Al Qaeda's comeback

This is a rush transcript from "Journal Editorial Report," August 10, 2013. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," as a global terror alert shuts U.S. embassies across the Arab world, a look at how Al Qaeda made its comeback.

Plus, it is the story nobody in Washington wants to talk about. We will tell you how the White House is helping Congress weasel out of Obama-care.

And the president says it is time for the government to get out of the mortgage business. Six years after the housing bubble burst, is it a step in the right direction?

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

Nineteen U.S. embassies and consulates in the Middle East and Africa were shuttered this week and a global travel alert issued after communications among senior Al Qaeda operatives were intercepted indicating the plans for a major attack were under way and calling it into question the Obama administration's narrative that the terror group is on the run.

Wall Street Journal columnist and deputy editor, Bret Stephens; and editorial board member, Matt Kaminski, join me with more.

So just to add this list on Friday, the U.S. closed the consulate in Lahore, Pakistan, which I have been to, and which is the safest part, supposedly the safest part of Pakistan. Are we watching the comeback of Al Qaeda as a global threat?

MATT KAMINSKI, EDITORIAL BOARD MEMBER: Actually, we have been watching it for months. It is just that only now we noticed. I think with this last week has shown, one, that's the Al Qaeda core, the central Pakistan, led my Ayman Zawahiri, taking over from Usama bin Laden, he is in charge --


KAMINSKI: -- and he is active. Exactly. Number two, we have seen that the -- these Al Qaeda affiliates took up -- basically, when we went out after Al Qaeda and Pakistan, they moved to Yemen, they moved to North Africa, and now to Syria. But this affiliate in Yemen has been the most dangerous one.

GIGOT: This is the one that's the source of this?

KAMINSKI: Exactly. And when think about the embassy in Yemen, he just named the head of the affiliate, his number two, and that's what prompted the alerts earlier this week.

GIGOT: What makes these Al Qaeda franchises dangerous, Bret? Because a lot of the people who say don't worry about this so much, these are local franchises, they are not threat yenning us, they are preoccupied with the governments of their countries and that's all. We don't need to be as concerned about them as we do with the Al Qaeda core.

BRET STEPHENS, COLUMNIST & DEPUTY EDITOR: Well, I mean, we need to be free occupied with them as they grow in sophistication, reach and ambition. That's what we have been seeing. The affiliate in Yemen was trying to bomb western jetliners over Detroit several years ago. So this has been going on for some time. Al Qaeda in North Africa tried to take over Mali earlier this year and would have succeeded had it not been for French intervention.


GIGOT: But is Mali really a threat to us? I mean, is that really a threat to the United States?

STEPHENS: Look, you could have made the same argument 15 years ago, is Afghanistan really a threat to us? This distant, highly remote little country in the middle of Asia. But it is a threat to the extent it provides a secure base from which Al Qaeda can plan and plot. That's the issue.

Now the biggest threat increasingly, I would say, is not Yemen but it's Syria where we have literally thousands of fighters affiliated with the al-Nusra Front and various other Al Qaeda -- ideologically-linked Al Qaeda groups that are gaining strength. They're gaining expertise, they're gaining fighting experience. They're jihadis --

GIGOT: And they have created sanctuaries inside of Syria, which will be presumably very hard for us to penetrate.

STEPHENS: Right. Not only that but they are importing jihadis from Europe who are going to go home at one point, back to Hamburg or Madrid, and they are going to create, perpetrated jihadi --


GIGOT: But we were told, Matt, we were told that this Syria isn't our fight. It is irrelevant to our security. Yeah, it is OK, it is over there. That's the Middle East. We need to withdraw from the Middle East, pivot to Asia, the president said, because we have been stirring the hornet's nest there. Are we finding out it is a threat to us?


KAMINSKI: We were told that what happens in Syria stays in Syria. But it has already been clear the threat (ph) has moved into Iraq. It destabilized the government there where -- Al Qaeda --


GIGOT: There is an Al Qaeda cell that --


GIGOT: -- defeated in the surge but that is gathering --

KAMINSKI: Right. Prisoners escaped last week. They destabilized Jordan and Lebanon, and as Bret as pointed out, one day it will come back and hurt us. This is why we are paying the price for not doing anything about Syria.

STEPHENS: Al Qaeda in Iraq was defeated when we left Iraq.

KAMINSKI: That's right.

STEPHENS: Defeated in 2008. It is gaining strength precisely because we are not there, not because we were there.

GIGOT: What about the argument that this global alert about embassies is really an overreaction, that this is a political response to the criticism the president got about the disaster in -- where Americans were killed in Benghazi. And this is really not as threatening as they say. This is mostly just frankly political self-protection.

STEPHENS: I think overreacting to terrorist threats is always the right thing to do. Just imagine if we had another consulate or another embassy destroyed as the embassies in Tanzania and Kenya were in 1998, hundreds of dead, both locals as well as --

GIGOT: As Americans.

STEPHENS: As well as Americans. People would be demanding to know why we didn't take the necessary precautions to make sure, especially if we felt we had intelligence that could have prevented this. So the idea we are overreacting to terrorism is an idea that seems persuasive until there is a terrorist attack.

GIGOT: You credit the Obama administration with doing the right thing here?

KAMINSKI: Yes, absolutely. I think one thing is we don't know fully what happens. There's stories out that there was a meeting of 20 senior Al Qaeda leaders by some sort of -- not by phone, by chat somehow last week is what they found. But we don't also know what they are responding to or what they were trying on provoke. There is a very possible --


GIGOT: You give them the benefit of the doubt?

KAMINSKI: That's the role of the president in times of war. And that's what -- we are still in --


STEPHENS: This is where I don't give the benefit of the doubt. The president spent all year doing victory laps around Al Qaeda saying that essentially Al Qaeda or what we call core Al Qaeda was on the path to defeat, that we could end the global war on terror, that we could rescind the 2001 Authorization for the Use of Military Force, that we could treat Al Qaeda as essentially a nuisance threat. And very quickly, in just the 10 weeks since he gave that speech, calling for an end to the war on terror, we now see Al Qaeda continues to have the ability to act globally.

GIGOT: This is what -- there is a disconnect here between what seems to be going on in the world where we have alarms and drones in Yemen and so on. Then at home, we are debating whether we even want to have surveillance, anti-terrorist surveillance anymore.

KAMINSKI: It's schizophrenia on both sides. The Republicans aren't - - blame --


GIGOT: I agree.

KAMINSKI: -- these programs, too. I think it's true President Obama has not fully defended his own policies.


GIGOT: How do you explain this disconnect between overseas and here?

KAMINSKI: People are tired of this war. It has been 12 years in the making. People think that -- it would be great to wind it down. Everyone wants to end a war.

GIGOT: But the Cold War went on for 40 years. We didn't say, oh, well, let's give up.


STEPHENS: Well, we actually --


STEPHENS: Look, when you actually look at the history of the Cold War, people became exhausted with it again and again. And they saw (INAUDIBLE) detente, unilateral disarmament. It is a bit of the same story. And until you have a vivid perception of the threat, you are going to want to wind the war down.

GIGOT: All right, gents, thank you very much.

When we come back, it is the story nobody in Washington wants you to know about, how the White House is helping engineer an ObamaCare bailout, believe it or not, for members of Congress. The details are next.


GIGOT: Well, last week, we learned that a plan was in works to exempt members of Congress and their staffs from the health care law they passed for everyone else. This week, we learned how they are going to do it, with the White House Wednesday releasing the legal details behind its ObamaCare bailout.

Wall Street Journal editorial board member, Joe Rago; and Washington columnist, Kim Strassel, are here with more.

Joe, what are Congress and the administration up to?

JOE RAGO, EDITORIAL BOARD MEMBER: Right. In 2009, Congress adopted a rule that said that they would lose their federal health care coverage and move into the ObamaCare exchanges. The idea was that they would get firsthand experience with what their constituents are going through and play by the same rules as everybody else.

GIGOT: Amendment sponsored by Chuck Grassley, Iowa Republican, adopted by Democrats who were in control Congress at the time and passed it. But they made a mistake, didn't they? They didn't decide how to fund that and --

RAGO: Right. The problem is that the members, who make $174,000 a year, and some of their better-compensated aides wouldn't qualify for subsidies --

GIGOT: Because they make too much money.

RAGO: Right. Subsidies based on income. So they would be exposed to potentially thousands of dollars in new health care costs every year.

GIGOT: Because the coverage they currently have is richer, right, you get if you are an individual, $5,000 or so in subsidies.

RAGO: $10,000 for a family, lot of choices, a very well-functioning program.

GIGOT: It is a very good plan, as you would expect.

RAGO: The exchanges are more like Medicaid Plus. In D.C., there is only three options versus 21 in the --

GIGOT: Three options versus --

RAGO: -- in the federal program.


GIGOT: So the members and their staff in particular were saying, wait a minute here, we are going to basically take a pay cut because we are going to have to pay for our own health care. And they are squawking and that's led to this deal. So how do you -- how is this working now? What's the administration going to do?

RAGO: Right. What they are saying is -- Congress didn't actually kick themselves out of the federal program. They are going to remain in the federal program for the subsidy. But they will get the health care coverage itself, the insurance plan in the exchange. So they created what's really an illegal funding stream for Congress.

GIGOT: And this isn't in the law, right?


GIGOT: They're just making this up or reinterpreting the law to make it happen.

RAGO: Right. What they should do is they should pass -- if this is such a big problem for the chiefs of staff and the legislative council and so forth, they should give them a pay raise. They should make up for the lost compensation of federal coverage.

GIGOT: Kim, how do you explain this politically? I mean, Joe Rago has frankly been about the only person in Washington paying attention to this.


And Joe has been in New York. Maybe that's the reason. He doesn't live in that hot house.


But the Republicans and Democrats both here, they're ducking and covering, they don't want to cover. Don't put me on a letter protesting this. What is going on here?

KIM STRASSEL, WASHINGTON COLUMNIST: I mean, that's the thing. Look, media only is interested in controversies. Right now, everyone in Congress agrees that this was the right thing to do. It is a real problem, especially for Republicans. Because, look, they have been out there complaining about ObamaCare, complaining in particular about the waivers that the White House has been giving to every sort of entity that comes along, saying, look, everyone should have to live under the ravages that this law is going to bring. So here they are now self-dealing, giving themselves an out and doing it illegally, as you said. But nobody wants to talk about it, in particular, not Republicans, because their own staffs were unhappy about this. So they are just preferring it will all go away. You've had a few Republicans. House Ways and Means Chairman Dave Camp came out and said, this is wrong, there should be no waivers for anyone, there should be no waivers for us. But for the most part, the Republicans have remained silent. I think, Paul, it is a dramatic -- it's a big missed opportunity here to --


GIGOT: That's right. Isn't this an opportunity to define ObamaCare and its problems? I mean, they messed up. The Democrats messed up. They rushed it through so fast they didn't know what was in it. They didn't even know that something that hurt them and their staffs was in it. So isn't that a metaphor for what this law is going to do to so much of the rest of America?

STRASSEL: That's right. Also, for Republicans to simply stand up and say, look, you know, this -- this is going to be terrible for everyone else. We should have to live under this, too. And put pressure on Democrats and their staffs to live under it because that may, in fact, cause a couple of -- a little bit of rethinking about just how much this -- whether or not we should keep this law in place.

GIGOT: So is there any way to challenge this other than politically in Congress? I mean, if this is a unilateral interpretation, executive interpretation that the administration is doing, can anybody do anything? Any standing to sue?

RAGO: I don't think so. This is -- this is really political issue and -- it is a good one for Republicans, I think, because, look, they have had a lot of trouble changing the Affordable Care Act. Here is an issue where Democrats looking out for number one might be willing to go along.

GIGOT: To sign on to it. This would create an opening for them to make other changes in the law, perhaps ask for a year's delay in its implementation, for example.

RAGO: Sure. That's one option. How about helping all the low-wage workers that can't find full-time job because the Affordable Care Act defines the workweek as 30 hours? So, you know, they are not getting any kind of unilateral fix out of the White House. Let's make this universal.

GIGOT: Any beeping out of the Republicans at all, Kim, do you expect when they come back?

STRASSEL: Again, there are a few that are out there talking about this. But most of them have sat back quiet and they are happy that this is what has been given to their staff. Again, big missed opportunity.

GIGOT: All right, Kim, thanks.

When we come back, could it be? President Obama calls for a smaller role for the federal government, and you, the taxpayer, in the mortgage market. Is it a step in the right direction?



PRESIDENT BARACK OBAMA: Private capital should take a bigger role in the mortgage market. I know that sounds confusing to folks who call me a Socialist. I think I saw some posters there on the way in.


But I actually believe in the free market.

I believe that our housing system should operate where there is a limited government role, and private lending should be the backbone of the housing market.


GIGOT: That was President Obama Tuesday, rolling out his plan to reform the nation's housing system. Speaking in Phoenix, one of the city's hardest hit by the 2008 crash, the president vowed to wind down government-backed mortgage giants Fannie Mae and Freddie Mac. That should come as welcomed news to taxpayers who now guarantee about 85 percent of all new mortgages.

For more, I'm joined by Wall Street Journal editorial board member, Mary Kissel; and assistant editorial page editor, James Freeman.

So do you appreciate the irony there? The president even recognized it himself. Is his plan a step in the right direction?

MARY KISSEL, EDITORIAL BOARD MEMBER: Yeah. Any time this president says he wants private investors investing in mortgages rather than taxpayers, yes, that's a big step in the right direction.

I think that, look, market starting crashing in 2007. We are in 2013. Fannie and Freddie are making money again. So this is the time to reform because the longer they make money, the harder it is going to be to convince Congress or any White House to do anything.

GIGOT: Because Congress will want to take the money and spend it on something else because they have them in conservatorship. But isn't that also a step in the right direction? He's saying let's get rid of Fannie Mae and Freddie Mac. And the problem there is have public risk, taxpayer risk and private profit. If he gets rid of that, that's a step in the right direction.

KISSEL: It's absolutely a step in the right direction. But there's politics at work here, too, Paul, because you have a bill in the House and a bill in the Senate --

GIGOT: Right.

KISSEL: -- that are also pushing in the same direction. I think what you saw from the president was an attempt to get in front of that.

GIGOT: So he has been in the caboose --


KISSEL: He's in the caboose and he wants to get in the front of the train to take credit for it.

GIGOT: James Freeman, do you see any problem with this -- with this proposal or are we finally moving in the right direction on what has been, frankly, since the crisis on nationalized housing market?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Well, the right direction, but, yes, there is a problem. The difference between the House, which gets rid of Fannie Mae and -- excuse me -- Fannie Mae and Freddie Mac and does not replace them with anything except the free market, the plan Mr. Obama is backing, the Senate bill, still has taxpayers on the hook. The big step forward you mentioned is that the private investor takes the first loss but --


GIGOT: In the Senate Bill. In the Senate bill.

FREEMAN: In the Senate bill, which the president has now endorsed this week. So there is some -- still a role for taxpayers, unfortunately, under the president's plan. But, clearly, yes, a step in the right direction.

KISSEL: Yeah, the taxpayers are going to be at risk, Paul, in either plan. You look at the House bill, it gets rid of Fannie Mae and Freddie Mac but it leaves something called the Federal Housing Administration in place. And that's --

GIGOT: That's the FHA.

KISSEL: That's the FHA.


GIGOT: -- a lot of mortgages.

KISSEL: That's right. And it is broke as of today. The House bill goes a long way to reform that institution. But as we've learned from Fannie and Freddie, when you put the government behind the mortgage market, even if you are paring it back, it has a habit of coming back and biting you. That taxpayer backing tends to grow over the years.

GIGOT: James, it's interesting, the housing market has really started to come back across the country, as the price is up about 12 percent according to Case-Schiller in the last year. In 20 of the major metropolitan areas, investment and residential real estate growing in double digits in each of the last two quarters. Does that create an opening politically to get this done in Congress where you can actually maybe get rid of Fannie and Freddie?

FREEMAN: I think this may be the only window where you have a housing market that is coming back to the extent that politicians are not afraid to make a change. But you also have memories fresh enough from the financial crisis that's people still remember why we need to get rid of these mortgage monsters that require huge taxpayer bailouts. You know, obviously, if last year's election had gone differently, the final bill might look a little different. But given where we are, and that had is the opportunity, I think you had to be -- encouraged to see the president's remarks this week.

GIGOT: Did you agree with that? Because housing lobby, the realtors, the homebuilders, the mortgage brokers, all of that, the housing-industrial complex, as we call it, it is very influential still and wants to retain these federal guarantees.

KISSEL: They have influence over both parties and over this president. In the speech, you heard conflicting goals. You played the clip where he said I want private investors in the mortgage market, not taxpayers. But in the very same speech, he said but we still have to make sure that first-time home buyers have the opportunity to buy homes and we still -- you know, we need the 30- year mortgage, things like that. So you know what? We will see what comes out of this.

GIGOT: We hope we can still make some progress --


-- even if not perfect.

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


GIGOT: Time now for the ever-popular "Hits and Misses" of the week.

James, first to you.

FREEMAN: This is a miss to Actor Matt Damon who said set some kind of record this week in the annals of Hollywood hypocrisy. As you may know, Mr. Damon is the preeminent celebrity blowhard in fighting against reform in public education and lauding the benefits of the public educational system in this country. And, of course, now we learn he is sending his children to private schools. He says it is because public schools in his area are not progressive enough. Uh-huh. Just amazing hypocrisy. But maybe not so much, given how often we see this out of Hollywood.

GIGOT: And Matt Damon is invited on this show any time he wants.



KISSEL: He sure is. I'm giving the easy, really big miss that Alex Rodriguez, the only baseball player to appeal his suspension for using performance-enhancing drugs. Ego is clearly not a problem here, if ethics are. It is all about A-Rod, all the time. Never mind the reputation of the game that he professes to love.

GIGOT: Spoken like a non-Yankees --


Not a fan of the Yankees.

OK, Bret?

STEPHENS: Listen, I think a hit goes to Jeff Bezos, the Amazon's super billionaire entrepreneur, for purchasing The Washington Post, as he did this week for a song, at least when it comes to his kind of wealth, $250 million. It shows he has faith in content, faith in a great brand and a great title. And maybe he can provide the innovation and imaginativeness to renew this storied paper.

GIGOT: All right, we hope so.

Thanks, Bret.

And remember, if you have your own "Hit or Miss," please send it to us at And be sure to follow us on Twitter -- I know you are all on it -- at JERonFNC.

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

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