Debunking Democrat myths on the GOP tax reform plan

This is a rush transcript from "Journal Editorial Report," December 2, 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.

Another big step forward in the Republican effort to overhaul the tax code, with the Senate passing tax cuts and jobs act by a vote of 51-49 after a last-minute scramble to bring all but one Republican holdout along. Mitch McConnell calling the early morning vote a great day for the country.


SEN. MITCH MCCONNELL, R-KY., SENATE MAJORITY LEADER: It's been 31 years since we have done comprehensive tax reform. We have an opportunity to make America more competitive, keep jobs from being shipped offshore, and provide substantial relief to the middle-class.


GIGOT: Joining the panel, Wall Street Journal columnist and deputy editor, Dan Henninger, columnist, Mary Anastasia O'Grady, columnist and Manhattan Institute senior fellow, Jason Riley, and columnist, Kim Strassel.

Mary, 51, 52 votes, not always sure they were going to get them, what turned the tide in the end?

MARY ANASTASIA O'GRADY, COLUMNIST: Using a seasonal metaphor, you heard of the Christmas tree, there were four or five Senators who were holding out, and I think Mitch McConnell very masterfully addressed concerns of each of them by giving them small presents to put under the tree or on the tree. So you have Susan Collins, who gets her $10,000 property deduction, property tax deduction, medical expense deduction increase. Ron Johnson really wanted something better for small.

GIGOT: Senator from Wisconsin.

O'GRADY: Yes, for small businesses. And a quite generous deduction for businesses. Each of those things were enough to bring 51 Senators on board.

GIGOT: Classic legislating. Not pretty, let's be honest. Buying of votes with policy.

But why did this succeed where the effort on health care failed?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: The sort answer is this succeeded because of the effort on health care failed.


GIGOT: Quiet desperation?

HENNINGER: This was the Republican Party on the brink. The possibility of failure on the tax reform bill was unthinkable. This party would have been washed up if they had failed on these two major pieces of legislation. What are they there for if they had not passed this bill. So I think they've got the winds at their backs. They reversed all the dire predictions have diminished because they passed this. They'll probably go to conference and get a bill out of that. I think they're going into 2018 looking a lot stronger than they did a month ago.

JASON RILEY, COLUMNIST & SENIOR FELLOW, MANHATTAN INSTITUTE: I think one of the most important things Mitch McConnell accomplished was preserving the best parts of the reform, the corporate side of this.

GIGOT: Twenty percent corporate rate down from 35. Jason, I have to tell you, a year ago, would you have believed they got a 20 percent corporate rate?

RILEY: I would not. It was despite efforts by some Republicans to want to water down that side of it. People like Marco Rubio and Mike Lee want to put in an expensive tax credits that do nothing for growth. And what is worse, to water down the corporate tax rate reduction to give those freebies away. It is impressive what Mitch McConnell did. And if they push this over the finish line, Republicans will show that they can govern, and they'll have something to run on next year, which, let's face it, they need to --

GIGOT: Kim, what are the perils going ahead? There has to be a House/Senate conference. It will go back to both bodies with a final bill for a vote. What are the big risks here going into the conference?

KIM STRASSEL, WASHINGTON COLUMNIST: The good news is a number of provisions that are exactly the same in the Senate and House bill, like that 20 percent corporate rate. What you have differences on, for instance, when some tax breaks sunset, when they expire. The Senate had to sunset a number of them because of the rules to get this through, the Byrd Rule. That makes it easier because -- they are kind of bound by Senate rules, so the House has to swallow a little bit of that. But there are other things, for instance, the House version only has four tax brackets. The Senate version has seven. The question of state and local income tax deductions. Right now, they're the same but will there be push back to increase that allowance. The difference in pass-through income for small businesses. The Senate version is more generous. They got things to work through, but the sense of palpable relief when it passed the Senate is a good sign that people feel this would be an easier lift that initial bills in the House and the Senate.

GIGOT: One I would add, Mary, is the estate tax repeal, the death tax repeal. In the House, it's repealed totally, the Senate, no. Both of them will probably compromise on doubling the exemption for the death tax from $5.5 million to $11 million. But it won't be revealed.

O'GRADY: Right. That is an important conversation to have because this whole tax reform is about getting capital into the market. There are too many people, I think, on the Republican side, who keep talking in terms of jobs and middle-class tax cuts. This is --

GIGOT: We want jobs.

O'GRADY: It is fine. But we want jobs with free-trade, too. But what you do when you do this tax cut and deploy capital in the market as you create wealth, you don't know how that wealth is going to be allocated in the market after that. You have to allow the market to do that. The messaging from Republicans has to be this is about making the country wealthier.

GIGOT: What's the worst part of the bill?

HENNINGER: The worst part of the bill is some of the provisions snuck in there for Susan Collins, such as medical deduction, things like that. But we call this cats and dogs, Paul. This is the way tax bills get done and you got to do these things to get the best parts of the bill and so far they are achieving that.

O'GRADY: The worst part is the $1 million mortgage deduction. That is scandalous.

GIGOT: That's still in the Senate bill. The House cuts to half a million dollars. I don't know if that will stay.

Still ahead, Democrats pull out all the stops in an effort to block the GOP tax overhaul from reaching President Trump's desk by year's end. We will look at the biggest criticisms being offered by tax-cut opponents, next.



SEN. CHUCK SCHUMER, D-N.Y.,SENATE MINORITY LEADER: The tax bill will balloon the deficit by at least $1.5 trillion.

SEN. BERNIE SANDERS, I-VT.: And now we have a bill that raises the deficit by $1.4 trillion.

SEN. ELIZABETH WARREN, D-MASS.: The nonpartisan Congressional Budget Office says this bill be tack on $1.4 trillion to the debt in the next 10 years.


GIGOT: Democrats voicing this week voicing concerns that the Republican tax form plan will bust the budget and add to the federal debt. It's just one of the talking points the left is using in its effort to block Republicans from getting a bill on Donald Trump's desk by Christmas.

Earlier, I spoke with Tax Foundation president, Scott Hodge, about the arguments against tax reform.


GIGOT: Let's take these issues one by one. First, the Joint Tax Committee's report, a so-called dynamic analysis that said it is going to increase -- the tax reform would increase the economy by a minor amount, 0.8 percent, and that would only get back one third of this $1.4 trillion. What do you think of that?

SCOTT HODGE, PRESIDNET, TAX FOUNDATION: The good news is the official scorekeepers on Capitol Hill say this is a pro-growth tax bill that will generate additional economy and revenues. But I think they were conservative in their estimates. And when we use our Tax Foundation model, we find the bill is far more pro-growth and delivers far more revenues to bring down the overall cost of the plan.

GIGOT: Your argument, that would raise -- your model, raising more than $1 trillion quite comfortably --

HODGE: Right.

GIGOT: -- over 10 years. What is the biggest difference between the assumptions in your model and assumptions in the Joint Tax Committee's?

HODGE: The joint committee uses a closed-economy model, assuming the United States is a closed economy. So anytime the government runs deficits that that crowds out private borrowing, raises interest rates and adds to the borrowing costs and slows the economy. We have an open-economy model, assuming the global capital markets won't be affected by a little bit of additional government borrowing, and so that is why our models prove a lot more growth.

GIGOT: What about the argument about the deficit, that it will increase the deficit by that amount, and it's in the growth estimate, which I understand it's the closed-economy model, which is a crucial point you make. But what about the growth impact of cutting the corporate rate like the bill proposes, expensing immediately at 100 percent? You guys give more growth credits than do a lot of other models.

HODGE: We think capital matters. And taxes on capital matter the most. Capital is the most sensitive factor in the economy because it is so mobile. So when you lower the cost of capital, you increase the amount of investment in the economy, which raises productivity, wages, living standards. That's all good for economic growth. So those are the most positive aspects of the bill. Unfortunately, they are the least politically popular, but they're the most pro-growth elements.

GIGOT: Well, who wants to give a tax break to corporations, a so-called tax break.

HODGE: Right.

GIGOT: On the other hand, if you get the economy growing, everybody will benefit from the growth that follows it.

One of the other complaints you hear, particularly from the Democrats is about equity and distribution. That this, in fact, is, in its tax cut, for corporations and for the pass-through businesses, a tax cut for the rich. As you look at the distribution table, is that accurate?

HODGE: We have to understand the U.S. tax code is extremely progressive already. The top 1 percent of taxpayers pays a greater share of the tax burden than the bottom 90 percent combined. Over the years, and Congress has passed these child tax credits and other tax credits that have knocked millions of people off of tax rolls at the bottom, so the only people left paying taxes are the wealthy. Almost, by definition, anytime you try to cut taxes across the board, to some extent, it will benefit the rich.

GIGOT: I am getting e-mails from people I know in Illinois and California and New York, and I hear them saying, my taxes are going up under these bills because they are getting rid of the state and local tax deduction. These are relatively well-off, upper-middle-class taxpayers but most of them are Republican voters. And they are saying is, my taxes are going to go up after this bill because there's no real cut. As you know, there's no cut at all in the top rate, income tax rate in the House bill, and only a one percentage point cut in the Senate tax bill. So they say, I am going to pay hundreds, tens of thousands of dollars more on income. That sound plausible to you?

HODGE: It is possible. If you live in a high-tax area, with high property taxes and a state with high income taxes, you may pay more. And in an odd sort of way, these plans make the tax code even more progressive, which is funny to hear Democrats complain about this being a tax cut for the rich, when eliminating state and local tax deduction is one of the more progressive tax plans you can do.

GIGOT: It belies the argument this is a tax-cut for the donor class, so- called Republican donors. They are the ones complaining about it, at least that I hear.


HODGE: I know. And that has caused consternation in the Republican caucus, especially for Republicans that are in blue states. But those are very isolated cases. The vast majority of people will get a tax-cut. They aren't affected by the state and local tax deduction. And they will be beneficiaries at the end of the day.

GIGOT: So net on net, looking at all things considered, you think good corporate reform, much less high-quality individual reform. But is it still worth passing?

HODGE: It is. This is a pro-growth tax plan. The corporate cuts are the most import elements in this. They will make us -- the economy grow, but also make the U.S. more competitive. That is the key at the end of the day.

GIGOT: All right, thank you, Scott. Pleasure to have you here.

HODGE: Thank you.


GIGOT: Still ahead, former Trump national security adviser, Michael Flynn, pleading guilty Friday to lying to the FBI. What it means for the president and his administration, when we come back.


GIGOT: Donald Trump's former national security advisor, Michael Flynn, pleads guilty in federal court Friday to lying to the FBI about his December 26 conversations with then-Russian ambassador, Sergey Kislyak. Flynn disclosed he is cooperating with the special counsel's office, as highest-ranking current or former White House official to be caught up so far. President Donald Trump tweeting earlier, quote, "I had to fire General Flynn because he lied to the vice president and the FBI. He has pled guilty to those lies. It is a shame, because his actions during the transition were lawful. There was nothing to hide."

We are back with Dan Henninger, Mary Anastasia O'Grady, Jason Riley, and Kim Strassel.

Dan, why did he turn?

HENNINGER: Paul, there would be several reasons for it. I might say I don't think any of them had much of anything to do with the central issue of collusion.

First of all, I suspect Mike Flynn was essentially broke. Very expensive to defend yourself against a federal prosecutor. He's been in the military his whole life and I think he just had run out of money.

Secondly, it looks like he did lie to the FBI. That is a felony. And for whatever reason he said these things to the FBI, that remains a mystery.

Thirdly, there may have been other problems for Mike Flynn, like his relationships with the Turkish government and some of the work he had done for them.

GIGOT: So larger charges --


HENNINGER: Larger charges, might have exposed him. And his son, who was working in the company as well could have been a target of Mr. Mueller. Part of the deal may have been that he got his son a set aside in all this.

So Mike Flynn -- it's a tragedy. He had a distinguished career as a public servant for 30 years, and now he faces the prospect of going to prison for six months.

GIGOT: Kim, your sources are telling you that James Comey, former FBI director, told the House Intelligence Committee in March that his agents decided General Flynn had not lied about those meetings, and yet now the FBI is saying he did. Do you know what changed?

STRASSEL: That is what makes this very interesting, Paul. What they are saying is he lied about is the nature of the conversations he had with the former ambassador and whether he had a follow-up call. When FBI agents interviewed him, there was reporting at the time, and James Comey, in a private briefing to the House Intelligence Committee, said his agent did not believe Flynn was lying, that he had forgotten these conversations, what was discussed. So the fact this is changing makes a strong case that, as Dan said, he's simply trying to cut a deal to forestall being hit with larger charges. There's a good question of whether he did lie or not.

GIGOT: But it is clear, Jason, he is being held to basically provide information going up the chain.

RILEY: Yes, exactly. This looks like Mueller is methodically going about his business here. It looks like he has flipped someone close to Trump's inner circle. And it doesn't look like he is anywhere near done with this, Paul.

GIGOT: So who --

RILEY: -- this is not a big development.

GIGOT: It looks like, Jared Kushner, the president's son-in-law, is the senior transition official cited in the court document as somebody who talked to Flynn when he was talking to the Russians.

Mary, that looks to me like he is targeting Kushner for some kind of similar charge.

O'GRADY: Yes, but the idea that he flipped, that he committed a crime and is now having to confess to it, he was talking to the Russians during the transition. There's nothing wrong with that. He shouldn't have lied about it, or maybe forgot. We don't know. But obviously --

GIGOT: It's an admitted lie now, so it will be a crime on the record.

O'GRADY: Right. But it all happened during the transition, so it was completely fine what he did. And the idea that they will smoke out Kushner because they were planning on how they would deal with the Russians once Donald Trump got into office, it doesn't seem like there's much there.

GIGOT: That's the key point. This happened after the election, Dan.


GIGOT: This is about things that happened in the transition. As our colleague, Homer Jenkins, put it, he lied about a non-crime.

HENNINGER: Yes. Let's keep something in mind. Lying to the FBI is a crime. A prosecutor can indict you for that. Robert Mueller's mandate from Deputy Attorney General Rod Rosenstein is not simply to look at collusion, which is not a crime, but to find evidence that federal crimes were committed. A lot of what we have been talking about through this is not a federal crime.

GIGOT: Whoa, whoa, whoa. I understand that, but this whole thing was supposed to be about the collusion, or the Trump administration working with the Russians to defeat Hillary Clinton.

O'GRADY: But during the campaign.

GIGOT: Yes. What evidence do we have that that happened? Any?

RILEY: We don't. No. We have no evidence.


GIGOT: I'm looking for it in the documents. I don't see it.

RILEY: What we know is we think Mueller had something bigger on Flynn, and that was the threat. I will go forward with this, General, unless you come to us and start talking. That is the concern, I think, if you are in the White House, and that's why he took this plea deal.

GIGOT: Is there anything you see, Kim, on the collusion front or during the campaign that shows in these documents?

STRASSEL: Absolutely not. By the way, if you want the cynical view, and several experts point this out, what was the Obama Justice Department doing interviewing Flynn anyway. What he was doing, the conversations they were having were entirely legal. Moreover, it's highly likely, in fact, we can assume the Russian ambassador was being monitored by intelligence agencies, so they knew the contents of these conversations. If you want to be cynical, you can suggest that those agents were going there specifically trying to catch Flynn in something like this.

GIGOT: There may be something more he knows. We will find out. But our job is to wait for the facts.

When we come back, the sexual misconduct bonfire that's engulfing the media and Hollywood is now spreading to Capitol Hill. We look at how party leaders are responding, next.


REP. NANCY PELOSI, D-CALIF., HOUSE MINORITY LEADER: Congressman Conyers should resign. Zero tolerance means consequences for everyone. No matter how great the legacy, it is no license to harass or discriminate.


GIGOT: The sexual-harassment bonfire now threatening to engulf Capitol Hill. That was Nancy Pelosi Thursday calling on fellow Democrat John Conyers to resign amid multiple allegations of misconduct. The minority leader also calling on first-term Nevada Democrat Ruben Kihuen to step down after he harassed an aid during his 2016 campaign. This, as more women come forward to accuse Minnesota Senator Al Franken of groping and unwanted kissing.

So, Kim, a week ago, or 10 days ago, Nancy Pelosi was saying John Conyers was an icon who deserved due process. Now she is saying he needs to resign. What's changed?

KIM STRASSEL, WASHINGTON COLUMNIST: I think what changed his Democrats have been caught up in the very words that Mrs. Pelosi used, zero tolerance. That is what they have claimed all along needs to be the standard. As we talked about before, there are problems with that because you are convicting people before the facts come out, before the Ethics Committee has done an investigation. But given what that standard has been for them on campuses, they felt they need to apply it uniformly to anyone accused of anything, and this is where you end up, with calls for resignations.

GIGOT: That make it a tough situation, Mary. It means, if you are accused, and if you settle something, no matter what the facts might be, you are a suspect, and she's saying you are out.

MARY ANATASIA O'GRADY, COLUMNIST: Let's separate a case where someone is accusing a congressman and there is no process, and these cases we're talking about where there was money paid to do a settlement. You can say, well, OK, nobody wanted to deal with it, so they paid the money to move on. But whose money is it? It's taxpayer money. Whether it is local, from the district, or federal, it's taxpayer money.

And something else that is disturbing, which is some of these payments seemed to have been serial. It wasn't just a one-time payment, but a number of payments. If you have someone in one of these offices who is a problem, you can just shut the whole thing up by paying a bunch of money, and the problem continues, I don't think that's right.

GIGOT: Jason, there is also a Republican involved. Blake Fahrenthold now apparently -- reportedly settled the sexual-harassment claim by his former communications director for $84,000 out of this Office of House Compliance.

JASON RILEY, COLUMNIST & SENIOR FELLOW, MANHATTAN INSTITUTE: Yes. And other Republicans, a Senate candidate in Alabama, Roy Moore, was accused. The president of the United States has been accused.

I think as the public has become aware of the situation in Congress, talk about what Mary was saying, they are shocked that this process is in place, that it's so difficult for these women to come forward, that these payments can be made in secret and no one can know about them. And a lot of the public is saying this is outrageous, we want transparency.

GIGOT: Let's bring in a group called the voters, Dan.



GIGOT: Take Roy Moore, OK, everyone knows these accusations. He is close in the polls. If he wins, what deference do we owe voters to say, you elected him anyway?

HENNINGER: I think Roy Moore is actually five or six points up in the polls. And there's members of the Senate who said they would vote to recuse the seat of Roy Moore if he's elected


HENNINGER: -- by the people of Alabama. There are competing interests here, the people of Alabama. They got the whole story and they're still going to vote for Roy Moore. And that I think would be true of some of these other people who have been accused.

Look, there is a process. The Constitution says the Congress in both Houses can expel a member by a two-thirds vote. That happened almost to Bob Packwood, of Oregon, in the '80s after a Senate Ethics Committee determined that he harassed women. And before they could expel him, he resigned.

Kim makes the right point. The Senate Ethics Committee has got to get involved in these cases, so we have some standards of proof before you simply say an accusation should expel a person.

GIGOT: What do you think about the question about the voters and what we owe them?

O'GRADY: I agree without any standards of proof, you can't go around accusing people. But I think that the Congress should have a certain ethical standard that, whether the congressman is popular or not, and decide the point. If there's an assault or power use over a subordinate, that's a crime. That should be dealt with, even if it's a popular politician.

RILEY: Speaking of popularity, Democrats have not come out -- Chuck Schumer, the leader of the Democratic Party in the Senate, has not come out asking Al Franken to resign.

GIGOT: Right.

RILEY: That may have something to do with him being popular with the donor class on the Democratic side. It may have to do with how closely divided the Senate is. But what is happening to Conyers has not happened to our Al Franken.

GIGOT: Kim, do you think Al Franken, with the pressure on John Conyers to resign, do you think the pressure for Al Franken to resign will grow?

STRASSEL: I do think it's going to grow. But, again, this is a question where there needs to be a process in place like the Senate Ethics Committee. And I think it's important, too, that -- what our Franken is accused of is different than, say, what John Conyers in the House has been accused of. And not suggesting they both may night be bad, but the degree does matter. And right now, under the standard Nancy Pelosi is putting forward, zero tolerance, they all get lumped into the same category.


STRASSEL: To get to the voters, really quick, the important point here is we do need more transparency in these settlements, only to give voters more information about what happened as they go to the ballot box.

GIGOT: You think this should be transparent if they're made. They need to say what was involved and how much was paid out?

STRASSEL: Yes. The reform going through the House has some good elements and bad elements. Transparency is probably one we need to think about seriously.

GIGOT: All right.

Still ahead, North Korea tests its longest-range missile to date, setting up alarms in Washington and across the global. But with some saying a State Department shakeup is in the works, how will the Trump administration respond?



GEN. JAMES MATTIS, DEFENSE SECRETARY: North Korea launched an intercontinental ballistic missile. It went higher than any previous shots they have taken. It is a research-and-develop effort on their part to continue building ballistic missiles that could threaten everywhere in the world.


GIGOT: North Korea testing a new intercontinental ballistic missile this week, one reportedly capable of hitting all of the continental United States. The launch was the first since September, and came despite repeated warnings from President Donald Trump, who told reporters at the White House Tuesday that the U.S. will handle the situation. The heightened tension with Pyongyang comes amid reports this week that Secretary of State Rex Tillerson could exit the administration as early as January.

Earlier, I spoke with Anthony Ruggiero. He's a senior fellow at the Foundation for Defense of Democracies.


GIGOT: Any doubt at all that this new missile they tested -- and they have shown some photos since the launch -- can reach the United States?

RUGGIERO: Thanks for having me. Yes. North Korea has been working on this ballistic missile program, at least a long-range program since 1998. This is another step in the process. It looks like the missile - it's larger than the ones we have seen before. It looks like it can reach the United States. The question is whether the reentry vehicle, which would have a nuclear weapon in it, could survive reentry. I think they will do more tests to ensure that would happen.

GIGOT: They have to miniaturize the warhead and make sure of that as well. But is there any doubt they will get there, given the pace of their progress?

RUGGIERO: No, there's no doubt. The other thing to keep in mind is that North Korea showed us their ballistic missiles in their April parade that are probably larger than this one. So they're continuing to work on this program

GIGOT: Rex Tillerson, the secretary of state, called for more sanctions to come down on North Korea here. Do you think that is the answer, just press North Korea even more with sanctions and other pressure?

RUGGIERO: Right. There's a lot of people now who are suggesting sanctions have not worked, a pressure campaign by the Trump administration, where we only had 10 months of it, really. Ten years of failed policies by Republican and Democratic administrations, and now we are only willing to give 10-months-worth of robust sanctions. Look at the other options. Diplomacy, North Korea doesn't want to talk to us. So what exactly are we going to talk about? The military option comes with several disadvantages. So we have to look at the options clear eyed. Sanctions is the best one now to give us whatever leverage we can attain with North Korea.

GIGOT: It sounds like you would agree with those who said while we have had sanctions on North Korea, they haven't been the same kind of sanctions, severe sanctions that were against Iran, for example. And we haven't also really put a lot of pressure on China and Chinese firms, companies that trade and do business with North Korea. Would you agree with that?

RUGGIERO: That's right. We are nowhere near the types of sanctions we put on Iran. I worked on both of those programs in the government, Iran sanctions and North Korea sanctions. And some of the things that these Chinese banks are doing to aid North Korea, sanctions evasion, they would have been punished very severely through the Iran sanctions program. So until we get to that point -- I think the Trump administration has gone the furthest of any presidential administration to target China and to go after its nationals and companies. They've held back from going after additional banks and they actually held back on some of the sanctions for issues they put forward. They need to really unleash the power of the Treasury Department to go after both Pyongyang and Beijing.

GIGOT: I guess the response to that would be, wait, if we go after Chinese companies like that, then we'll lose the cooperation of the Chinese that they are promising. I guess you have to make a judgment about when the Chinese are leading you on to string you along, like some people think they have been for years, and when you might get cooperation.

RUGGIERO: The Chinese have been leading us on over a decade. At some point, we have to smarten up and realize that the Chinese are always going to nibble around the edges and they'll make a big deal about closing this bridge or targeting these North Koreans. They will never go after their own nationals unless they're forced to do so. And the United States is the only one with the authority to force them to do that.

GIGOT: What about the defense side of things? Some have suggested, including us, redeploying tactical nuclear weapons to the peninsula in the south, not because we want to use them, but as a demonstration of seriousness and saying, look, you do anything here to us, North Korea, this is the kind of response you'll get. Deterrence, in other words.

RUGGIERO: I guess we could do that. I'm not sure that it arguments the terms that much. The North Koreans understand that we have the nuclear triad that can launch a nuclear weapon against North Korea. I think the disadvantages of doing that, feed into North Korea's propaganda, probably outweigh the benefits of doing that. At this point, we have to stay away from symbolic moves and move towards harsh sanctions. And increasing our military exercises would be one way to do that, especially in the interdiction phase, where we talk about how to interdict North Korean missiles, missile defense. Other things like that, I think, would be more practical on the defense side and not as symbolic.

GIGOT: OK. Thank you, Anthony Ruggiero. Good to have you here.

RUGGIERO: Thank you.


GIGOT: When we come back, a not-guilty verdict in the Kate Steinle murder case reigniting the debate over illegal immigration and sanctuary cities. So could it emerge as a big issue in the midterm elections?


GIGOT: A San Francisco jury Thursday found an illegal immigrant not guilty in the July 2015 death of Kate Steinle. Jose Ines Garcia Zarate was acquitted of murder and involuntary manslaughter charges as well as assault with a deadly weapon. President Trump, who made cracking down on illegal immigration a cornerstone of his presidential campaign, called the verdict disgraceful and promised the issue will hurt Democrats at the ballot box. Tweeting quote, "The jury was not told the killer of Kate was a seven-time felon. The Schumer/Pelosi Democrats are so weak on crime they will pay a big price in the 2018 and 2020 elections.

We are back with Dan Henninger, Mary Anastasia O'Grady, Jason Riley and Kim Strassel.

So, Jason, explain this verdict to me. There were several charges they could have convicted him on, but they did convict him on any.

RILEY: A lot of Americans are scratching their heads over this. The president is characterizing this as outrageous. That is exactly right. How can someone fire a stolen gun, kill someone and not at least be convicted of involuntary manslaughter.

GIGOT: The defense said he fired it accidentally and it ricocheted and hit Kate Steinle. Is that --

RILEY: A stolen gun.

GIGOT: Well, OK, we don't know for sure it was stolen. He claims he just found it on a bench, I think, somewhere. OK. But they must've bought his story.


RILEY: Perhaps, they did. Perhaps, they did. I don't understand how. They had several charges they could have brought, first-degree murder, secondary murder, involuntary manslaughter, and they didn't find any of them sufficient. But I think, ultimately, Paul, sanctuary city politics are what killed Kate Steinle in addition to this man who pulled this trigger.

GIGOT: Explain.

RILEY: It is outrageous, the policies these cities have in place to not cooperate with federal authorities when they request local authorities hold someone until they get there. Because they have issues with this person. San Francisco has a noncooperation policy in place. And it remains in place today. If he were picked up, if he were being held, he would be released again. They have done nothing to change it. Moreover, the state of California has made it a state policy that moves more towards the San Francisco policy.

O'GRADY: But, Jason, the feds are not off the hook. The feds had him, his sixth violation of coming into the country illegally. They had him. Instead of deporting him, they sent him to San Francisco to face a marijuana charge that was 20 years old, and then San Francisco let him go -- California let him go. But that was a mistake. But what about the INS. What about --


RILEY: It was the policy in place. And it remains in place.


O'GRADY: It is a federal policy. It's not all on the --


GIGOT: Right now, he will be deported I think under the current administration, Dan.

HENNINGER: I think Mary put her finger on it. San Francisco let him go, which is to say, the San Francisco jury made a political decision. This is nullification. If you cannot convict this guy for involuntary manslaughter, the phrase has no meaning.

GIGOT: When you say that, you think it is politically motivated.


HENNINGER: I think it was politically motivated.


HENNINGER: The city of -- the people of San Francisco are in a battle with Donald Trump that is as intense as Trump's battle with the White House press corps over immigration. That is what Jason is describing, a city that will not comply with federal law. You get a San Francisco jury and they go, we are not convicting this guy.

GIGOT: Kim, let's talk about the impact of this kind of decision on the politics of immigration. Because for those of us who are for relatively open immigration, and I am, and I think you are, too, this is a terrible verdict, because a lot of people who look at this verdict say, oh, there you go. People who might be open to immigration say, we can't enforce our borders adequately because he keeps coming back. And then when we catch somebody, we can't convict them if he commits a crime.

STRASSEL: Yes, it definitely loses public sentiment. Because the view becomes, look, if we can't get even rid of somebody like this guy, multiple felony convictions, deported numerous times and just let out on the streets, our system is broken, and we can't afford, from a crime perspective or any other perspective, to do comprehensive immigration reform.

On the San Francisco thing, too, I don't think a lot of Democrats are thrilled, as Dan said, that San Francisco is taking this stand, because they are worried about public sentiment. And that they're on the wrong side of it. That's why you even have people like Dianne Feinstein, California Democratic Senator, complaining about San Francisco's policies.

GIGOT: If I were a Democrat, I would speak up about this. If you want to deal on DACA, the DREAMers, why not speak up and say, you know what, this is not right, and this is not related to how we should think about immigration, and we will enforce those laws and we're going to cooperate. I think you are likely to get an easier chance getting a consensus for legal immigration and legalizing the DREAMers.

O'GRADY: Yes. This is a tragedy on so many levels. But one of the big problems is it is going to be lumped in by people who don't like immigration as an example of


O'GRADY: -- an example of what happens when you have very lax immigration policy and where most of the immigrants to this country are law-abiding contributors to the nation.

GIGOT: Yes. And, Dan, we have this DACA debate later.

HENNINGER: Later in the week. It will be there in the budget. The Democrats can use it as leverage. But I think the leverage has weakened as a result of this.

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


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

Kim, start us off.

STRASSEL: Well, Paul, I don't want to spend a lot of time criticizing Donald Trump's tweets because there's only so many hours in a day. But I think we should all make an exception for when he causes international incidents, which is what he did when he retweeted these anti-Muslim videos by a fringe group in the United Kingdom. When British Prime Minister Theresa May, her office criticized him, he then personally attacked the prime minister. Racial -- the religious question is tough enough without him elevating it and undermining one of our biggest allies in this fight.

GIGOT: All right, Kim, thanks.


RILEY: This is a miss for James O'Keefe and Project Veritas, which attempted to place a fake story with the Washington Post about Senate Candidate Roy Moore impregnating a teenager and then paying for her abortion. I think these tactics by O'Keefe not only undermine serious investigative journalism, but they also trivial sexual assault. And I'm glad the "Washington Post" called him out on it.

GIGOT: So they wanted "The Post" to report the false story?

RILEY: Yes, exactly.

GIGOT: All right.


HENNINGER: I'm giving my miss to the Washington Metro system. This is the Washington transportation system, which said it was going to refuse to run ads on the sides of buses from the Catholic archdiocese of Washington, which said, "Give the perfect gift," and showed some shepherds against a dark sky. Why? Because Washington Metro said this might promote religion or religious belief. Jesus, Mary and Joseph weren't even in the ads. Just a bunch of shepherds. This is where the ethos of "happy holidays" get you. I will tell you, Paul, Santa is next.


GIGOT: All right, thank you, Dan.

Remember, if you have your own hit or miss, be sure to tweet it us at JERonFNC.

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

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