This is a rush transcript from "Journal Editorial Report," October 18, 2014. This copy may not be in its final form and may be updated.
PAUL GIGOT, HOST: This week on the "Journal Editorial Report," President Obama steps up his administration's Ebola response as the disease has spread testing faith in domestic and international agencies in charge of containing the outbreak.
Plus, another wild week on Wall Street. What the stock market swings signal for the fragile U.S. recovery.
And they swept into office on promises of tax cuts and pension reforms, why are some GOP governors facing a difficult battle for re- election this November?
Welcome to the "Journal Editorial Report," I'm Paul Gigot.
President Obama vowed this week his administration would tackle the Ebola threat in a, quote, "much more aggressive way," authorizing the Pentagon to call up Reserve and National Guard troops to assist U.S. efforts in Liberia and deploying medical SWAT teams to any hospital reporting a new case here at home. But news of another U.S. infection, along with dire predictions of the virus's continued spread in West Africa, raise questions about how well domestic and international agencies are responding, and whether institutions like the CDC and the World Health Organization are failing in their core mission to contain such outbreaks.
Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; editorial board member, Joe Rago; and former FDA deputy commissioner and frequent "Wall Street Journal" contributor, Dr. Scott Gottlieb.
Scott, good to have you here.
You've been predicting all along that this would be worse than a lot of people in Washington were saying. Now that's turned out to be true. Is the administration finally getting its arms around the extent of the problem?
DR. SCOTT GOTTLIEB, CONTRIBUTOR & FORMER FDA DEPUTY COMMISSIONER: I think they are finally recognizing the scope of the problem both here and abroad. In the case of Dallas, CDC underestimated how hard it would be in the hospital to handle a hot pathogen like this. It didn't have experience. And it might turn out to be the case our health care workers are at greater risk domestically than health care workers in Africa by virtue of the fact, when we deliver critical care here, we're much more invasive so we create much more risks.
GIGOT: When you say much more invasive, what does that mean? Because we would think normally, well, we're so much more advanced. We have experience with these teams and with protecting health care workers. Why would it be worse?
GOTTLIEB: Well, Frieden specifically cited intubation and dialysis. But if you think about what we do in a critical care setting --
GIGOT: Intubation is where you --
GOTTLIEB: Put a breathing tube down someone's throat. But there's frequent blood draws and frequent bed changes. And even something as simple as an NG tube, a nasal gastric tube creates a lot of risk. We do a lot of interventions in critical care. That's going to expose health care workers.
I think what this points out is you probably need to make sure the team that's taking care of these patients is a very constrained team. You don't want a lot of people to be involved. That seems to be where CDC is going. They are learning and adapting quickly, and you have to give them some credit for that.
GIGOT: What did Washington miss? Just the extent of the biggest issue, just the extent of the problem?
GOTTLIEB: I think, first of all, they probably missed how quickly it would come to the United States. I think they didn't anticipate this many cases this early. And they didn't think there would be this much secondary spread, especially among health care workers. They probably thought the immediate family could be at risk but not the health care team. That was clearly missed in this case.
GIGOT: Joe, let's talk about some of these public institutions, CDC and the World Health Organization in particular. The World Health Organization was created, in large part, to deal with this kind of thing. They dropped the ball.
JOE RAGO, EDITORIAL BOARD MEMBER: Yeah, I think they were very slow to recognize the outbreak in West Africa as a region. They thought they had it under control only for it to flare up again. And I think, in part, this is due to the transformation of public health. Its mission, it priorities over the last --
GIGOT: What do you mean by that?
RAGO: Well, the World Health Organization, in particular, used to be about securing the conditions necessary for human survival, which meant transmissible diseases. Now this week, for example, they had a big conference on tobacco. They're focused on things -- obesity, chronic diseases.
GIGOT: Sounds like they're making their agenda the modern political agenda, political priorities of the developed world, not dealing -- instead of these basic fundamentals --
RAGO: You're seeing the same thing at the CDC, to a lesser extent, with a focus on, you know, salad bars in public schools, workplace wellness, and some of the other marginal pursuits that distract from its core mission.
GIGOT: Do you agree with that --
GOTTLIEB: It's an interesting question, how much incompetence makes you culpable.
-- made very competent projections about the scope of this outbreak based on faulty information, and the world was relying on that. And that's what caused the outbreak in West Africa to get out of control in the first place.
GIGOT: Dan, what does this tell you about the question you deal with a lot, which is kind of the competence of the public institutions and governments?
DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Well, it tells us that we're in a lot of trouble if we're relying on the competence of public institutions in the United States at least. The Ebola problem was identified at least as far back as March. So the CDC and the World Health Organization knew about it then. And President Obama himself, in September, said we are dealing with it aggressively. They were not dealing with it aggressively, OK? That was happy talk as sometimes happens with Barack Obama.
But there's a larger problem. And anyone who's involved in emergency preparedness will tell you this with institutions in the United States. They know that they should prepare, whether it's a police department or hospital. And when you ask them to do that, they'll say, we don't have time to assign people to take on the preparation like that. So that it simply doesn't get done. I think what we've learned now is these hospitals have got to do this. They cannot say, "We're too busy." That's not a sufficient excuse.
GIGOT: Scott, you've -- a lot of people are saying Dr. Tom Frieden, the head of CDC, is the major culprit. But you disagree with that.
GOTTLIEB: Well, he's been pushed out as the public spokesperson and he doesn't help himself in front of the podium because he's not that adept at working to his talking points. But the bottom line is I think CDC has done a laudable job in many respects. Clearly, there were missteps, some that had tragic consequences. But if you look at what they've done, they deployed 200 people to West Africa, an unprecedented mobilization for that agency. They've adapted quickly in terms of the approach they are taking in dealing with hospitals. And I think if you go back to the trip that Frieden took in early September, when he came back from West Africa and really hit the alarm bell and used some really almost apocalyptic language to describe the scope of the outbreak in West Africa, he was way in front of the White House. And I think he forced the White House to take action. It takes a lot of courage to be a political operative in front of your president and it takes a lot of courage I think, particularly in this Washington, to do that.
GIGOT: Is the charge that somehow budget cuts are responsible for these -- this weakness? Does that have any credibility? You looked at the numbers.
RAGO: Looked at the numbers, I don't think it has any credibility. If you look at CDC, they've got about a $10 billion budget now, counting all sources of funding. That's up from about $8 billion during the George W. Bush years. 35 percent increase over 10 years ago. If you look at NIH, for example, Dr. Francis Collins came out and said we would have had an Ebola vaccine years ago if NIH had more funding. And I think it's uncharacteristically foolish thing for him to say.
GIGOT: Stop all flights from West Africa and any entry into the United States, that's the other big political hot issue?
GOTTLIEB: Well, I think it's a moot point. The president is going to do it because of the politics around it. It's probably not going to help the situation. It's going to further hurt the economies of these countries and make it harder for them to deal with their domestic threat, which is eventually going to be a global threat. But I think, inevitably, we're going to do it.
I was going to say, we've put a lot of money into public health resources as a result of worries of bio-terrorisms --
GOTTLIEB: -- in the '90s and 2000s. So these have been beefed up.
GIGOT: OK. All right, thank you all very much.
Still ahead, another wild week on Wall Street. So what's driving the stock market swings and what does it mean for the American economy?
GIGOT: Another wild ride own Wall Street as stocks continue their October swings with the Dow Jones Industrial Average at one point dropping below 16,000 for the first time in eight months. What's behind the latest volatility? And should American investors keep their seatbelts buckled?
We're back with Dan Henninger. And Wall Street Journal assistant editorial page editor, James Freeman, also joins us.
Dan, what's your diagnosis --
HENNINGER: Well, Paul, it is fascinating. We have seen nothing like the volatility we had this week where the Dow was going in the red and green all day long. And you know, stock markets are pretty good at pricing events out there. And I don't think some of these things that are going on right now, like Islamic State in Iraq, Ebola, and so forth, could be causing that kind of volatility. Markets absorb -- they knew those things were going on. I think it has to be something else.
I'd like to point to the International Monetary Fund meetings last weekend in Washington in which central bankers admitted they have run out of tools to stimulate growth in the United States. Yet, the United States has to lead if the world is going to grow again. The institution here that has been trying to do that is indeed the Federal Reserve. And the Federal Reserve keeps sending mixed signals on when it's going to get off the zero- bound interest rate policy. And even they say that we need something else. And that something else would be pro-growth policies from the White House and Congress, tax policy, regulatory policy. None of that is happening. So I think the stock markets have reached their own upper bounds and are bouncing around trying to react to when the United States economic policy is going to enter a pro-growth phase.
GIGOT: James, a correction IS supposed to be a 10 percent from a market peak. We're not there yet. But is this decline of volatility signaling in your mind maybe slower growth to come?
JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Well, certainly, we've gotten bad news on that front lately. Germany and Europe --
GIGOT: Not in the U.S. so much, as overseas.
FREEMAN: We have some bad U.S. news in terms of retail spending. Generally, I think the U.S. economy is grinding along and still growing. But we got bad news overseas. Germany, as we mentioned, and Europe, and China slowing down as well. But I think, this moment, this is very healthy if central bankers are realizing finally that printing more money is not the cure and the path to economic prosperity and --
GIGOT: I think you're both optimists, because I think, in fact --
-- the pressure, the political pressure will build on the European central bank to follow the U.S. route here. And the political systems over there don't want to make the reforms that we all know are necessary, that they know are necessary in labor markets and tax markets and regulation. Then the Federal Reserve is basically signaling this week, look, if you get any slowdown overseas, we're not going to --
GIGOT: -- move up our interest rates at all. It will just delay the day that that happens.
FREEMAN: I'm not optimistic that Europe is going to reform its economy, that southern Europe is going to fix what's wrong in terms of labor markets where people don't want to hire anyone because you can't fire anyone.
FREEMAN: But I think there's a reason to be a little more optimistic potentially about a policy change in the U.S. If Republicans take the Senate, you probably have at least a pretty big break on the hyper- regulating we've seen in the last few years. I don't know how you can't be optimistic when you can see this continuing North American energy boom rolling out. This is what's giving -- partly, along with slowing global command, this is what is giving us cheaper gasoline and oil. That's good for a lot of industries in the U.S.
GIGOT: Yet, this week, the administration effectively killed a merger --
GIGOT: -- of a U.S. company and the overseas -- an Irish company -- they were going to take over an Irish company, and now their board is saying no because of the new rules on corporate tax policy.
HENNINGER: Well, exactly. Their tax policy -- the corporate tax rate in the United States remains the highest in the developed world, 35 percent. And Barack Obama could have had a cut in the corporate tax rate from his first term onward, but has refused to do it because his price for doing so is too high. Then you end up with the Treasury Department essentially shutting down this merger you just described between two pharmaceutical companies and basically killing the tax inversion idea. As long as markets are watching this kind of activity from the Obama administration, I think they are going to fluctuate for a long time.
GIGOT: All right.
When we come back, they were elected to cut taxes and reign in state spending, but now some so-called Republican reform governors are facing tight re-election fights. Find out why and which races you should be watching as Election Day approaches.
GIGOT: Less than three weeks now until Election Day, and as many as a dozen incumbent governors are fighting for their political lives. This week, we look at Republicans and a group of reform governors who were elected in 2010 on promises of cutting taxes and reigning in state pension and health care costs, but now some are facing tight battles for re- election, including Scott Walker in Wisconsin, Rick Snyder in Michigan, Sam Brownback in Kansas, and Rick Scott in Florida.
"Wall Street Journal" editorial page writer, Allysia Finley, joins us with more.
So, Allysia, let's start with Michigan where Snyder has passed Right- to-Work legislation and presided over a pretty big jobs boom.
ALLYSIA FINLEY, EDITORIAL PAGE WRITER: That's right, and he's done business tax reform, which was one of his first actions as governor, which streamlined their business tax code, and eliminating most loopholes and tax codes, and simplifying the code and broadening the base, which he's really being attacked for now.
GIGOT: Well, with so much growth, particularly rebound, compared to his predecessor, Jennifer Granholm, why is it a close race?
FINLEY: Partly because it is a more Democratic state.
FINLEY: And also because he's being hammered for levying a tax on pension, basically, equalizing the taxes on pensions and regular income.
GIGOT: Ah, so that was part of the tax reform --
GIGOT: -- and he's getting -- he's getting bashed by Democrats because he didn't cut taxes enough? Is that --
FINLEY: Pretty, ironic. Exactly.
FINLEY: -- for increasing revenues.
GIGOT: He still has a slight lead in the race?
GIGOT: All right.
Let's move to Wisconsin, where Scott Walker, of course, was ground zero for a huge fight over union reforms, governor's reforms, collective bargaining for "public" workers. Why is Scott walker facing such a tight re-election fight?
FREEMAN: He is in a tight race, mainly because he promised to create 250,000 jobs. This is always dangerous --
FREEMAN: But as we know, politicians don't create jobs.
They create an environment, and other people create jobs. Jobs are being created, but he hasn't hit that target yet. He has made the state more competitive in terms of tax cuts, streamlining regulations. I think businesses over time will be moving in but he hasn't gotten there yet. But what he has done, the signature reforms on the -- reigning in the cost of government unions, they are working. So spending has been reduced. And in that way, I think he's got a success story on his signature initiative. But as we've said, a tight race.
GIGOT: Yeah, the unions across the country are throwing everything they have to try to defeat him.
FREEMAN: That's right.
GIGOT: What about Florida, Dan, where, again, you've had real economic progress under Rick Scott. What's going on there?
HENNINGER: Well, Florida is fun, though maybe not if you're a Floridian.
The incumbent, Rick Scott, is running against Charlie Crist, who used to be a Republican but now he is a Democrat.
GIGOT: He was governor once.
HENNINGER: He was a governor once. And he's Democrat, at least as of this weekend.
And it is fascinating. The race is very tight, even though Florida is doing well economically. To me, this is the most fascinating result of the polls in Florida. Rick Scott's unfavorable rating is 41 percent. His challenger's unfavorable rating is 42 percent. They are not too happy down there in Florida.
One of the reasons for this is that, as in Wisconsin, there has been a torrent of negative advertising on television, thousands of ads, mostly run by outside groups. This tends to give people the idea that nothing is going right.
I have a view about this in these elections, Paul, which is I think it's going to suppress turnout in these states. If you suppress turnout in the midterm elections, I think the Democrats are the ones who are going to suffer and that ultimately these Republican incumbents will pull it out.
GIGOT: Finally, Kansas, where Governor Sam Brownback has passed a major reform. But it's the most Republican state of any of the ones we're discussing, and yet this may be the race where he has -- of all of the four, where he's in the most trouble.
FINLEY: Look, Kansas is a two-party state, moderate Republicans and conservatives.
And right now, what you really have is an inner-party dispute between the moderates and the conservatives. And the conservatives have been pushing this tax reform agenda that Brownback backed, which really simplified the tax code and cut rates for all income earners, and he's getting whacked by Democrats and moderate Republicans because it also reduce revenues, which means less spending.
GIGOT: They are saying, though, that it's increased the deficit. Is that true?
FINLEY: Well, yes, but they expected that to happen. And because it was not a revenue-neutral tax reform.
GIGOT: Basically it's a question of whether this hits and when you see the economic results, the benefits from this kind of tax cut or whether you will.
FINLEY: Well, yes. They've already had some of the modest improvements, at least they whittled down the gap between -- the growth gap between neighboring states whereas Kansas has been lagging in the region for over a decade.
GIGOT: Well, this is going to be important cases and states to watch on election night because this will be real referenda on whether or not this kind of Republican reform can succeed in not necessarily all Republican state.
We have to take one more break. When we come back, our "Hits & Misses" of the week.
GIGOT: Time now for "Hits & Misses" of the week.
Joe, start us off.
RAGO: This week, it emerged that Israeli scientists are closing in on creating an artificial black hole in their laboratory. Now remember, this is a force whose gravity is so strong that light cannot escape and that bends the fabric of space and time. This is either a hit for a major research advance in quantum physics or a miss --
GIGOT: If it's the end of the world.
RAGO: -- and something goes wrong it destroys the world.
GIGOT: All right, Allysia?
FINLEY: This is a miss for the V.A. One of the big, supposedly, advantages of the last V.A. reform was to give up Robert McDonald, the secretary, the power to fire executives. He has not used that. Of the four people he was going to fire, two are retiring.
GIGOT: At the Veterans Administration.
GIGOT: With full benefits, I assume?
FINLEY: I assume as well.
GIGOT: All right.
HENNINGER: Well, I'm giving a miss to Marilyn Monroe. Not the real Marilyn Monroe. She died in '62. But a virtual Marilyn Monroe, which a company now says they can digitally recreate so you that have a life-size - - essentially an apparition. And I'm talking about an operator who can manipulate this character to appear on a stage and perform. And they say they can do this for pretty much everyone. In other words, they could even recreate Paul Gigot so that you could take the week off and then a programmed digital version could then appear here and do the show.
GIGOT: There's a lot less clamoring for my apparition, I think -- just a hunch -- than Marilyn Monroe's --
(LAUGHTER) HENNINGER: Well, we can take a poll on that.
HENNINGER: You know we're not going to take a poll on it.
Do you guys know who Marilyn Monroe is?
GIGOT: All right.
FREEMAN: -- come up once or twice.
GIGOT: All right. And remember, if you have your own hit or miss, please tweet it to us, @JERonFNC.
That's it for this week's show. 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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