TRANSCRIPT

Can Republicans make a deal on historic tax overhaul?; Trump targets regulations in effort to revive coal industry

Former Bush CBO Director Douglas Holtz-Eakin weighs in on 'Journal Editorial Report'

 

This is a rush transcript from "Journal Editorial Report," April 1, 2017. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

A Supreme Court showdown is brewing on Capitol Hill with votes on President Trump's nominee expected next week. The Senate Judiciary Committee is scheduled to vote Monday on Neil Gorsuch, with Republicans now planning for a full Senate vote by the end of the week before lawmakers leave for a two-week Easter recess. And as Democratic opposition to Gorsuch continued to mount and the threat of a filibuster continued to grow, Senate Majority Leader Mitch McConnell, vowed this week that he will be confirmed one way or another.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL, R-KY., MAJORITY LEADER: We are going to get Judge Gorsuch confirmed. There will be an opportunity for the Democrats to invoke closure, we will see where that ends. It'll be really up to them how the process to confirm Judge Gorsuch goes forward.

(END VIDEO CLIP)

GIGOT: Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; Washington columnist, Kim Strassel; and editorial board member, Colin Levy.

So, Colin, so far, only two Democratic Senators say they'll vote for Gorsuch, Heidi Heitkamp of North Dakota, Joe Manchin of West Virginia. And most of the rest of the Democrats, not all declared, but the vote count against him is mounting. What's the Democratic strategy here to defeat Judge Gorsuch?

COLIN LEVY, EDITORIAL BOARD MEMBER: Well, the Democratic strategy here is to somehow portray Republicans as the ones who are radical forever considering breaking the filibuster. But we have to look, Paul, we have to get back to basics here. What the Democrats are doing is crazy. They are proposing a filibuster of a nominee who is as mainstream as they come. This is a judge who had 2700 opinions, 98 percent of those opinions were unanimous. Of the times he dissented, half of those were against Republican colleagues and half against Democratic colleagues. There's nothing controversial here. You have a crazy situation where it's pure politics the Democrats are playing. There's nothing in his record and nothing in his testimony that -- that they should be getting so worked up about. It's a play to the base.

GIGOT: If you have 52 Republicans voting for Gorsuch, and so far that looks like what you'll get, plus two Democrats, that's 54, that's a majority of the Senate. What the Democrats are saying, wait a minute here, it's not a 50-vote threshold, we now want 60 votes, and you have to meet the threshold. How -- historically speaking, is that a threshold that is actually been invoked?

LEVY: No, of course not. Democrats are coming out and say, oh, look, there was a filibuster once upon a time in 1968 against Justice Abe Fortus. That, Paul, was not a partisan filibuster. It was bipartisan filibuster. He was already on the court and it was a situation where he was picked -- they basically picked on him because of some specific things that were going on with the White House, some specific policy issues.

(CROSSTALK)

GIGOT: He was appointed -- LBJ was going to elevate to chief justice.

LEVY: Right, exactly. You know, these situations are not at all analogues. If we go now to have a 60-vote standard for Republicans, you know for sure that Republican -- Democrats are going to be sure to switch it back to a majority standard when they're in control.

GIGOT: All right, so, Kim, what about this -- this angle here? I think Chuck Schumer is trying -- the majority leader in the Senate is trying to basically get handful of Republicans to say, we are so intimidated about breaking a filibuster, the so-called nuclear option that would make it a 50-vote threshold for Supreme Court nominee, that we want to cut some kind of a deal that either blocks Gorsuch or will confirm Gorsuch, but any future nominees will have to meet that 60-vote threshold. Is this likely - - are the Republicans thinking about this?

KIM STRASSEL, WASHINGTON COLUMNIST: Well, if they did, it would be the dumbest thing that they have ever considered. Look, right now Republicans are totally positioned to get Neil Gorsuch on the court without having to do any deals with the Democrats. There's a talk of which McConnell invoking the nuclear option, which means that they would change the rules so that they could not have cloture, not have a filibuster for Supreme Court nominees anymore, and all they need to do as Republicans is stick together, 52 of them, that's what you need to change the rules. Now, there may be a temptation for a few moderates, but there's a lot of pressure on folks like Susan Collins and others to -- to move with mitch McConnell and not go down that road. When you have institutionalist like John McCain and Lindsey Graham saying they'd be happy to go nuclear, it's harder for other Republicans to think about a deal.

GIGOT: If you did a deal like that, Dan, what you'd be saying is, for future nominees, let's say, OK, we will let Gorsuch go through, he has impeccable credentials. But any future nominees, and if there's an opening in June or later, get 60 votes, that would make Chuck Schumer almost co- president for the purposes of nominations because it would basically mean that anybody on Donald Trump's list of 21, that he proposed during campaign as nominees, couldn't get confirmed?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: No, they would be off the list. This is a ploy to put someone left of center on the court -- the only people that would acceptable to the Democrats. They have made that very clear. And so once again the Democrats are paying the price for what Harry Reid, by blowing up the filibuster for appellate court nominees. I mean, the filibuster --

GIGOT: In 2013.

HENNINGER: In 2013 he did that. The Supreme Court ruled in 1982 that the Senate had within its power to do that, except that any motion like that itself could be filibustered. Harry Reid is the guy who changed the filibuster that has been used since 1837. It's the Senators reason for being. It's what distinguishes them from being more than House members. But he did that, and now we are at this point, and now the stakes are so high, both for Neil Gorsuch and President Trump and for the Republicans, that there is no option if the Democrats insist on going down the strategy, to blow it up.

GIGOT: Does he get confirmed, Gorsuch?

HENNINGER: I think he absolutely gets confirmed. There's no way that three Republicans could go along with Chuck Schumer's strategy and survive.

GIGOT: Colin, what do you think? Will he get confirmed? How many votes?

LEVY: I think he gets confirmed. I think it's going to be close. I'm not going to make the vote call but I think he's going to get confirmed.

GIGOT: Kim, do you agree?

STRASSEL: Yeah, he will probably get 54.

(LAUGHTER)

GIGOT: Thank you.

When we come back, the president targets the Freedom Caucus following the GOP's health care failure, so is there still a path forward on repealing and replacing ObamaCare?

(BEGIN VIDEO CLIP)

PRESIDENT DONALD TRUMP: I know that we are all going to make a deal on health care. That's such an easy one. So I have no doubt that that's going to happen quickly. I think it will actually. I think it's going to happen.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

GIGOT: President Trump lashed out this week at the conservative Freedom Caucus following the GOP's failure to advance a bill to repeal and replace ObamaCare. The president tweeted Thursday, quote, "The Freedom Caucus will hurt the entire Republican agenda if they don't get on the team and fast. We must fight them and Dems in 2018."

House Speaker Paul Ryan later said he sympathized with the president and indicated that an agreement on health care was not off the table.

(BEGIN VIDEO CLIP)

REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: I understand the president's frustration. I share the frustration. About 90 percent of our conference is for this bill to repeal and replace ObamaCare, and about 10 percent are not. That's not enough to pass the bill. We are close. What I am encouraging our members to do is to talk to each other until we can get the consensus to pass this bill.

(END VIDEO CLIP)

GIGOT: We are back with Dan Henninger and Kim Strassel. Wall Street Journal editorial board member, Joe Rago, also joins the panel.

Joe, you have been reporting the story. Is this possible to revive this bill?

JOE RAGO, EDITORIAL BOARD MEMBER: Well, I feel a little bit like it's the scene in "Dumb and Dumber" where he goes, "So you're saying there's a chance?"

(LAUGHTER)

It's not impossible, they could reach consensus but it's very unlikely. And the reason these talks are going on is that, I think, a lot of members of the Freedom Caucus didn't realize or didn't think through the implications of what they were doing, how it harmed the Trump agenda, kept ObamaCare in place, and failed to have any kind of spending reform early in this presidency.

GIGOT: They claim to be fiscal hawks but this took a trillion dollars out of federal spending and now that's back in.

RAGO: It's back in. You are giving huge tax cut. And there are all kinds of problems with this. This was a conservative bill that the conservatives killed for being insufficiently conservative but this is right -- this is what they wanted to do on health care for the entire Obama presidency.

GIGOT: Right now, they have to basically get the moderates in the middle who were put off by some of the changes that the Freedom Caucus insisted on, and the Freedom Caucus agreed to some things, otherwise they don't have a majority in the House.

RAGO: Yeah. The real problem here is that the original bill was what a compromise looks like. The moderates didn't like this or that element but they would have been there in the end. When you pulled it so far to the right, it just alienated the caucus and blew up a very fragile coalition.

GIGOT: They were close, four to five votes.

RAGO: Four or five votes, 10 votes. I mean, you heard Paul Ryan say 90 percent of the caucus was there. I think it might have been a little bit higher.

GIGOT: Did you -- Dan, you were critical this week in your column of the Freedom Caucus, and they defined themselves as the only conservatives who are really conservative. And Trump went after them. Is that a smart strategy for Trump to do that?

HENNINGER: It looks like it created more division. One of the members of the Freedom Caucus, Justin Amash of Michigan, tweeted back that it didn't take long for the swamp to drain Trump. That was nice.

GIGOT: But Justin Amash never voted for anything.

HENNINGER: Right.

GIGOT: That's an exaggeration. But his modus operandi is always to vote no.

HENNINGER: I know. But I'm trying to point out the divisions that actually exist inside the Republican caucus. Congressman Chris Collins of New York, head of Tuesday Group of moderates, said they will never, capitol N-E-V-E-R, with the Freedom Caucus. These two groups of people are at each other's throats. I would say I think the Freedom Caucus now constitutes a third party inside the Congress. It's a faction. It's like Italy.

(LAUGHTER)

They have set themselves outside. There's nothing they can do that's positive. All they can do is block things from happening.

GIGOT: And yet, Kim, without them, let's say, they have 30 members, we don't know exactly how many they have, that's enough to kill any bill because they only have a majority of 22. Is -- is Trump smart to go after them or is this going to make them dig in and blow up everything?

STRASSEL: Well, the evidence so far is that his pounding on them a little bit seems to be having some sort of impact. You've had a couple of members of the Freedom Caucus who have left the caucus or criticized the caucus itself for going down the road that it did go down. The president has been tweeting about individual members who have largely been silent, not been going back. Justin Amash is a bit of an outlier there.

The pressure needs to be put on them, and that's the best way to putting them in a situation where it becomes clear that they're holding the Republican Party hostage themselves.

(CROSSTALK)

STRASSEL: And to see if their own -- their voters are happy with that.

GIGOT: So Donald Trump talked about maybe working with Democrats on this, Joe. What would it take to get Democratic cooperation on a health care reform? Are we basically - the starting point would be to take repeal off the table?

RAGO: Yeah, I think it would be taking repeal off the table. And the Democratic priority is expanding government control of health care. So, for example, one-third of U.S. counties are down to a single insurer.

GIGOT: Under ObamaCare?

RAGO: Under ObamaCare. If that situation persists and they get down to zero, I think a lot of Democrats would say, just send Medicaid in. So expand Medicaid.

GIGOT: OK, so expand from 58 to age 65, which would be hugely expensive. That would be their offer to compromise.

RAGO: Right. Just look at Medicaid. Kansas this week, the conservative Kansas legislature voted to expand Medicaid. They figured the status quo is going to persist, so why not take the free money. So this has really been a very fiscally and policy damage, a lot of it has been inflicted here.

GIGOT: So you think it's off the table for the last two years, briefly, Dan, for the next two years?

HENNINGER: I say it's 80 percent off the table. This was such a big loss that I think they will at least try to get it back.

GIGOT: All right.

When we come back, Republican leaders vowing to move ahead with their agenda, but is rewriting the tax code harder after the GOP's health care defeat?

(BEGIN VIDEO CLIP)

RYAN: We want this to be the last tax season Americans have to put up with this broken tax code.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

GIGOT: Vowing to go move ahead after last week's health care defeat, Republican leaders are setting their sights on a historic tax overhaul, something that can't come soon enough for many Americans, with 73 percent of voters in a new FOX News poll saying they want to see tax reform this year.

Economist Douglas Holtz-Eakin was the director of the Congressional Budget Office under President George W. Bush. He's now the president of the American Action Forum.

So welcome back, sir. Good to see you.

DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION FORUM & FORMER DIRECTOR, CONGRESSIONAL BUDGET OFFICE: Good to see you. Thank you.

GIGOT: So does the health care failure make tax reform harder or will it concentrate Republican minds and say, we have to get something done, let's go with this?

HOLTZ-EAKIN: I think it's a little bit of both, to be honest. It certainly sent a bad message to the tax reform caucus because what it really showed is that a small group of individuals can act as holdouts and bring things to a standstill. The reality of tax reform is there's always winners and losers. This is a lesson to the losers of just how a holdout can stop it. That's the bad news.

The other part that you mentioned I think is very real. Republicans know that they have to go into 2018 with some victories that shows they know how to govern or they'll be in bad electoral shape. This should concentrate their attention in a very big way.

GIGOT: You think -- you're in favor of tax reform. You think it would had to the growth --

HOLTZ-EAKIN: Absolutely.

GIGOT: -- in the near term and long term. How much are we talking about if it's tax reform done right?

HOLTZ-EAKIN: If you did a serious pro-growth tax reform that was very discipline and didn't have a whole bunch of goodies for people, you can add half a percentage point to the growth rate of this economy.

GIGOT: That's year after year after year?

HOLTZ-EAKIN: It accumulates in ways that boggle the mind. The difference between the growth rate of England, say, and the growth of the United States over periods of centuries was about two-tenths to three-tenths of a percentage point, and in the process, the U.S. became the largest global economic power and the United Kingdom was no longer. Those are the differences that really matter.

GIGOT: Well, here is the other thing. We are at a stage -- you know this -- we're at a stage of this expansion, a long expansion, over seven years, where it's going to be hard to get a lot of growth out of the labor market because, you know, we have full employment in some parts of the country. The consumer has been doing fine but he probably can't get a lot more. So If you are going to get growth, you have to get it from increased business investment and capital expenditure. Do you agree with that?

HOLTZ-EAKIN: Yes.

GIGOT: And that's what you're talking about when you're talking about tax reform, is kicking off that capital expenditure?

HOLTZ-EAKIN: Yes, you have to get the investment in innovation, in capital, in structures, and with that comes greater productivity growth. That's been a big Achille's heel in the economy. That's the route to higher real wages. That's what's needed to kick-start the acceleration back into the consumer sectors. So everything should be focused on getting better business investment performance in the United States and tax reform is the number one thing in that list.

GIGOT: All right, the corporate tax rate in the U.S., 35 percent, we know it's the highest in the developed world. The House bill gets it down to 20. Trump has talked about get to go 15. What do you think is the top rate you need to get it down to in order to really have an impact on growth?

HOLTZ-EAKIN: I think if you get it to 25 percent, you get it to the middle of the pack in the developed world. To get it to 20 and 15 would be enormous success. The House plan, as taken at face value, would establish the U.S. as the place on the globe that has a single tax, not a corporate tax and a value-added tax, but a single tax at low rate of 20 percent. That would be an enormous competitive improvement for our companies.

GIGOT: You mean a single business tax at 20 percent. You still have the individual tax, unfortunately.

(LAUGHTER)

OK, so but 25, you can live with that or you don't get as big a growth kick?

HOLTZ-EAKIN: Right. Right. No one should settle for anything above 25. We need a serious reform that gets us down to 20 or 15 that also changes the structure of the tax. It should be very pro-investment. The House, for example, has immediate write-off of all tangible and intangible investments. A fantastic provision. We should be territorial. We are the last country trying to tax water companies around the globe. We should tax them in the United States. There's some really substantial steps that need to be taken to get us back just to being competitive.

GIGOT: Some people are saying because of the issue that you raised, tax reform has a lot of losers and a lot of people are going to oppose it, they're say, you know what, we are not going to get the through reform that you're talking about, so we may have to settle for a tax rate cut and not a really big reform that takes out a lot of the junk in the tax code that. That hurts the growth impact, does it not?

HOLTZ-EAKIN: It does, because we've got a lot of provision that have nothing to do with growth and are really just in there as special favors to different industries. You really have to clean that stuff out and get capital flowing into its most productive use in every way.

GIGOT: The individual tax rate would go down to 33 percent under the House bill. Is that adequate?

(CROSSTALK)

GIGOT: I mean, a lot of your scholarship has an on-growth effect of lower tax rate. 33 percent is still pretty high.

HOLTZ-EAKIN: 33 percent is still pretty high. What the House did is have a separate provision that says if you have business income report it on individual income tax, sole proprietorships or partnerships of some sort, that income would be taxed at a 25 percent rate. So they recognize that 33 is too high. They're trying to have a separate rate for business income.

(CROSSTALK)

HOLTZ-EAKIN: That's a very extraordinary step. We have never seen that before.

GIGOT: Yeah, but that leads the poor wage earner and salary person behind. It sucks, no?

HOLTZ-EAKIN: Yes, I completely agree with you. It would be better just to get the rates down. In a deal reform, the top rate on the individual side would match corporate rate. That's the kind of thing that we have done in the past.

GIGOT: Thank you very much, Douglas Holtz-Eakin. Thanks for being here.

HOLTZ-EAKIN: Thank you.

GIGOT: Still ahead, the Intelligence Committee opens its probe into Russia's election meddling as the House investigation descends into chaos. The latest on both, next

(BEGIN VIDEO CLIP)

SEN. RICHARD BURR, R-N.C., CHAIRMAN, INTELLIGENCE COMMITTEE: The public deserves to hear the truth about possible Russian involvement in our elections, how they came to be involved, how we may have failed to prevent that involvement, what actions were taken in response, if any, and what we plan to do to ensure the integrity of future, free elections.

(END VIDEO CLIP)

GIGOT: That was Senate Intelligence Chair Richard Burr Thursday at his committee's opening hearing on Russian interference in the 2016 election. Burr and vice chair, Mark Warner, pledging to work together and vowing to go wherever the intelligence leads them, even as a similar effort in the House has stalled amid partisan brawling. Democrats are calling on Devin Nunes to step down as chairman of the House Intelligence Committee after he viewed documents on White House grounds and then briefed President Trump before telling committee Democrats. White House officials reportedly aided Nunes in reviewing that intelligence.

We are back with Dan Henninger, Kim Strassel and Joe Rago. Wall Street Journal columnist, Bill McGurn, also joins the panel.

And so, Kim, you talk today chairman Nunes at length this week. What did he tell you about this story?

STRASSEL: Well, I think what's important that we understand about this story is that he went, he viewed these documents, and what they essentially proved, you have dozens upon dozens document that contain information about Trump transition officials. Some of the people's names in them are still masked, meaning, they are not outright called by their name in the reports, but the reports are written in such a way to make it clear what Trump transition people we were talking about. And these were wildly disseminated at the top levels of the Obama government. You could look at this and, in essence, what Devin Nunes has seen is evidence that the Obama administration was essentially spying on the incoming administration.

GIGOT: So there's really two sides of the investigation. The first side is, how did Russia meddle and getting to the bottom of that, and the Intelligence Committee is doing that. The second thing is that Nunes wants to put on the table is, was the administration, the Obama administration somehow -- how did it listen in on Michael Flynn, for example, the former national security adviser, when he was meeting with a Russian ambassador, and was that information, which is, as you say, supposed to be masked when it involves U.S. citizens, why was that so widely disseminated across the government that it could leak to the media. That's what he wants to focus on.

Is he saying that the Democrats in the House Intelligence Committee don't wanting to there.

STRASSEL: No, they don't want to go there because this is potentially criminal, what is going on. We have very strict rules about monitoring U.S. citizens. And then if you do incidentally, about minimizing the use of their names, making sure that they're protected from exposure and having -- this only way we can trust the government on spying on people. Democrats are concern that if this continued to be looked and there was enough information high enough up at the White House, that somebody may have broken some laws.

GIGOT: What about the issue who Devin Nunes sources were in the White House. Is that significant to this or does it matter?

STRASSEL: Devin Nunes has said that he got his information from intelligence officials. There's no reason not to believe this. "The New York Times" has a story that is thinly sources. We don't know where they got it from. But the bigger point is, every time we have a conversation about process, this is what the Democrats want to have happen, because they don't want to talk about the information that he actually found.

GIGOT: Where does this leave us, Dan? Step back on this. Does it mean the Democrats are succeeding with the media, delegitimizing the House probe, does that leave us with the Senate probe?

HENNINGER: It leaves us with the Senate probe. There's some hope there because in the first day of the hearings this past week, Senator Mark Warner actually said that he didn't think the Russian meddling favored one party over the other. It doesn't seem like a big deal, but in the context of what the Democrats have been saying, it is a big deal because the whole narrative has been that they only helped the Trump campaign. So I think it's possible that the Democrats on the Senate Intelligence Committee are actually going to try to find out what happened. But it's going to be so hard to push on that direction because 80 percent of the media narrative is to push the Trump campaign and presidency to the edge of the cliff on this story.

GIGOT: You, Bill, wrote about Jim Comey saying that he's more important than anyone else, because he's got -- he has investigative power and he's -- and the House Intelligence Committee folks, they're complaining that Comey hasn't been very uncooperative.

BILL MCGURN, COLUMNIST: Look, the problem that we have is that Jim Comey is in the position of determining the legitimacy of the Trump presidency, as I wrote about. An FBI director shouldn't be in that position.

I agree with Kim on this issue with Devin Nunes. It's insane that people are talking about leaks to Devin Nunes. He's the head of House Intelligence Committee. There's --

GIGOT: He has an oversight role --

(CROSSTALK)

MCGURN: He has an oversight role. Maybe he made some procedural mistakes. Look, there's an effort to discredit him, get him to recuse himself. Loretta Lynch did not recuse herself --

GIGOT: The former attorney general under Obama.

MCGURN: -- after she met with Clinton on a much, more serious matter involving her. This is an effort not to find out what Devin Nunes says.

Look, he's the only one in all of this who has been very specific. He's read reports, he has seen names, he actually hasn't gone too far. He doesn't even know whether this was incidentally collected, you know? He just knows -- he wants to find out was it that was collected. And he's also said it's not related to Russia or a criminal investigation. These are questions, and the storm is designed not to answer the questions. And with General Flynn we have -- he's seeking immunity, the one man a felony has been committed against, and everyone assuming he's guilty when we have evidence in the other direction. It's just crazy.

GIGOT: Briefly, Joe, should former General Flynn get immunity?

RAGO: If he's got something to say, I suppose.

GIGOT: Well, we don't want this to be basically a criminal investigation unless something really serious happened. We want to find out what happened. That would be the best contribution for our democracy.

All right. Still ahead, President Trump signs an executive order rolling back Obama-era energy regulations. What it means for the environment and the economy, when we come back.

(BEGIN VIDEO CLIP)

TRUMP: My administration is putting an end to the war on coal.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

TRUMP: With today's executive action, I'm taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations.

(APPLAUSE)

(END VIDEO CLIP)

GIGOT: President Trump Tuesday signed an executive order rolling back many Obama-era policies, including the 2015 Clean Power Plan that capped the amount of carbon dioxide that can be emitted from power plants, particularly those that burn coal.

Jeff Holmstead was the assistant administrator of the EPA under President George W. Bush. He joins me now from Los Angeles.

Welcome. Good to see you on the program. Thanks for coming in.

JEFF HOLMESTEAD, FORMER ASSITANT ADMINISTRATOR, EPA: My pleasure.

GIGOT: So do you think that the convention wisdom of the media is that this is President Trump repudiating President Obama's climate agenda. Would you describe it that way?

HOLMSTEAD: I think it's a fair characterization, but it's actually more than that. It really is focused on the overreach that we've had from the Obama EPA for the last eight years. And it's not just with climate change, it's dealing with a number of regulations that is actually making it very difficult to produce energy at least in some parts of the country.

GIGOT: Because the administration had a real focus, though, particularly on coal, and really any fossil fuel as opposed to renewables. That's where the Obama administration we wanted to favor renewables over fossil fuels. This goes back to leveling the playing field, is that fair?

HOLMSTEAD: I think that is fair. There was a particular focus on coal. There are dozens and dozens of regulations that is were targeted at anybody that uses coal, at people who produce coal. And so that was such a focus during the Obama administration that they're really turning it back to a level playing field not just for coal and natural gas and oil but also for renewables to make sure that there's an appropriate level of regulation.

GIGOT: One criticism I heard about this rule, and the claim by the president that he can revive the coal industry is, look, it's not just regulation that hurt coal but market forces because natural gas, fracking that has developed, new technology makes gas cheaper than coal to produce electricity and you really aren't going to be able to do that much to revive the coal industry.

HOLMSTEAD: Well, look, we believe in markets, and if it really is true that natural gas can outcompete coal, then that's how it should be. The problem is there's been heavy-hand of government that hasn't been the case. There's been so many thumbs on the scale especially for wind and solar and such an animus against coal. We are removing some of the government impediments that have made the competition --

GIGOT: Do you think coal can make something of a comeback?

HOLMSTEAD: I do. At this point, it is certainly true that companies are not looking at building new coal fire-powered plants for a variety of reasons. But when it comes to where we get our electricity from, without this -- without this regulatory overreach there will be more energy produced by coal than there would have been.

GIGOT: One thing that's happened in recent years is carbon emissions have declined in the United States, certainly as a share of electric output, and one of the reasons for that is natural gas because less carbon intensive than coal. Do you see that trend continuing that would accomplish some of the climate change agenda that so many environmentalists want without heavy-handed regulation?

HOLMSTEAD: Well, as you say, it really is clear that the market is driving significant reductions, and everyone I know in the industry does expect that to continue for ways into the future just because of the natural gas revolution and what we have been able to produce here in the United States. And this executive order from the president will actually remove some of the regulatory burdens on that industry as well.

GIGOT: One of the things that wasn't in the executive order was what the U.S. is going to do about the Paris Climate Change Accord that President Obama signed. There's a debate in the White House about whether to stay or leave. What's your advice to the administration?

HOLMSTEAD: Well, I'm not sure I'm the best person to be offering advice. There's certainly two sides to this. Some of the people say, look, Paris was complete nonbinding anyway. It was basically an aspirtional rule set by the president. So staying in doesn't have that big of an impact.

On the other hand, there are people who believe legitimately that just as a matter of constitutional law that was inappropriate for the president and the international community to specifically try to circumvent Congress in the way that he designed this treaty. I think it's objectionable on constitutional grounds.

GIGOT: President Obama committed the United States to an accord that was not committed to the Senate for approval of two-thirds of the Senate as the Constitution says treaties should be submitted. That's the problem.

HOLMSTEAD: Right. That's the problem. And so he acknowledges that he didn't commit the United States, although they certainly tried to portray it that way in the press, but it is not legally binding on the United States because it was not ratified by the Senate.

GIGOT: OK, all right. Thank you Jeff Holmstead. I appreciate you taking the time.

HOLMSTEAD: My pleasure. Thanks for having me.

GIGOT: When we come back, the Trump administration taking aim at so-called sanctuary cities. Is this latest move sound policy or enforcement overkill? Our panel debates, next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JEFF SESSIONS, ATTORNEY GENERAL: When cities and states refuse to enforce immigration laws, our nation is less safe. Failure to deport aliens who are convicted of criminal offenses puts whole communities at risk, especially immigrant communities in the very sanctuary jurisdictions that seek to protect the perpetrators.

(END VIDEO CLIP)

GIGOT: Attorney General Jeff Sessions this week urging so-called sanctuary cities to cooperate with immigration officials or risk losing funds. The move is the latest step by the Trump administration to crack down on the more than 140 jurisdictions in the U.S. that do not assist federal authorities in forcing immigration law. Sessions said Monday that state and local governments will now have to certify that they are not sanctuary cities when applying for $4.1 billion in Justice Department grants.

We are back with Dan Henninger and Bill McGurn. And Wall Street Journal columnist, Mary Anastasia O'Grady, also join us.

Mary, who has the legal upper hand in this fights between the cities and the federal government?

MARY ANASTASIA O'GRADY, COLUMNIST: I think the cities have the upper hand, only in the sense that federal appeals courts have ruled that if there's no warrant for the city to hold the individual and only what they call a detainer, then there's no obligation for them to -- to keep the prisoner or hand them over to ICE.

GIGOT: Even if they're illegally documented -- undocumented? I mean, illegal?

O'GRADY: Yeah, they just say you have to have a warrant, and if you only have to have a detainer, that's not enough.

GIGOT: This is an order to detain somebody who is undocumented?

O'GRADY: Right. Basically, the problem is that most of the cities are saying, look f he's wanted for homicide or, you know --

(CROSSTALK)

GIGOT: Serious violent crimes.

O'GRADY: In the case of New York, 170 serious crimes. For example, if he's a gang member, the cities say we have no obligation to hold them and they have released people like that.

GIGOT: States are sovereigns, cities have sovereignty. And the federal government cannot go in and say use square police resources for a federal law like immigration enforcement. On the other hand, the federal government is it really obliged, Mary, to send money to the cities?

O'GRADY: It's not obliged. And I think Donald Trump can win this in a political sphere not in the legal sphere. And he can win because the majority of Americans and even illegals living in the communities do not want these kinds of people in the streets.

GIGOT: Bill?

MCGURN: Yeah, I'm with Mary on that part. The states have some rights, the courts made clear they can't be totally drafted. I mean, the two parts that I enjoy about this is that the left is discovering states' rights for the first time, not really the cause that they have been taking --

(CROSSTALK)

GIGOT: The glories of federalism. Welcome aboard.

MCGURN: And part of the trade-off is you may not get the federal dollars, right, that may be a power that Donald Trump.

The larger thing is that my immigration solution is I want more people coming in but I don't want bad guys. And if we find bad guys, I want to send them out. And the real answer to all this is fix the law. And too many people, especially on the left, have -- would rather have nonimmigration solution where you clear up the status of people, and so forth, they rather have the issue. And in some ways that led us to where we are today because Donald Trump campaigned and I'm going to clarify.

GIGOT: Is that fair in the sense -- that I agree with some of the left and a lot of people on the right don't want immigration reform.

(CROSSTALK)

MCGURN: Barack Obama had eight years to put immigration bill and he didn't do it. This is what we are getting.

GIGOT: Well, is there a compromise here, Mary, that suggests, OK, cities and states really should cooperate with violent criminals, serious criminals who are illegals, but, look, we are not going to necessarily send to you somebody who commits a misdemeanor or caught with a driver's violation or something like that?

HENNINGER: It's going to be difficult because the cities and the federal authorities, ice, immigration service don't trust each other. The city thinks ice is going to overreact and grab anybody including people with minor offenses and not just felons. The police overreact and say we are not going to cooperate with that.

The big question whether cities like San Francisco and Chicago have, in effect, have become safe harbors for illegal immigrant felons.

(CROSSTALK)

HENNINGER: The one everyone talks about Ricardo Sanchez who murdered Kate Steinle. Ricardo Sanchez was deported to Mexico five or six times. He came back every single time. He said he went to San Francisco because he thought he would be safe from ICE because of San Francisco's laws on this.

GIGOT: That's appalling.

HENINGER: That's an appalling situation. You cannot have people like Mayor Rahm Emanuel saying they are not going to cooperate at all in helping you get people like Ricardo Sanchez.

GIGOT: Briefly, Mary.

O'GRADY: They're not addressing the main problem, which is criminality that Dan is talking about. Each side is trying to use this to appeal to their base. The Democrats are trying to say, you know what, the Republicans don't like you and that's good for them at the ballot box. And the Republicans are trying to appeal to their native base.

GIGOT: Thank you, Mary.

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

(COMMERCIAL BREAK)

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

Colin, start us off.

LEVY: Paul, this is a hit to Education Secretary Betty DeVos, who gave a great speech this week calling for an expansion of school choice. A report at the end of the Obama administration said that after spending about $7 billion trying to funnel money into low-performing schools, there were no significant academic improvements. So Secretary DeVos has a basically said we need to start looking at a broader range of options and empowering parents and stop apologizing for a system that is harming children it's supposed to serve.

GIGOT: All right, thanks, Colin.

Joe?

RAGO: Paul, a miss this week to Chelsea Clinton, who in a variety of interviews denied any intention of running for public office, and thereby denying me the pleasure of watching another Clinton lose another big election. You know, there's nothing like the entitled, unproductive kid of a politician to energize voters.

(LAUGHTER)

On the other hand, she didn't rule it out entirely, so maybe there's hope.

GIGOT: Oh, boy, kicking them when they're down.

(LAUGHTER)

All right, Mary?

O'GRADY: Paul, this is a hit for United Airlines, which last week decided to enforce its dress code for relatives and family members and employees who are flying for free on the airline. This caused a big stink because the -- an airline employee rejected two young people who came not wearing the proper attire. And I applaud United Airlines. As someone who travels always time, I think that civilization would be much better off if we started dressing like we used to.

GIGOT: All right.

Bill?

MCGURN: Paul, a miss to the naval academy for the political correctness that led Jim Webb, a graduate, a combat veteran, a Senator, to decline this year's Distinguished Graduate Award. The pressure came because he wrote an article against women in combat 40 years ago, and after the pressure, he decided to withdraw rather than risk a disruption. Terrible message to the officers-to-be.

GIGOT: All right, thanks, Bill.

Thanks to my panel and to all of you for watching. I'm Paul Gigot. We hope the see you right here next week.

Content and Programming Copyright 2017 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2017 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.