This is a rush transcript from "Journal Editorial Report," March 18, 2017. This copy may not be in its final form and may be updated.
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PRESIDENT DONALD TRUMP: We are proposing a budget that will shrink the bloated federal bureaucracy -- and I mean bloated --
TRUMP: -- while protecting our national security. You see what we are doing with their military, bigger, better, stronger than ever before.
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PAUL GIGOT, HOST: Welcome to the "Journal Editorial Report." I'm Paul Gigot.
The Trump administration released its 2018 budget blueprint on Thursday igniting a political uprising on Capitol Hill. The $1.1 trillion budget outlines the president's policy priorities with the Defense Department, Homeland Security and Veterans Affairs all getting increases. But the EPA and State Department taking the biggest hits with double-digit spending cuts. And despite a proposed $54 billion increase in defense spending, House Minority Leader Nancy Pelosi says President Trump's budget will leave the nation weaker.
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REP. NANCY PELOSI, D-CALIF., HOUSE MINROITY LEADER: It throws billions of dollars at defense while ransacking America's investment in jobs, education and innovation, clean energy and lifesaving medical research.
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GIGOT: Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; Washington columnist, Kim Strassel; editorial board member, Mary Kissel; and assistant editorial page editor, James Freeman.
Kim, what does this budget tell you about President Trump's budget priorities?
KIM STRASSEL, WASHINGTON COLUMNIST: Well, that's what budgets are, they're blueprints, they're visions. They will go through a lot of modifications before they actually end up in an appropriations bill on the president's desk. But what he is essentially saying is that the money is going to go for core American projects like defense, for instance, and national security, and that a lot of other items, which have become bloated over the years, or that to be better handled by the states, are going to get some big cuts. Now, he is limited a little bit on how much he can do because he is not touching entitlement, but as a vision, this is one he ran on, and I think a lot of Americans would agree with.
GIGOT: Mary, he did run on more money for veterans, more money for Homeland Security, and more money for defense. In that sense, he's fulfilling a campaign promise. But here's the question. Those domestic discretionary cuts, as Kim said, these are not Medicare, not Social Security. Medicaid, the other growing entitlement, is in the health care bill, so it is not part of this. There's a big percentage of cuts here for EPA, 20 percent for Labor and the Aid Department. That is unheard of.
MARY KISSEL, EDITORIAL BOARD MEMBER: Yes, it is unheard of. But Donald Trump also did not run on reforming Social Security and dealing with the national debt. You also see that reflected in this budget blueprint.
I think about 70 percent of the budget spending is on mandatory spending. So --
GIGOT: That's entitlements.
KISSEL: Entitlement spending. And, yes, you are right, the health care bill deal with that. But in some respects, Trump is almost playing on the edges because he's only really looking at this budget blueprint at the other 30 percent.
GIGOT: OK. I think that is the essential point, James. I mean what is he doing in terms of actual -- I mean, he is proposing a cut a lot out of these programs. Congress almost never goes along with that. Is this just kind of pro forma policy that will not be passed by Congress?
JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Let's see about that. I think it is again him fulfilling a promise. He talked about how he said he would give more to veterans, defense and Homeland Security. He also said the regulatory state needs to be peeled back, and part of that you see substantial cuts at the Environmental Protection Agency, other agencies. But I am hoping, and I think he is beginning a useful conversation, about what is the appropriate role in the federal government. And you see the administration seemingly getting beat up in the media about Meals on Wheels --
GIGOT: Not seemingly. Actually.
FREEMAN: But I think, I would hope that this would force some discussion of, gee, if a program cannot gain support in the communities where it operates, maybe that is telling us something. Maybe church food pantries, local food banks, people, other groups that take care of shut-ins do the job better. And I think this could be -- maybe it all gets reduced by Congress. But I think he is going after some sacred cows in terms of federal funding in a healthy way.
GIGOT: Dan, we have seen these debates before.
DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yeah.
GIGOT: The sacred cows almost always win.
HENNINGER: They do almost always win. But that doesn't mean you can't keep fighting. Look, I'm going to do something a little heretical here. I'm going to get a little bit excited about the Trump budget. I think could be the start of something big, or shall we say smaller.
Look, we all say entitlements - he's not toughing entitlements, and that is the big part of the federal spending, but does that means that the Labor Department, Agricultural Department, State Department don't mean anything? This is the sludge that has built up over decades. You and I recall that back in 1982, Ronald Reagan commissioned something called the Grace Commission --
HENNINGER: -- to rule out waste, fraud and abuse. It was a great report. They did do some of that. And I'm kind of hoping that maybe Donald Trump, being Trump, who issued an executive order on Monday, ordering the agencies to look at redundancies, as Kim suggested, things to be sent back to the state, it sounds to me like he -- and Mick Mulvaney, his OMB director, are going to stay on this case.
KISSEL: I thought it was great that Mick Mulvaney said, look, the taxpayers are giving up this money and we have to show them what they're getting for it. That was refreshing to hear. But we also did not hear very much about growth. There was a lot of talk about cutbacks and the austerity, which is the kind of conversation you've seen in Europe. But there was not a lot of focus or explanation on why this budget would get America growing again, why it would get companies to invest and companies to hire.
GIGOT: Kim, what about this defense complaints from Republicans that this isn't enough spending. It's really a 10 percent increase over what had been the budget baseline that Congress had installed. But it is only 3 percent more than Barack Obama requested in his last budget. And John McCain and others are saying is just not enough.
STRASSEL: And that is a fair criticism. And again, this is one of the problems if you are only going to look at domestic discretionary spending. Because they wanted to offset this here, $54 billion they are taking money out of other programs to send over to the Defense Department. It is not a big pool of money that you have to work with, even with these deep cuts. This is going to be one of Donald Trump's big struggles with this budget, is going to be Republicans who push back on the amount of defense spending.
There is also going to be a big moment for Republicans, too. As he said, the sacred cows usually win when it comes these fights over some of the domestic cuts that he has proposed. If Republicans stand up and start protecting all of their hometown pet projects here and there, it will not be a big message they're sending out to the country.
GIGOT: All right, thank you all.
Still ahead, the Congressional Budget Office releases its analysis of the Republican health care bill, shaking up the fight to repeal and replace ObamaCare. So what should we make of the numbers? We will ask former CBO Director Douglas Holtz-Eakin, next.
GIGOT: Republicans and Democrats both seizing on this week's Congressional Budget Office analysis of the Republican plan to repeal and replace ObamaCare, with Republicans touting the CBO's estimate that passage of the bill that would reduce the federal deficit by $337 billion over the next 10 years, but the Democrats pouncing on the projection that 24 million fewer people would be uninsured by 2026 under the Republican plan. So what should we make of the numbers?
Douglas Holtz-Eakin was the director of the Congressional Budget Office under President George W. Bush. He is now the president of the American Action Forum.
Welcome. Good to see you.
DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION FORUM & FORMER DIRECTOR, CONGRESSIONAL BUDGET OFFICE: Thank you.
GIGOT: Let's step back a bit before we get into details. For a lot of viewers who do not understand what CBO's role is, and I think they wonder, why should budget scorekeepers determine policy, and why they so important in this debate, because actually they never ran for election.
HOLTZ-EAKIN: The CBO was created to do two things for Congress. Number one, it issues occasional reports at the request of Congress on policy issues and what our options for defense and things like that. And then its core function is to score or calculate the impact on the federal budget of any piece of legislation their considering. So what happens to taxes coming in and what happens to the spending going out.
GIGOT: Right. But Congress can ignore those numbers if they want and set their own policy because, after all, they are the people who did put their ideas before the voters.
HOLTZ-EAKIN: Absolutely. And I always try to remind people that the CBO's job is to calculate the federal budget costs of policy. It's the lawmakers' job to identify the benefits and say it's really worth doing this.
GIGOT: Let's start with the two big numbers, the $24 million in loss coverage. What do you make of that prediction? It seems to me, looking at the report, that it is basically, most of it, on the fact that the mandate to buy insurance would go away. Do you agree with that?
HOLTZ-EAKIN: Yes, that's the crucial piece. And the easiest way to see that is to look at next year, 2018, when most of ObamaCare would still be in place, and it would be the same kinds of subsidies, same kinds of insurance regulations. They have not phased all of that out yet. But the mandate is gone, so it is no longer illegal to be uninsured. CBO says five million people will choose not to buy individual insurance policies. And six million people will choose not to participate in a free Medicaid program. So there will be 11 million people, quote, "uninsured" because of the law. But that tells you two things. Number one, the mandate is really important to CBO. That is a very big change.
GIGOT: They put a lot of faith into it. They put a lot of faith into the mandate.
HOLTZ-EAKIN: They really do. But the second thing, you have to ask yourself, well, they chose to do this. They could have bought insurance. They didn't. They could have participated in Medicaid. They didn't. Are they really worse off? Should we be upset about that number? I think that's the crucial issue.
GIGOT: Because it is a matter of personal choice that they're not doing it.
GIGOT: Here's the issue that I have with CBO's faith in the mandate. The mandate has not been working all that well so far. I mean, they have overestimated the number of people who would be insured under the Affordable Care Act. I mean, I think it is something like 12 million more, 16 million more that they anticipated in this year, back when the bill was passed. So I they think that this going to work so well -- work so well in the future?
HOLTZ-EAKIN: They really do have a lot of faith in it. I cannot fully explain it.
Another thing to point out, go to the end of this, 2026, you have two million fewer in the market. That is essentially a rounding error over a 10-year period.
HOLTZ-EAKIN: You have seven million fewer in the employer market, which tells you they have great faith in the employer mandate. That suddenly employers are going to stop offering insurance. That is a really big number in my view. And I do not fully understand it.
And last piece that I think is crucial is 14 million fewer people in Medicaid in 2026. That calculation assumes that the current Medicaid program can go on for 10 more years. I think that is completely unrealistic. In 10 years, we will have deficits well over $1 trillion. It will be driven by Medicare, Medicaid and Social Security and those types of programs. The idea that Medicaid will go unreformed for that period I think is an illusion. What you really want to look at is a comparison between this Medicaid reform and another Medicaid reform because it is going to happen.
HOLTZ-EAKIN: And that gives you a very different view of the world.
GIGOT: That is what I want to focus on now. You're been a deficit hawk, as we say, about entitlements for a long time. Basically, making the point --
GIGOT: -- that these in terms of crowding out the federal fisk (ph) and everything else. You look at this bill, CBO's projection, their analysis that spending would fall by $1.2 trillion over 10 years.
GIGOT: And the deficit would fall, despite the fact that you are repealing almost $900 billion in taxes. So that kind of deficit reduction, I don't know about you, but I haven't seen that in a very long time, much less that magnitude of spending cuts. Is this, in your view, an important entitlement reform?
HOLTZ-EAKIN: This is the single biggest entitlement reform ever contemplated. It is very important. And I am thrilled that someone would actually take on one of these big entitlement programs and think about a different way to run it, not just to cut the costs. I mean, I am a big budget hawk, it's true. But it is also not a very good program.
HOLTZ-EAKIN: And I think hard about getting better health care for low-income Americans. That is what the bill is designed to do.
GIGOT: So if you get back to the states, the idea is that the states, knowing their populations better, knowing the incentive structures within their states, would be a better -- would be able to do a better job of managing the program, reducing costs, and naming working patients off Medicaid, which, after all, we do not want everyone on Medicaid all of their lives. We want them off, just like we want them off welfare.
HOLTZ-EAKIN: I think that is exactly right. And there are a couple of things in here that give me just a lot of hope. The notion of giving a cap amount to states means there is a budget.
HOLTZ-EAKIN: You put something on a budget, people manage it. If you don't put it on a budget, people just spend it. So managing it is important. We've seen states that have made these initiatives, like Indiana under Mike Pence as governor, have a tremendous amount of success in covering people and controlling their costs. That is the number-one objective in health care in America. So I think that is the place to go.
And if there was one thing that would be in here that I have not seen so far, it would be nice if they had the option for states to have a work requirement with Medicaid. So you could replicate the welfare reform success in this context as well.
GIGOT: All right. And some, in fact, Republicans are pushing for that as this bill moves ahead.
Thank you, Douglas Holtz-Eakin. I appreciate you being here.
HOLTZ-EAKIN: Thank you.
GIGOT: When we come back, with Republicans split over just what should replace ObamaCare, can President Trump broker a deal?
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TRUMP: The bill that I will ultimately sign, and that will be a bill where everybody is going to get into the room and we are going to get it done.
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TRUMP: The House has put forward a plan to repeal and replace ObamaCare based on the principle I outlined in my joint address. But let me tell you, we are going to arbitrate, we're going to all get together and we're going to get something done.
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GIGOT: President Trump in Nashville this week promising to broker a deal to advance the House plan to repeal and replace ObamaCare. Despite descent within the GOP, the bill narrowly cleared another key hurdle this week with the House Budget Committee approving the package over the objections of three Republican members.
We are back with Dan Henninger, Kim Strassel, Mary Kissel and James Freeman.
Mary, third committee passed this, more narrowly than the other two. Where does this debate stand? Where does the bill stand?
KISSEL: We're seeing something really shocking, Paul, which is the normal practice of politics, which is something we have not seen in this country for a very long time.
Where does the bill stand? It is moving through committees, it's going next to a House floor vote, and then Mitch McConnell and the Senate wants to get this thing done by the first or second week of April. So I'd say it is moving along the normal political process. Yes, you see some grumbling. There were three Republicans in the House who voted against it in committee, but they knew it was going to get through and go to the floor here. Is it going to be killed? You see the same names coming out, same couple of figures, Mark Meadows, Rand Paul, Ted Cruz. But I think, overall, behind closed doors, Republicans know that they have to get this deal done. There is no other option.
GIGOT: James, next week, it goes to the House Rules Committee where there will be a package of some fixes introduced, and the following week, it goes to the floor. What do the critics want? What do your friends in the Freedom Caucus --
-- say that they want?
FREEMAN: I'm surprised you called them my friends.
I think what they want is a move towards freedom and people being responsible for themselves as opposed to government --
GIGOT: What do they want out of this bill?
FREEMAN: I think what they should reasonably looking for is appreciating have to get something done, that it is not every day you get a $900 billion tax cut, paired with $1.2 billion in --
GIGOT: $1.2 trillion.
FREEMAN: $1.2 trillion, excuse me, in spending cuts. So this is --
GIGOT: He cannot even believe it is a trillion.
FREEMAN: I think, at the margins, you're still worried about the structure because, what you do is, even if you get more freedom and you get less cost and a lot of reform in here, you still, every time you widen the federal safety net, you discourage people from working. So you want to reduce some of those incentives to not work as benefits are broadly given. I think that is what they should focus on. Whether it is work requirements, tightening the eligibility for aid, I think is where they ought to go.
GIGOT: But that is what the conservatives want. But some of the moderates, and particularly in the Senate, are worried that if you put too many restrictions on Medicaid, it will hurt their states. So you have some of them saying, no, we want a little more money for Medicaid. I want to move up the date where the expansion ends. So it is a needle here. I mean, it's -- pardon my metaphor.
It is a narrow path they have to walk.
HENNINGER: Yes, and that is politics. Indeed, some of the governors expanded their Medicaid. That may be why Tom Cotton has been criticizing the bill. Arkansas was one of the states that took a big buy-in into the Medicaid piece of ObamaCare. Governor Chris Sununu has said the Medicaid money had been helping with the opioid crisis in Vermont, which is real, there's no question about that. But some decision has to be made about whether you will go down that road and make it Medicaid for everybody or do a reform like this. And I think we've seen what the conservatives want. Ted Cruz and Mark Meadows, Congressman Mark Meadows, wrote a piece for our website this week, in which they laid out the things they wanted, expanded health care savings accounts, nonrefundable tax credits. They want a freeze on Medicaid expansion right now. And they want a work requirement. Look, this is all the sorts of things that will be negotiated over the next two weeks.
GIGOT: Kim, suddenly, there is a discussion here, some people saying, oh, well, look, Trump should be bipartisan, he should reach out to Democrats. They should -- don't try to do this with Republican votes alone. Is that realistic?
STRASSEL: Trump is getting a lot of advice. He's also got putative allies telling him he should ditch the whole process and blame it on Paul Ryan. Fortunately, he has not taken that advice so far.
But look, he had done as much outreach as possibly could be done to Democrats. He went into this thing saying let's work together, but the Democratic response has been we will not help you, we will not aid in this process in any form or fashion. So the idea of him making any concessions, when he is not likely to give any Democratic votes in the end, I think is a waste of time.
GIGOT: Yeah. It is uninformed I think to think any Democrat is going to vote for repeal to help him. I just do not see that happening.
But what about Donald Trump, the arbitrator?
He says he is the arbitrator. This is like the closer? He is going to --
# I mean, what does he mean?
FREEMAN: Well, as you know, I was hoping for the live event -
-- where the various politicians would make their pitch and he would decide between them. But I think behind closed doors, that is what the president needs to do. Eventually, a deal will have to be cut. Some pressure probably applied to the Senate to accept that this has to be a reasonable reform, and that spending and taxes do have to come down. But, yeah, that is what a president is supposed to do. And --
GIGOT: Are you as optimistic? Are you, too, Mary?
And, Kim, are you as optimistic as these gentlemen, as these folks?
STRASSEL: I am all in with James.
But still ahead, another showdown is brewing on Capitol Hill as hearings get underway Monday for President Trump's Supreme Court nominee. We'll preview the Democratic line of attack against Judge Neil Gorsuch, next.
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SEN. CHUCK SCHUMER, D-N.Y., SENATE MINORITY LEADER: Judge Gorsuch may act like a neutral, calm judge, but his record and his career clearly show he harbors a right-wing, pro-corporate, special-interest agenda.
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GIGOT: Senate Minority Leader Chuck Schumer Wednesday in preview of the case that the Democrats plan to make against Donald Trump's Supreme Court nominee. Hearings for Neil Gorsuch are set to begin Monday amid efforts by the left to portray him as an enemy of the little guy to keep them from getting the 60 votes needed for confirmation under current Senate rules.
Ed Whelan is the president of the Ethics and Public Policy Center and a former law clerk to Supreme Court Justice Antonin Scalia.
Ed, good to see you. Thank you for coming in.
EDWARD WHELAN, PRESIDENT, ETHICS & PUBLIC POLICY CENTER & FORMER CLERK FOR SUPREME COURT JUSTICE ANTONIN SCALIA: Thank you, Paul.
GIGOT: Where does Neil Gorsuch's nomination stand now going into the hearing? Is he in a strong position?
WHELAN: He is in a very strong position. Judge Gorsuch has an outstanding record. Everyone across the ideological spectrum that has examined that record with care and dispassion has praised him. The American Bar Association Judicial Evaluations Committee gave him its highest unanimous well-qualified rating, what it called its strongest affirmative endorsement. You have folks like the acting solicitor general in the Obama administration, Neal Katyal, who has endorsed Judge Gorsuch from the beginning. You have a whole host of folks, including a member of the board of the American Constitution Society, a left-leaning alternative to the Federal Society. So this is a man who, over more than 10 years, has shown himself to be a superb judge. And it's a shame that some folks are coming in to try and smear him.
GIGOT: It is interesting because the left -0 you see a lot of stories this last week saying that there is some pressure on Democrats, who, from their base, who say that the Democrats have not stepped up and criticized him enough and put enough pressure on him. Therefore, I think it helps to explain some of what we heard from Chuck Schumer.
What about this attack that Judge Gorsuch is basically a spokesman for corporate interests and rules in their favor? Is there anything in his judicial background that would support that?
WHELAN: Not at all. The attack is a baseless one. Chuck Schumer himself, years ago, praised Sonia Sotomayor for ruling against sympathetic litigants when their claims were weak. That is exactly what Judge Gorsuch has done. He has ruled based on the law. Sometimes the little guy wins and he'll be able to cite plenty of cases when he's ruled for the little guy. Sometimes the little guy loses. That is called the rule of law. It's something that Chuck Schumer and others on the left, unfortunately, are seeing fit to attack.
GIGOT: Where else in the hearings do think that Democrats will try to undermine Judge Gorsuch's support? Where will they attack him?
WHELAN: I think they're going to try to say that he is no different from Donald Trump and try to fault him for whatever they see to be President Trump's faults. I don't think that gets you anywhere. And they tried the same with previous presidents.
GIGOT: They're going to go after him on abortion rights, aren't they? They're going to say, you want to repeal -- try to coax him to say something about overturning Roe versus Wade, I assume.
WHELAN: Sure, they will. The fact of the matter is there is nothing specific in his record about the abortion question. He is a committed Textualist and Originalist and man of courage, and I think that goes well for those of us who believe Roe versus Wade is an abomination that has distorted American politics for more than three decades now and needs to be reversed. When we look at his record, they are not going to see anything that clearly signals anything specific on that matter.
GIGOT: You clerked for the late Justice Scalia. Tell us where -- and Judge Gorsuch is replacing him, tell us what you think one or two places where he, Neil Gorsuch, would differ, his jurisprudence differs from Justice Scalia.
WHELAN: One area that Judge Gorsuch has highlighted is his skepticism of so-called Chevron Deference.
GIGOT: That's the executive authority, executive branch authority.
WHELAN: Right. Basically, Chevron Deference means that when a statute is ambiguous, the courts will defer to an administrative agency's interpretation of the statute. So you can have an agency in one administration say a statute means X, and in the next administration it means Y, and in the next administration says it means not X. And Judge Gorsuch has called into question the soundness of that approach. Justice Scalia was a strong defender of Chevron Deference, though I think in his later years he may have had some second thoughts about how things apply.
GIGOT: Think about the irony of that. You have Donald Trump, who everyone is saying is afraid he will run rampant with executive power, and he has nominated a justice who is skeptical of executive branch discretion when it comes to interpreting statutes. I think Democrats should look at that and say, hey, great, this is exactly the kind of justice we want, who will be there and be a bulwark against any abuses by the executive branch.
WHELAN: That's right. And more broadly, Judge Gorsuch is exactly the type of nominee that Democrats would want from a Republican president. And they should be praising Donald Trump for this peck, not attacking him for it.
GIGOT: OK, thanks, Edward Whelan. Appreciate you coming in.
WHELAN: Thank you.
GIGOT: Still ahead, North Korea's nuclear threat looms as Secretary of State Rex Tillerson makes his first visit to Asia. So will his call for a new approach to that rogue regime reassure nervous allies?
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REX TILLERSON, SECRETARY OF STATE: Let me be very clear, this policy of strategic patience has ended. We are exploring a new range of diplomatic, security and economic measures. North Korea must understand that the only path to a secure economically prosperous future is to abandon its development of nuclear weapons, ballistic missiles and other weapons of mass destruction.
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TILLERSON: The United States calls on North Korea to abandon its nuclear and ballistic missile programs and refrain from any further provocations. The U.S. commitment to the defense of Japan and its other treaty allies through the full range of our military capabilities is unwavering.
(END VIDEO CLIP)
GIGOT: Secretary of State Rex Tillerson in Tokyo this week warning North Korea that the U.S. will respond to its nuclear aggression and saying nothing has been taken off the table when it comes to defending our allies in the region. The warning comes as Tillerson embarks on his first official trip to Asia where he is calling for a new approach to dealing with Pyongyang after 20 years of, quote, "failed diplomacy."
We are back with Dan Henninger, Kim Strassel, Mary Kissel and James Freeman.
So, Dan, this is interesting because you're seeing the Trump administration in his first real problem area, North Korea, coming out and saying we are going to think differently about this. How do you read that?
DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: I think is a very, very big deal. Secretary Tillerson was actually raising the possibility of nuclearizing our allies there, I assume, as he talked about Japan --
GIGOT: And South Korea, sure.
HENNINGER: -- and North Korea. You know, Paul, I don't think there's any other word for this other than it's a new form of brinksmanship. After having given up diplomacy -- he says diplomacy hasn't worked for the last 20 years. The Chinese themselves have said recently that North Korea should be nuclearized, for instance, and that South Korean and the United States should stand down on their military exercises, even as China is projecting into the South China Sea. Rex Tillerson said that is a nonstarter. We're not doing that. And he is pushing this to the brink. And I think he is trying to tell everybody over there, look, North Korea is getting to the point where they may be able to fasten a nuclear warhead onto a missile. That is very difficult to do. That has always been the break point in these issues. If they're getting to the point, the United States is saying we are done with diplomacy.
GIGOT: And do you think, Mary, that this was as much aimed -- Tillerson's comments as much aimed at China as they were at North Korea? Because China, for all of its talk that North Korea must de-nuclearize, they have done nothing to stop them.
MARY KISSEL, EDITORIAL BOARD MEMBER: Yeah, China is North Korea's main benefactor. And North Korea, as Dan said, is increasingly a threat. Not just on the nuclear side -- they have done five nuclear tests -- but also on that ballistic missile side. They launched four just in these last weeks. And there are using also weapons of mass destruction, let's not forget, in a public assassination in the middle of Kuala Lumpur Airport recently.
KISSEL: That's right. And Kim Jong-Un is not a leader that has had like a lot of contact with China. China may have the type of control that they've had over North Korea in the past. Look --
GIGOT: Wait, wait. Now, that is a fair point. But if they stop buying their coal, if they would open the border and let North Koreans come over and then go to South Korea, that would put enormous pressure on South Korea.
KISSEL: Yeah, and that is something that both the Bush and the Obama administration went to China and said they should do. I think Tillerson is going to Asia and saying to China, if you're not going to do something, we will. And I think he should go to the table and say, look, it is time for a new approach, it is called a change of regime in North Korea. It can be a change of regime that you like, that you have some sort of influence over, or it can be a change of regime that the United States likes, which is a democratic and a unified Korea. But it is also a good message, by the way, to send to China that there will be consequences for bad actions, because Beijing is the other big problem in the region.
GIGOT: Kim, the question of nuclearizing in the peninsula, now that has always sort of hung out there, like South Korea and Japan. I personally do not agree that we should seek that. But it may be that could be the outcome if you get a situation where North Korea can be seen as having a first-strike nuclear capacity. How can you stop those democratic countries from saying we want a deterrent ourselves?
KIM STRASSEL, WASHINGTON COLUMNIST: You can't. What you're saying here is an entire change of strategy. We have had 20 years of what Tillerson calls quiet diplomacy, patient diplomacy. It yielded absolutely nothing. And what the administration is signaling here is that they're going to roll out the full roster of other possibilities. That has to include the potential nuclearizing of the other countries in the region. It is not a place that we necessarily want to go but North Korea needs to understand that that could be one outcome. China needs to understand that could be one outcome.
GIGOT: James, there is more on the table than just North Korea. When Tillerson meets with the Chinese, and when President Xi Jinping and Donald Trump, set for some time in the coming weeks, in Florida.
And what about the economic agenda? If you make a priority of North Korea and you making a priority, as Dan suggested, of stopping their movement into the South China Sea, it is a lot to ask to say we also want you to do the following things on the economy.
JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: There are a lot of asks. I think this episode also underlines how difficult it is. We think of China having made so much progress on economics. But when their bullying and criticizing South Korea for trying to defend itself with a anti-missile system, it tells you that the same old Communists are still in control there. But as you can see the economic sphere, I think a clear message from Tillerson to the Chinese government saying stop stealing our intellectual property, stop forcing our companies to share their trade secrets and to take on local partners backed by your Communist government, I think that would be a good start in terms of changing the trade relations.
GIGOT: All right, thank you all.
When we come back, President Trump putting Obama-era fuel standards under the microscope as he vows to make Detroit the car capital of the world once again.
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TRUMP: We're going to ensure that any regulations we have protect and defend your jobs, your factories. We are going to be fair. We are going to be fair.
(END VIDEO CLIP)
GIGOT: Promising to make Detroit the car capital of the world again, President Trump on Wednesday said he will reassess fuel economy standards pushed through by the Obama administration that require automakers to achieve an average of 54.5 miles a gallon by 2025, a mandate that has caused U.S. carmakers to shift some of their production to Mexico.
We are back with Dan Henninger, Kim Strassel and James Freeman. And Wall Street Journal editorial page writer, Allysia Finley, also joins us, who covers this story for us.
So, Allysia, a good move by Trump or not?
ALLYSIA FINLEY, EDITORIAL PAGE WRITER: Yes. These were regulations that the Obama administration pushed through, finalized in his final days in office. It was first proposed in 2012. They were -- there was no way that they could actually be enforced without the price of cars increasing dramatically and more jobs shipped to Mexico.
GIGOT: Does the technology even exist now for carmakers to reach this standard by 2025?
FINLEY: No, it does not. So it would be a lot if new investment in electric cars.
GIGOT: Electric cars would be the way to have to go?
FINLEY: Likely, because the engine technology and the design just are not as efficient. Less than 1 percent of cars would even meet the 2022 standards, none the 2025 standards.
GIGOT: So let me ask a cynical journalist question. Did President Obama put these standards in place to take credit from his supporters for the anti-climate change meaning of that rule knowing that his successor would almost certainly have to re-do them?
FINLEY: Right, exactly. Do not underestimate the cynicism of the Obama administration. You can never go wrong there. But, yes, because the political and economic damage would be too great for any his successors. Either Hillary would have had to re-do them or -
FINLEY: Hillary Clinton would have had to re-done, too.
GIGOT: Really? How has this driven production to Mexico?
FINLEY: Because it's not economical to produce these small cars it the U.S.
GIGOT: Profit margins are too small.
FINLEY: Right. Right. Exactly. And it is squeezing the carmakers profit margins. And this is hurting union workers who are entitled to profit sharing agreements and are squeezing the carmakers' profit margins.
GIGOT: So politically, do think possibly some Democrats could get behind this?
FINLEY: I think you can get Democratic support, even though it is not necessarily needed. It is just a regulatory process. You could see Democrats in Congress, yes.
GIGOT: Dan, are you -- this is something that Donald Trump promise.
GIGOT: It is not easy though. Because they have to put through the rulemaking, as Allysia says. It will take maybe a year or something like that. And then they will get sued in court by the environmental groups.
HENNINGER: Yeah, it will not be easy, but understand, the CAFE standards were initiated by Congress in 1975, a long time ago, in the response to the Arab oil embargo of 1973 to '74. The idea that we would use less gasoline and become less dependent on the Arabs. Those conditions have changed completely. The United States does not have to depend on Saudi Arabian oil anymore.
Secondly, there's virtually no country outside the United States that has anything like the CAFE standards. And you can see Donald Trump making the argument, why are we putting ourselves at a disadvantage with this sort of thing trying to do hit the impossible goal of 54 miles per gallon and putting our workers out of work, as Allysia has just been described.
GIGOT: But, Kim, the answer to that is climate change, right? That is what -- the environmental groups say climate change is so big a problem, so looming a threat that you have to have these standards to drive the automakers to electric vehicles, otherwise they will never do it.
STRASSEL: You just put your finger on everything that was wrong with the Obama economy for the last eight years. Well, maybe not everything. There were more things, too.
But if you are going to be driven by this idea of a yet unknown horrible consequence coming down the road, and a science that people are viewing as a religion, then the economy is going to come second.
Look, what I love about this story is that Donald Trump put his finger on why we really do lose jobs. We do it because of the high cost of regulation in this country. He likes to complain about businesses going down to Mexico. The do so they can compete, not because they are anti- American. So if you want to bring them back, you cut these regulations. And if he does more this across government, that is how you get a thriving economy.
GIGOT: All right.
We have to take one more break. When we come back, "Hits & Misses" of the week.
GIGOT: Time now for our "Hits & Misses" of the week.
Kim, start us off.
STRASSEL: Paul, federal prosecutors serve at the pleasure of the president. And it is customary when a new president comes to town for holdover prosecutors to voluntarily and graciously resign. Instead, we were subjected this week to the spectacle of the now-former New York federal prosecutor, Preet Bharara, tweeting out that he had been fired and leading to another round of stories critical of Donald Trump. If we know anything about Mr. Bharara, it is that he is ambitious. This was probably more about paving the way for a future elected office, but nonetheless, a miss more unprincipled politics.
GIGOT: Yes, we should call him Governor Bharara from now on.
FREEMAN: Paul, this is a hit to Warren Buffett, Berkshire-Hathaway's CEO, who we learned this week is really the world champion, the greatest of all time in tax avoidance in the history of business. Last week, during the presidential campaign, he released his tax returns and challenged Donald Trump to do the same. Thanks to a leak this week, we learned that Donald Trump paid more than 20 times in 2005 what Mr. Buffett, who's much wealthier, paid in 2015. So you can think of the greats in other fields, Michael Jordan, Joe Montana. Tax avoidance, Warren Buffett's the best there ever was.
FINLEY: This is a miss to Democrats in California who have proposed exempting teachers, public school teachers from paying income tax. Now they've done this on the pretense that there's a teacher shortage. However, thousands of teachers in California are getting warnings that they could be laid off principally because pension obligations are too high. But there is no teacher shortage in California. The real problem is there aren't enough good teachers.
GIGOT: All right, Allysia.
HENNINGER: I'm giving my miss to the great debate over whether the Russians did something to somebody in the election of 2016. Time to wake up. The Justice Department has just indicted four Russians, including two from their intelligence services, for stealing up to a billion accounts from Yahoo! users. This means that not only perhaps that the Clinton campaign get hacked, the Russians are stealing accounts from all of us.
GIGOT: And those guys will probably never face a court of law in the United States.
HENNINGER: Three of them aren't here.
GIGOT: All right.
And remember, if you have your own hit or miss, be sure to tweet it to us, @JERonFNC.
That's it for this week. Thanks to my panel. Thanks to you for watching. I'm Paul Gigot. Hope to see you right here next week.
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