bomb in Syria, although it would be an important statement of political support.
HENNINGER: And the chairman of the Foreign Relations Committee has said the same thing. So, it's beginning to build in that direction in Congress.
GIGOT: Do you think there's going to be enough domestic political pressure, Matt, on the president from the right and left to actually overcome what Matt described as this kind of normal ambivalence and reluctance to do anything?
KAMINSKI: I think Americans -- when Americans see Americans being beheaded on television repeatedly, as Joe Biden said, they do get angry and they want action -- this is all part of a conflict we've been in for over a decade now. We've shown we can degrade al Qaeda. We did it in Pakistan, Afghanistan, and we did it, by the way, in Iraq. I mean, this was a problem resolved until Barack Obama pulled troops out.
So, I think people are -- there is a growing call and the polls show do this, that Americans do want a competent and active commander-in-chief.
GIGOT: Yet, there's still you see, Bret, when you read some of the liberal columnists and listen to some of the liberal politicians, they say, well, yes, he's got to do something, but better be cautious, better take his time, you even get the impression that they're saying President Obama's strategy is right he has ISIS just where he wants them.
STEPHENS: Right. I think what President Obama would like is a strategy which means that ISIS is not a glaring political problem for him all the time.
But remember, it's been over two years that we first started hearing the administration telling reporters, we're going to start arming the moderate Syrian rebels. We have programs in Jordan. So the president can say, we are going to do this, but translating what the president says on the dais to Europe to actually what is happening on the ground is a big distance.
GIGOT: But what about this political pressure, the changing mood in America. They are as I think you all said really angry about this American being killed on YouTube -- these Americans being killed. And it's going to continue, is that going to change the domestic politics of essentially returning to war this Iraq?
STEPHENS: Well, I think what we're going to do is get a return to a certain kind of normality in American politics. You had a drift especially among some Republicans to kind a neo-isolationist progressive left also among the Democrats. I think this is going to remind Americans that we have global responsibilities.
HENNINGER: With the support of American airstrikes, the Iraqi army this week was fighting to retake the city of Tikrit north of Baghdad. The Kurdish Peshmerga in the north have been fighting ISIS in Mosul with the support of the United States.
These people are willing to fight for themselves if they have significant support from the United States. We're not talking about sending the entire U.S. Army back into Iraq. We're helping these people fight for themselves.
GIGOT: But we are essentially back at war in Iraq, whether the president wants to admit it or not. We might as well fight to defeat ISIS and win.
When we come back, some hopeful signs of an accelerating recovery are giving the administration something to brag about. But with many voters still feeling anxious, can Democrats run on the economy and win in November?
(BEGIN VIDEO CLIP)
OBAMA: Construction is rebounding. Energy and technology are booming. American manufacturing is steadily creating jobs for the first time since the 1990s. So, I just want everybody to understand, because you wouldn't always know it from watching the news, by almost every measure, the American economy and American workers are better off than when I took office.
(END VIDEO CLIP)
GIGOT: President Obama touting recent economic gains in a Labor Day speech in Milwaukee. But despite signs that the economy is finally starting to pick up steam, hiring slowed in August and Americans remained anxious, with more than 70 percent in the latest poll saying the country is off on the wrong track. So, can Democrats run on the economy and win in November?
We're back with Dan Henninger, "Wall Street Journal" columnist, Mary Anastasia O'Grady, and assistant editorial page editor James Freeman joining us.
So, Anastasia, how -- stock market at record levels, but a kind of mediocre jobs report this week. Where does the economy stand now?
MARY ANASTASIA O'GRADY, THE WALL STREET JOURNAL: Well, I just want to say that I really admire the enthusiasm that President Obama brought to that rally. I think that, yes, we're far better off than we were, for example, in the first quarter of this year where there was a contraction in the economy. In that sense, it's picking up and things are better. But the Federal Reserve had a report out this week that said middle income families have not seen any wage gains, income gains from before -- since before -- they're not caught up to where they were before the crash.
GIGOT: Not even close.
O'GRADY: So, there's stagnant income there. I think there are a lot of other problems, for example, on unemployment. I mean, the employment numbers look good, but there's very low labor participation and what qualifies for employment includes a lot of part-time jobs. So, you have a lot of the U.S. work force working part time. That's not good either.
GIGOT: Well, I think the big question going forward, James, is, are we finally seeing this economy hit takeoff speed, right? We've had 2 percent average growth for the entire expansion, really disappointing, historically disappointing.
But people have been saying for five, six years, growth just as around the corner. We can see it coming. It's coming now. Is it finally there or another mirage?
JAMES FREEMAN, THE WALL STREET JOURNAL: You know, I was starting to get excited to make the optimistic case. I'm a glass is half full kind of guy, until the Friday jobs report.
But here's the optimistic scenario. We've had pretty good news lately on both manufacturing and services picking up, decent car sales, the commercial lending, lending to businesses from banks, has been picking up this year. Then when you look at our trading partners, after Europe basically ground to a halt economically, no growth, you see German manufacturing picking up. So I think there are signs. You combine that with a great energy opportunity in the United States, there are a lot of reasons to be optimistic.
I think the policies from Washington are keeping us from that breakout, and I think that has something to do with Friday, where we just can't get that growth that we've all been hoping for.
GIGOT: Just to buttress Mary's point, if you look at business investment, which is really the main driver of growth over time, it's just still not anywhere you would expect it to be at this stage of a recovery.
HENNINGER: That's right. And that poll number we put up, 70 percent of the country thinks it's going in the wrong direction. That's an astounding number. You'll never see poll numbers --
GIGOT: How do you explain it?
HENNINGER: You know, you can only guess, but I think -- I actually think a lot of it has to do with Barack Obama outsourcing the economy to the Federal Reserve. We've had this zero bound interest rate policy for going on four years. You know what that means is for a lot of people out there who aren't in the stock market, they have been making no money whatsoever on their savings. If they invest in CDs, they basically get next to nothing. That would make anybody anxious.
And the fact that those zero bound interest rates have not produced investment as you're suggesting I think is a very negative sign sitting on the economy no matter what the stock market does.
GIGOT: If you own assets, you've had a real nice run. You own stocks, you're doing great. So, wealthy doing great, the average person who doesn't have that core of savings or investments just not doing as well.
So, you've got this -- the president rails against inequality. He's enhanced it.
O'GRADY: You know, Paul, the bottom line is, you need faster growth. I don't think they're going to get the 3 percent number. The reason why is because, if you look at U.S. productivity growth, which is output per worker, it's pretty much stuck around 2 percent, a little higher. And that generally reflects where the economy is going.
GIGOT: How is it going to play in the midterms, James?
FREEMAN: Well, I think the Democrats are almost out of time to say we've really turned the corner to the breakout we're all hoping for. Those wrong track numbers, you know, CEOs are people, too. They've got the same attitude that the general population does. They don't want to invest in new equipment.
GIGOT: I don't see the Republicans making the case to exploit this, do you?
FREEMAN: Well, I think what they have to do is talk about the growth story. We've obviously --
GIGOT: The lack of growth story.
FREEMAN: The last five years, we've had the non-growth policy the last five years. Now they need to explain how we get the growth we all want.
GIGOT: All right. We have to take one more break. When we come back, Hits and Misses of the week.
GIGOT: Time now for our Hits and Misses of the week.
Dan, first to you.
HENNINGER: Well, Paul, an over needed hit to the paleontologist from Drexel University in Philadelphia who announced they had found in Argentina one of the biggest dinosaur remains ever. They found almost 16 tons of bones.
This dinosaur would be as long as a basketball court. It would weigh 130,000 pounds, which is about 12 elephants. And it lived about 66 million years ago. It was only a teenager. All right?
Look, kids like dinosaurs. Adults like dinosaurs. We all love them. I think it's just a good news story that's we've found one of the biggest teenage dinosaurs ever.
GIGOT: All right. Mary?
O'GRADY: Here's another good news story. This is a hit to the people of Connecticut for snubbing Bill Clinton who went there to give a speech and rally for Governor Dana Malloy, who's behind in the polls for his reelection in November. The room was half full according to the press reports. People just didn't turn up.
And, as the "New Haven Independent" put it, at times it felt more like a late night post dessert stale coffee phase of a rubber chicken dinner. So, bravo, Nutmeggers.
GIGOT: Should have brought his saxophone.
FREEMAN: Paul, this is a miss to NBC and Guinness Beer and all the pressure group who persuaded -- persuaded is a nice word -- the organizers of the St. Patrick's Day parade in New York to allow gay groups to carry banners in next year's parade. The parade has not banned any gay people from marching, but the idea that a celebration of Irish heritage in honor of a Catholic saint has to include political and messages about sexuality I think is bizarre.
GIGOT: All right, James.
That's it for this week's show. Thanks to my panel, and to all of you for watching. I'm Paul Gigot. Hope to see you all right here next week.
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