This is a rush transcript from "The Journal Editorial Report," February 13, 2010. This copy may not be in its final form and may be updated.

STUART VARNEY, FOX GUEST HOST: This week on the "Journal Editorial Report," Sarah Palin's prospects, fresh from the tea party performance. Some say she doesn't have with and it takes to be president, but do liberals mock her at their own peril?

And the big climate crackup. The cap-and-trade bill gets buried in the Washington. And the U.N.'s climate panel comes under fire for some faulty findings.

Plus, the end game in Iran. What's next for that self-described nuclear state? An internal revolution? An Israeli attack?

Welcome to the "Journal Editorial Report." I'm Stuart Varney, in this week for Paul Gigot.

First up, Sarah Palin's prospects. Fresh from headlining the first ever national tea party convention, Palin told "Fox News Sunday" host, Chris Wallace, last week, she isn't ruling out a run for the presidency in 2012.


SARAH PALIN, FORMER VICE PRESIDENTIAL CANDIDATE & FORMER ALASKA GOVERNOR: I would. I would if I believed that that is the right thing to do for our country and for the Palin family, certainly, I would do so. I think that it would be absurd to not consider what it is that I can potentially do to help our country.


VARNEY: This, despite a new poll showing her unfavorable ratings up and her qualifications for president being called into question.

Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; columnist and deputy editor, Bret Stephens; and senior editorial page writers Joe Rago and Colin levy.

All right, Dan, the poll suggests that we should count her out. Should we?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: I don't think so, Stuart. If you take the polls on the west coast or the eastern seaboard, there's a lot of negativity about Sarah Palin and a lot of disdain. But if you go out into the heartland of America, she does gather a lot of support. And if the heartland still matters to the Republican Party, I think instead of simply deriding her, they've got to sit and figure out what is her appeal out there in the middle of the country. And I think, by and large, it's that she represents opposition to the status quo. She's fighting the machine, whether it's the Democrat or the Republican. And it taps into what's going on with the tea party right now. We're in an environment that is just ripe for mavericks, third-party candidates like the tea party. And Sarah is beading into that feeling right now.

VARNEY: Joe, you're probably the more negative on Sarah Palin running for the presidency. But you'd have to admit that she is the freshest and brightest new face in the Republican Party, wouldn't you?

JOE RAGO, SENIOR EDITORIAL PAGE WRITER: Sure, but what does that say about the Republican Party?



RAGO: If you look at the poll, President Obama's health care plan is slightly more popular than Sarah Palin. And I think the Republicans need to be rejuvenated and revived in it. And I'm not sure that Sarah Palin is exactly the person to do that.

VARNEY: You're not sure? She's a fresh bold new face out there. She's got enormous buzz.

RAGO: Right. But in terms of the political philosophy and intellectual ideas that they need to rebound, I'm not sure she has that.

BRET STEPHENS, COLUMNIST & DEPUTY EDITOR: Yes, look, the freshest, maybe the brightest, I'm not so sure. Yesterday evening, I spent time reading a collection of Reagan's personal letters. And she sometimes compared — she's been compared to Reagan. I think she'd like to compare herself to. And when you read Reagan you see here is a man whose mind kind of moves from thought to a set of ideas, from, you know, discrete thoughts to a set of ideas of political philosophy. In Palin's case, you get the sense of somebody moving from cliche in ideology and then kind of trying to struggle to get the thought behind it. I think that's the problem that a lot of Americans and an awful lot of conservatives have with her. It's not that they disagree with her per se. It's the sense, the distinct sense that if you asked her a follow-up question, she wouldn't have an idea how to answer it.



VARNEY: Oh, Colin, get into that.

LEVY: Wait. I have to break in here, too. I think the important thing to realize is that the Sarah Palin phenomenon is much more dangerous to Democrats than it is an opportunity for Republicans. And I think you really saw that this week with this whole issue over her writing on her hand. I think there's an enormous number of people out there who really identify with her. And when liberals think they've got a gotcha moment, when they sort of see her behaving as what they see as a minor leaguer, they're putting themselves in jeopardy. Because a lot of people actually like her, because she seems like a minor-leaguer. And they identify with her. And so they start to see these insults as direct insults to them.

VARNEY: Well, Colin, what about her position with the tea party? I mean, is that — she's not leading it, but she's almost as a leader of that movement.

LEVY: She has. I think what's happening here is she's become a touchstone for a portion of the Republican Party. And I think that's more important than whether or not her presidential aspirations actually could or would amount to anything right now. And, you know, what she really has found with the tea party is that whether or not she's exactly on board with what they represent, the people who are supporting the tea party are the same people. It's coming from the same place as people —

VARNEY: Dan (ph), go ahead.

STEPHENS: Well, I think it's right that it's easy to take Palin because the people who hate her are, themselves, so dislikable. And I think Colin was absolutely right. The business of writing a few lines on her hand, well, what on earth was wrong with that? It's better than reading scripts from a teleprompter.

VARNEY: And you challenged her intellectually. You said she's maybe not the kind of person who would answer a follow-up question.

STEPHENS: Yes. I think that's right. And I think that's —

VARNEY: That's a mocking in a sense.

STEPHENS: I mean, Chris Wallace asked her, what about the 5.7 percent growth in the fourth quarter. She didn't even know how to answer — answer that. She sort of touched on unemployment, but there was no sense that she understood that well, this is kind of what you bottom out —

HENNINGER: But as Colin suggests, she's part of a larger movement. The new Sarah Palin. Her name is Debra Medina. She's in the Republican primary for governor in Texas. She's representing the tea party. She is this close to passing Kay Bailey Hutchinson in the polls out there. Kay Bailey Hutchison is a sitting Senator, a senior figure in American politics, and she's about to sink below the tea party candidate, a woman named Debra Medina.

VARNEY: Yes, but —

HENNINGER: What's going on is something stronger than mere personalities, Stuart.

VARNEY: Debra Medina has failed to repudiate the 9/11 truthers and she's catching a lot of grief because of that. Should she —

HENNINGER: She's still rising in the polls. This is not about 9/11 truthers. I think politics can sometimes get very simple. This movement is about spending, political spending and spending in Washington. Most of the tea party people started in opposition to that.

VARNEY: Joe, the tea party movement, the most vibrant political movement of the last generation?

RAGO: Well, since the 1980s, certainly. I think it is important historically. And one of the things that that — to harness that into politics, it needs the right leaders. And I'm not sure that Sarah Palin is exactly the right person for job.

VARNEY: Colin, I give you the last word.

LEVY: Yes, she doesn't need to be a leader here. She just needs to be something of a party mascot, and just by doing that, she'll help shape the direction of where the party's going to go.

VARNEY: All right.

When we come back, the climate crackup. Here at home, chances of a cap-and-trade bill passed in Congress this year slipped from slim to none. And across the pond, the U.N. climate chief lashes out big time after critics question some faulty findings.


VARNEY: Next up, the climate crackup. Here at home, chances of a climate bill or climate change bill passing Congress this year appear slim. And some key Democrats are revolting against the administration's back-door efforts to regulate CO2. Abroad, the U.N.'s climate chief is under fire for some faulty findings and he is lashing out at his critics.

Joe, first of all, here at home. In Congress, all things climate change, dead?

RAGO: Not dead, but definitely dying. Climate change has been significantly downgraded in President Obama's rhetoric. And one reason is people are starting to realize the reality of what this would impose on the economy. The administration wants to plow ahead anyway, using the Clean Air laws that were written decades ago and never meant to apply to carbon.

And what you saw this past week in Congress is two very powerful Democratic committee chairmen, Ike Skelton, the head of the Armed Services Committee, and Collin Peterson, the head of Agriculture, who introduced a bill to say we do not want the administration doing this without Democratic consent. If we're going to do something about climate change, you should use debate and persuasion to make your case.

STEPHENS: There are two tracks here. One is that the economic costs of climate change legislation are beginning to be understood by the political class. They understand that this isn't just something that can be easily dealt with.

But just as importantly, the scientific case for global warming, the global warming alarmists, is beginning to crumble. The U.N.'s Intergovernmental Panel on Climate Change, the so-called IPCC, has been under assault because they've made a number of remarkable errors in some of their headline crisis projections. They were claiming that the Himalayan glaciers would melt by 2035. They claimed that global warming would destroy 40 percent of the Amazon Rain Forest also or could do it in just a few years. And those turn out to be totally bogus. It turns out that the IPCC relies, for studies — relies for evidence from studies from environmental pressure groups.

So people are beginning to say, hang on, not only is this expensive, but we're not really so sure just what kind of crisis we're dealing with, if any crisis at all.

VARNEY: I have to bring up the caliber of the man who leads the U.N. panel.

Dan, I want your reaction to this. In response to critics, Rajendra Pachauri, the chairman of the climate panel, he said this — he's responding to critics now, and he is a co-winner of the Nobel Peace Prize. Listen to this: "They are people who deny the link between smoking and cancer. They are people who say that asbestos is as good as talcum powder. I hope that they apply it to their faces every day." This is the chairman of the U.N. climate panel, a co-winner with Al Gore of the Nobel Peace Prize. What do you make of this, Dan?

HENNINGER: I make it, that he's very angry and very upset. And he's upset because things were going his way. They thought this was a slam-dunk. They had built global warming into something like a Save the Whales campaign. Everyone was supposed to be for it.


Al gore wins the Nobel Prize, does this great movie, "An Inconvenient Truth." We're discovering the most inconvenient truth is what they want to do is really, really expensive.

And I've always thought, in the United States, there's always been one interesting benchmark when it comes to the price of energy, the price of gasoline. Anytime it would rise up to $3 and go over it, the American people would push back and start slamming whoever was in office. You cannot let gasoline get to be that high. But that's what they're insisting, that all carbon prices rise to save the planet. And the American people and the political system are saying, whoa, that's too expensive.

VARNEY: Worldwide, is the whole idea of climate change mitigation and all of those laws and the rearrangement of the global economy, I think that's in full retreat. Isn't it?

STEPHENS: No, I mean, I think that's right. And it's partially in full retreat because, for a decade now, the sort of leading climatologists have been telling us, this is settled fine, there's no debate about it. I mean Pachauri's rant gives you a sense of it. It's as obvious as the fact that cigarettes are bad for your health, et cetera. But in fact, there now are real questions about how this is being done. And since we're being asked to place this huge bets and pay this enormous price to deal with climate mitigation, people are naturally taking a step back and reevaluating the science.

And I think the more they look at the IPCC report, I am — I feel the more they're going to see just what a weak study it is.

RAGO: And one of their big mistakes was taking something that was extremely complex and very contingent and simplifying it down to unequivocal and settled. And the idea that something as massive and as huge and as raging as the earth's climate could be put into a five-page report, I mean, it's ludicrous.

VARNEY: But will President Obama be forced to retreat on the whole issue of global warming?

STEPHENS: I think that it now has gone to the — it's now become a kind of rhetorical trop. But as Joe pointed out, it suddenly became essentially a footnote in his State of the Union address.

But there is kind of a religion component to this that we can't ignore. There's an aspect of believe. It plays into the sort of fear of the end of the world, and the belief we have to change the way we live our own lives personally in order to save ourselves. That — that is a very powerful aspect to this debate. So I don't think you're going to see this disappear entirely, at least not for another few years.

VARNEY: Got it.

When we come back, the end game in Iran. What's next for that self- proclaimed nuclear state? An internal revelation? An Israeli attack? Our panel weighs in next.


VARNEY: And finally this week, the end game in Iran. Thursday marked the 31st anniversary of the Islamic Revolution there. And in a televised address, President Mahmoud Ahmadinejad declared Iran a nuclear state and says it has managed to enrich uranium at the highest level yet. Opposition protesters clashed with police in Tehran. And President Obama and the international community threatened a new round of sanctions. But what will ultimately bring down the regime?

We're back with Dan Henninger and Bret Stephens. Also joining the panel is editorial board member, Matt Kaminski.

Bret, do you think — I mean, February 11th came and went. Has the green revolution, the green movement there peaked?

STEPHENS: I think that may be the case. At least it may be true that it's been effectively crushed. You saw that the regime turned off cell phones, Google access, Twitter, all of the electronics means by which the movement had been able to network, organize and come out in large numbers. There was a huge regime show of force in Tehran which, of course, they're able to do because they're the people that have the guns.

But this is — we may — the bigger problem is that this is a bit of a rudderless ship, the green movement. They know what they're against. They're against Ahmadinejad. Many of them are also against the regime in total. But they're not quite sure what they're for. It's a fairly fractious movement. So the regime may have gotten the upper hand. And this was a huge missed opportunity by the Obama administration.

VARNEY: Has the green revolution peaked?

MATTHEW KAMINSKI, EDITORIAL BOARD MEMBER: I would say no, actually. I think I would just agree with Bret here that this is really — the fact that it's rudderless and — but it has one goal, which is, here you have a very young country, an increasingly better educated country, unified by one thing, they don't like Ahmadinejad and they hate this regime. And I don't think you can judge one-day's turnout and declare it over.

VARNEY: So you think they could come back in force on the streets and maybe win?

KAMINSKI: Look, I think long-term though, saying in the long run Iran will be fine, it's always a question of how long is that long run. We saw in December, there were huge protests. The regime wasn't ready. The regime was ready for this day. This is basically an asymmetrical battle. And they're stronger —

HENNINGER: Look, they're hanging people. The Soviets crushed Czechoslovakia in 1968 and Hungary in 1956. If you want to kill your population, you can crush the revolts. That doesn't mean —

VARNEY: So is it a stark voice, internal regime change or an Israeli attack? As stark as that?

HENNINGER: Well, I don't know if I'd put it that stark. I think our biggest problem at the moment is the incoherency of the Obama administration's policy toward Iran. It's not clear what they want to achieve, whether they want to arrive at negotiation, or the negotiation of Iran standing down from its nuclear program is the goal, whether regime change is the goal. The Iranians themselves don't know what the target is. So the West is always moving the goal posts. And how are they supposed to achieve any progress under those conditions?

VARNEY: Well, do you think that the Obama administration could learn to live with and accommodate a nuclear Iran?

STEPHENS: I think they'd like to — they'd like to do that. I think a lot of voices in the administration that argue that a nuclear Iran can be contained just as we've contained other unsavory —

VARNEY: Yes, but that's another end game, isn't it?

STEPHENS: — nuclear powers. But even realists, people like Richard Haass, on the Council of Foreign Relations, are making the point that, if you allow Iran to go nuclear, you'll see other Middle Eastern regimes also — some of them unstable, some of them unsavory — also going nuclear. So what the question the administration really has to ask itself is, is it prepared to live with a nuclear Iran? I would argue it shouldn't be. But is it prepared to live also with the nuclear Saudi Arabia, a nuclear Egypt, nuclear Turkey, plus a nuclear Israel, a nuclear Pakistan, each with daggers drawn at one another. That's seems to me an inherently destabilizing situation.

KAMINSKI: But I'm not sure they're going to have a choice here. I think, you know, Israel, in looking at this, and they're much closer and they feel much more threatened. And for them, they do have the red line. And they may do something. And we may not fully control what they do. and worse, what they do may not even work if they do bomb Iran. So I think, you know, that Obama can look at the last six months and say diplomacy has failed. That was probably a mistake. And he's probably also realized that our problem in Iran is not necessarily the nuclear program as much as the regime. The reason that we can live with Pakistan as a nuclear state is because, for all the dysfunctions, it's a friendly regime that's not threatening to blow up Israel.

VARNEY: But we could see President Obama turn around and say, look, I've been talking for a year, got nowhere, and I've been mocked, and now I'm going to show you, now I'm going to attack you, now I will help Israel. I mean, it's that way out of the bounds of possibility?


STEPHENS: Yes, you're playing fantasy football here.


I mean, what —

VARNEY: Really?

STPHENS: Congress has passed a series of comprehensive — gasoline, what amounts to gasoline sanctions on Iran that could be effective. The administration has been fighting it, has been fighting a rear-guard action, making the case that they prefer to have sanctions against a few figures in the RIGC. And a few days ago, we saw the Treasury Department sanction a few Revolutionary Guards affiliated companies. All of these, they are fine as far as they go. But they're not going to persuade the regime that the future is better assured without a bomb than with one. And that's the only way sanctions could work.


HENNINGER: Well, let's put it this way. Listening to this discussion, I guess what is needed is for the United States and the West to get out ahead of Israel because, in these discussions, you always default to the Israeli solution, which is a strike, which will happen if the West doesn't do anything. I think the United States has to make it clear that a military option is on the table. That would at least give the Israelis some comfort that they don't have to go it alone, but it has to be credible.

VARNEY: Do you think Obama, President Obama would do that, make it clear a military option is on the table? Would he do that?

KAMINSKI: Well, unfortunately, I can't read his mind. But, you know, what they have now, they have the advantage of the French are on our side on this, the Western world is on our side. The Russians are unknown. The Chinese are sort of making noise that they don't want to go ahead. But this is the moment. This is the most important issue for Obama coming up in this year.

VARNEY: Coming to a head?


VARNEY: Got it.

We have to take one more break. And when we come back, our "Hits and Misses" of the week.


VARNEY: It is time now for our "Hits and Misses" of the week.

Dan, you're first.

HENNINGER: Stuart, Spain needs Ronald Reagan. Why? Because the Spanish people recently found out how much money air traffic controllers in Spain make. The average air traffic controller there makes $513,000 a year.


HENNINGER: 135 of them make $830,000 a year. Doctors and lawyers there have quit their jobs to become air traffic controllers, I kid you not.


The Spanish people recently found out this was going on, and they have gone nuts. So the socialist government has decided they're going to try to push the air traffic controllers' wages back towards the E.U. norm, which is something like $200,000 a year.

VARNEY: $200,000.


Matt, follow that.


KAMINSKI: It's going to be hard. Here's a miss to New York prosecutors for going after one Haisong Jiang. Now the name may not mean anything to you, but he is the Chinese graduate student who gave the kiss felt around the world, by sneaking under the security barrier at Newark Airport last month to accompany his girlfriend to the gate. This security breach, as you know, set off a panic in the airport. Thousands were inconvenienced. But the TSA guy, who was supposed to guard that post, had walked off his post. And with everything else going on, I think we should give a break to the love sick student.

VARNEY: I've got20 seconds for you, Colin.

LEVY: I've got a miss for Washington, D.C., Mayor Adrian Fenty, whose plan for the city's recent double blizzard seems to be to wait for spring. For a lack or shortage of snowplows here, the businesses were paralyzed and streets were blocked up and people stranded in their home. So if there's one silver lining, at least the federal government was closed.


VARNEY: Excellent "Hits and Misses" for the week, but I think the prize, I think, goes to Dan.

Remember, if you have your own "Hit or Miss," please send it to us at jer@FOXnews.com.

Thanks it for this week's edition of the "Journal Editorial Report." Thanks to my panel and to all of you for watching.

I'm Stuart Varney. Paul Gigot, back next week and we hope to see you then.

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