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Journal Editorial Report

Is Baltimore proof that progressive policies have failed urban America?

This is a rush transcript from "Journal Editorial Report," May 2, 2015. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," rioters lay waste to a big junk to an already struggling city. Does Baltimore show how progressive policies have failed urban America?

Plus, Bernie Sanders jumps into the presidential race, but is another liberal icon really calling the shots when it comes to Hillary Clinton's left turn?

And the U.S. economy stumbles as growth slows to a crawl. Will we see a spring rebound or is there more trouble ahead?

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

Rioters in Baltimore this week lay waste to parts of that already struggling city, looting stores and setting fires to scores of small businesses. The violence followed the funeral of 25-year-old Freddie Gray, who died from a spinal cord injury while in police custody. His death was ruled a homicide Friday, and six officers were charged.

Earlier this week, President Obama condemned the riots that have rocked the city and called on the nation to do some soul searching to address the problems of crime and poverty that have plagued urban America for decades.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: In those environments, if we think that we're just going to send the police to do the dirty work of containing the problems that arise there without as a nation and as a society saying what can we do to change those communities, to help lift those communities and give those kids opportunity, then we're not going to solve this problem.

(END VIDEO CLIP)

GIGOT: Joining the panel this week, Wall Street Journal contributor and Manhattan Institute senior fellow, Jason Riley; Main Street columnist, Bill McGurn; and Potomac Watch columnist, Kim Strassel.

Jason, let's start with you. What do you think the main lessons of the Baltimore events are?

JASON RILEY, CONTRIBUTOR & WASHINGTON INSTITUTE SENIOR FELLOW: I'm comparing what was going on in Baltimore with what was going on in Ferguson. Remember coming out of Ferguson that this had everything to do with the racial makeup of the police department, the racial makeup of city leaders and so forth. You had this white minority oppressing a black minority. Well, we don't have that issue in Baltimore, Paul. We have a black police commissioner, a black mayor, a black prosecutor, a black city council and so forth, so I don't think this is a response to racist oppression of poor blacks as the left is claiming in Ferguson.

GIGOT: OK, so if race is not implicated here, then what is?

RILEY: I think you have -- I think one of the lessons people in Baltimore learned from Ferguson is that responsible people, like the president of the United States and the attorney general, supposedly responsible people, are going to side with them when they act out in this way. They're not going to be condemned unequivocally.

(CROSSTALK)

GIGOT: -- Jason.

RILEY: And he also said that the police need to get their act together. He's played the same game. On the one hand, he said things about the criminals. He said things about the rioters. On the other hand, he's gone after the cops as well. That is not how you handle this. You attack the bad behavior unequivocally.

GIGOT: Public order, first obligation of government.

BILL MCGURN, MAIN STREET COLUMNIST: Absolutely. I'm with Jason.  What really went up in flames in Baltimore was the Great Society, this blue city model of governing. The president called for soul searching. What he always means is for other people to search their souls. No one is rethinking this 50 years of federal intervention that make a lot of our cities hellholes.

GIGOT: Explain that. What do you mean when you say that?

MCGURN: I mean government programs. I mean, first of all --

GIGOT: You wrote about this this weekend

MCGURN: Yeah. And I would say, look, they've got it backwards. One of the things the government should do is be on the side of the law abiding. That mom --

(CROSSTALK)

GIGOT: That's number one, public order. Make sure you go into high-crime neighborhoods --

(CROSSTALK)

MCGURN: Which is what Rudy did.

GIGOT: Rudy Giuliani.

MCGURN: ruddy Giuliani in the '90s in New York, which was worse than Baltimore today in terms of murders and so forth, went into the poor neighborhoods, and we heard all these people saying, this is terrible what's happening with our city, we just didn't have officials putting the force on the side of those people. That's one thing. That makes investment possible.

The president has talked about investment. He doesn't mean businesses investing. He means more federal spending and so forth.

And the third is schools. Maryland has one of the worst charter laws in the country, very restrictive. And these kids need choice. The public school programs in these big cities are jobs programs for unionized teachers.

GIGOT: And they don't care about learning.

MCGURN: Right.

RILEY: What drives tensions between the police and these poor communities are crime rates. That is what we need to deal with. Crime rates --

(CROSSTALK)

GIGOT: What about job opportunities, Jason? Because, as you know, these cities just don't have them.

RILEY: That's part of the problem, Paul, but there is also a cultural issue here regarding work ethics. There was an interesting story in "The Washington Post" earlier this week about a guy who works on a construction site. He says, I see 30 or 40 young black men walk by this construction site every day. Only one or two ever ask if we're hiring. The jobs, yes, they need to be available, but you also need a population that is interested in working, that values working and so forth. Unfortunately, you do not see that in many of these communities.

GIGOT: So, Kim, Hillary Clinton gave a speech this week in response to the riots in which she laid out basically a reform agenda for changes in policing, changes in incarceration policy, and more or less endorsed the president's agenda. Is this going to help her? What's going to be the reaction to that?

KIM STRASSEL, POTOMAC WATCH COLUMNIST: Well, after an almost entirely ideas-free campaign, she did find her issue this week, and as you said, a lot of it was she's going to be talking about race and criminal justice reforms. And when you combine that with just how big a topic this is now becoming across the country, it's likely this is going to become a big focus of the presidential campaign. It's probably going to help her in particular maybe with black voters, which is a segment of the population she's going to need. It's also going to demand a response from Republicans who, so far, have been pretty quiet. But there is an interesting contest here, Paul, because if you look at guys like Jeb Bush or Marco Rubio, they are running campaigns that are about opportunity, opportunity in jobs, equal opportunity, opportunity in education. If that's the response to this, it could be a very interesting contrast with Hillary Clinton out on the trail.

GIGOT: Do you agree with that, Jason, that there is a real opportunity here for conservative ideas? If Bill is right -- and I think you would agree with Bill that this blue city model has failed, OK, government spending, and so on and so forth. Is there an agenda that Republicans could offer that says we can do better by urban America?

GURNEY: In theory, there should be, Paul. The failure of these Great Society programs are -- we see what happened in Baltimore recently, or go back 50 years, go back to the riots of Detroit, go back to the riots of Watts and Los Angeles. Yes, there should be a long history of case studies her on what these policies have done with these communities. The Democratic Party has convinced many black Americans that big government is good for them, and the bigger the better. And that's what Republicans are up against.

GIGOT: One of the things that's really revitalized a lot of neighborhoods in New York and other places, immigration.

RILEY: Absolutely. You have --

GIGOT: You have new groups of immigrants from other countries coming in and just taking over neighborhoods that used to be decrepit.

(CROSSTALK)

MCGURN: There is a huge migration of African-Americans out of our cities. Baltimore was the fifth or sixth-largest city in 1960. It's shed a third of its population since these Great Society programs have been put in. Where are these people going? They're going back to where the jobs are.

GIGOT: Or they're going to the suburbs.

MCGURN: Yeah.

(CROSSTALK)

MCGURN: But a lot of them are going back -- there is a reverse migration of African-Americans to where the jobs are, and they're not in the blue states.

GIGOT: All right, thank you, all.

When we come back, Hillary Clinton gets her first primary challenge, but it's not Vermont Senator Bernie Sanders who is likely to push her further left on a whole host of policies. Find out who is literally calling the liberal shots, next.

(COMMERCIAL BREAK)

GIGOT: Vermont Senator Bernie Sanders jumped into the presidential race this week giving Democratic front runner, Hillary Clinton, a challenge from the left, though likely not the one that really matters. There is no doubt Mrs. Clinton is modifying her positions to more closely align with the new liberal agenda, including her recent refusal to endorse a trade deal, she once supported. So who is really calling the shots and what other policy shifts should we look for as the 2016 campaign kicks into high gear?

We're back with Jason Riley and Kim Strassel. And Wall Street Journal assistant editorial page editor, James Freeman, also joins the panel.

Kim, Bernie Sanders first. How seriously should voter and especially Democrats take him?

STRASSEL: You almost feel sorry for Bernie, Paul. Here he jumps into the race as a self-prescribed Socialist. All his policies are the sort of things that just tickle progressives, and yet when he made his announcement, you had all of these groups on the left that said, "Yeah, yeah, it's nice Bernie got in, but we want Elizabeth."

(LAUGHTER)

And that's a reference to Elizabeth Warren, the Massachusetts Senator.  That's who they see as their person who is going to ride forward on their issues, and Bernie Sanders, he's just not their guy.

GIGOT: He's not the guy. Well, he's 73 years old, and he doesn't have a huge following other than what he gets on MSNBC and cable TV, if you listen to him.

(LAUGHTER)

RILEY: And we know a relatively unknown Senator can beat Hillary for the nomination.

(LAUGHTER)

I mean, that's not his problem. I think his problem is that he's looking for people whose problems with Obama is he's not liberal enough.  And there are some people out there. I just don't think there are very many.

GIGOT: Not very many. So --

(CROSSTALK)

STRASSEL: The people who are his natural constituency are already in the camp of somebody else.

GIGOT: Yeah.

So what is it that he's going to run on? What do the liberals want?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Well, it's interesting, because as a devout Socialist, you would think there would be this great gulf between what he's advocating and what the left wing of the Democratic party is advocating, but over time, the differences are a little harder to spot.

GIGOT: Hostility to trade agreements.

(CROSSTALK)

GIGOT: And Social Security. Don't reform it.

FREEMAN: Right.

GIGOT: Raise taxes. Public financing for all campaigns. Government financing, that is, for all campaigns. Anything else?

FREEMAN: Just to emphasize the entitlement, that is one issue.

GIGOT: Social Security.

FREEMAN: Entitlements generally. This is one issue where the left of the Democratic Party is really evolving even further left, and apart from where, for example, the Obama officials that serve as the trustees for the Medicare and Social Security Trust Funds are. They're warning about massive problems going forward if politicians don't address entitlement programs, meaning rein in their costs. Yet, you know have Bernie Sanders, Hillary Clinton, you have others on the left, Martin O'Malley, Elizabeth Warren, saying we have to expand benefits, especially on Social Security.

RILEY: What's interesting about Hillary's case is she is, of course, moving away from the policies of her husband.

GIGOT: Yes, this isn't her husband's Democratic Party.

RILEY: Exactly. So whether you're talking about the crime bill he signed, which he's now saying mass incarceration is a problem, or a social issues like gay rights, where her husband signed "Don't Ask, Don't Tell" or pushed "Don't Ask, Don't Tell," and the Defense or Marriage Act and so forth. Hillary's other problem, as Kim said in the last segment, is that she wants to keep black voters in her camp.

GIGOT: Right.

RILEY: So as she is distancing herself from Obama, she needs to keep people in her camp that support the president quite handily.

GIGOT: You mentioned Elizabeth Warren, Kim. Could Bernie Sanders or Martin O'Malley, the former governor who may also run, could they be stalking horses for Elizabeth Warren? And here's what I mean. In 1968, Eugene McCarthy ran as an anti-war candidate against LBJ. Nobody gave him a chance. But he did well enough in New Hampshire that he knocked LBJ out and then Robert Kennedy got in, who was a more plausible likely president.  Could that similar kind of scenario happen this time?

STRASSEL: Oh, it's totally possible, because while Elizabeth Warren continues to maintain that she is not running, what you have -- and I mentioned these groups out there, they are setting up this vast network in support of her, this sort of virtual campaign that's in waiting for the moment at which they can finally coax her to get in. And if it does, there is going to be a lot of pent-up money and a lot of pent-up infrastructure right there ready and waiting for her if she wanted to get in a little bit later in this race.

GIGOT: So the left hand has this policy checklist for Hillary Clinton, basically.

Right. Right.

GIGOT: Trade, boom. Entitlements, boom. Rewrite the First Amendment to restrict free speech in campaign finance, boom.

FREEMAN: Deal.

(LAUGHTER)

GIGOT: Are they getting that?

FREEMAN: I think they're going to get all of that and more. They're also going to get taxes to address income inequality. What's they're --

(CROSSTALK)

GIGOT: Higher taxes on not everybody, but some people.

FREEMAN: Yeah. As we've discussed, Hillary has always held down the left wing in the Clinton household, so I don't think it's going to be a problem for her to get where she needs to be to get those votes ideologically. The problem, the vulnerability probably has more to do with the aroma of corruption around the Clinton Foundation, those kinds of ties.  If you're an idealogistic progressive young voter, you might be drawn to a Warren certainly, or even a Sanders, if there is no other alternative.

GIGOT: Let me finish this segment by offering a wild card, and I know you'll be delighted to hear it. But if Hillary Clinton does stumble, don't think that John Kerry, the secretary of state, might not get in the race if he gets a deal with Iran. He's been there before, and his wife could finance a campaign.

So, all right, thank you, all.

When we come back, some bad news for the U.S. economy as growth slows to a crawl. Is it a sign of bigger problems to come, or will we see a spring rebound?

(COMMERCIAL BREAK)

GIGOT: A jolt of bad news for the U.S. economy this week as the Commerce Department reported that growth nearly stalled in the first three months of the year with gross domestic product increasing to just 0.2 percent, its lowest reading in a year. It's just the latest evidence that the economic expansion that began almost six years ago remains the weakest in modern history.

We're back with James Freeman. And Wall Street Journal columnist, Mary Anastasia O'Grady, joins us.

Mary, most economists are saying the stall is over, we're bouncing back. Is that what you see?

MARY ANASTASIA O'GRADY, COLUMNIST: Yes, I think we probably had a rough quarter because of bad weather and the dollar was strong. Those are the two --

GIGOT: Exports, yeah.

O'GRADY: -- explanations for the low number, but I don't see us bouncing back to anything substantial. We haven't seen 3 percent growth for, you know, since the financial crisis --

GIGOT: A decade. Almost a decade.

O'GRADY: Exactly. And I don't see any reason why we're going to get up above that number if we don't have some important policy changes, which the president doesn't seem very interested in doing.

GIGOT: So you're talking two, two and a half percent, maybe upper twos and one -- maybe one quarter of really good growth and then kind of bouncing around to where we've been?

O'GRADY: One of the problems with having a very bad quarter is the other ones have to be that much better, right?

GIGOT: Better.

O'GRADY: So this is definitely going to dampen the overall annual growth for this year, and, you know, it's a trend that we saw for -- in recent years, that we have a bad winter quarter, but then we never get back up to anything really substantial.

GIGOT: James --

(CROSSTALK)

O'GRADY: It impacts wages, which is one important weakness.

GIGOT: Which is really what we want.

One of the things I noticed in the figures, James, is the oil patch.  The lower oil prices have really hit investment, and business investment was down.

FREEMAN: That's right.

GIGOT: You've been looking at business investment across this recovery. And it really hasn't gone back. This is capital expenditures that are --

FREEMAN: Right.

GIGOT: -- a big driver of productivity growth, and ultimately of wages. It's just not going back to the peak it was before the recession.  What's going on?

FREEMAN: It certainly has come back, but when you look at net investment, in other words, stuff depreciates, stuff wears out, are you building a new plant, new equipment beyond that to take you to the next level of growth? We're not really seeing that. And you mentioned it's a negative in the first quarter. Usually, in a recovery, investment exceeds GDP growth. Here, in this case, it's actually trailing. And I think what you're seeing -- keep in mind, this was happening in a world where we have merger mania, companies combining all over the world with over trillion dollars in deals announced so far this year. So --

(CROSSTALK)

GIGOT: And also companies repurchasing stock, right? They're buying back their shares even though their shares have gone up quite a bit.

FREEMAN: So what you're seeing is a lot of money in the system and companies choosing, in many cases, to buy other companies instead of to build new products, invent new things, create new services. And I think that is the Obama economy, and sadly, that's kind of the economies of a lot of the developed world, is very heavy regulation, hostile to innovation, hostile to new products, and so where is your opportunity to running a business to get growth so as to buy an existing company.

GIGOT: So you're saying that the cheap money that you can borrow at almost nothing, the cheap money is going into financial engineering as opposed to new investment?

FREEMAN: In large part. And because --- it's so striking, this kind of bumbling, stumbling economy we have, little job growth, little wage growth, and yet merger mania. This is really -- could be the greatest year ever for corporate mergers.

GIGOT: Mary, what are the -- you mentioned policy changes. What could we do? What would you like to see out of Washington? Not the whole --

(LAUGHTER)

GIGOT: -- but let's be realistic. What would you like to see?

O'GRADY: Well, one of the obvious ones is letting our oil producers export their product. There is a lot of investment in the ground.

GIGOT: Right.

O'GRADY: And now they can't sell it. And, actually, the foreign markets are thirsty for the type of oil that these independent producers all over the West are bringing up. You know, you could also do something on trade. Now, the president says he's out there on the Trans-Pacific Partnership --

GIGOT: Trans-Pacific.

O'GRADY: -- but where has he been? He really has to take, I think, a more of an aggressive stance to get Congress to approve the trade promotion authority if he's going to get that trade deal done. I don't think he's spent a lot of political capital there.

GIGOT: Those are two things that could really help.

We have to take one more break. When we come back, "Hits & Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Time now for our "Hits & Misses" of the week.

Kim, start us off.

STRASSEL: A miss to Chipotle, the restaurant chain that is now bragging they will no longer sell genetically modified food. Paul, put aside the weirdness of anybody feeling virtuous about eating million- calorie burritos at a fast-food restaurant --

(LAUGHTER)

-- G.M. or not.  The real pity of this is that Chipotle is feeding into fears about G.M. food despite the fact there is no evidence that it's caused any human harm, and despite the fact that it's so important these days to be able to feed a growing population. If Chipotle really wants to feel virtuous, it would spend a little time thinking about those kids in Sub-Sahara Africa who would love a Chipotle burrito, G.M. or not.

GIGOT: Give me a side of moral posturing.

STRASSEL: Yes.

GIGOT: Mary?

O'GRADY: Paul, this is a hit for Puerto Rican legislatures -- legislators who have rejected Governor Garcia Padilla's call for a 6 percent value-added tax. And they also rejected his second try of a 13 percent goods-and-service tax. The Puerto Rican economy has not grown since the 2008 financial crisis.

GIGOT: Wow.

O'GRADY: Unemployment is 15 percent and the government solution is more debt and more taxes. And good for Puerto Ricans for saying no mas.

GIGOT: William?

MCGURN: A miss for the People's Republic of New Jersey. The good news is that five years ago, Governor Christie put in a property tax cap. The bad news, according to a new report from Zillow (ph), is that of the 10 counties in America with the highest median property taxes, New Jersey has seven of them. And I live in one of them.

(LAUGHTER)

GIGOT: Yeah, so does a few other people on our staff as well.

And remember, if you have your own hit or miss, be sure to tweet it to us at JER on FNC.

Thanks it for this week's show. Thanks to my panel and especially to all of you for watching. I'm Paul Gigot. Hope to see you right here next week.

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