Beware: 'Fiscal cliff' ahead

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This is a rush transcript from "Journal Editorial Report," December 8, 2012. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," as fiscal negotiations drag on are Republicans ready with a Plan B, or is going off the cliff a better alternative?

Plus, mayhem in the Middle East as worries grow that Syria may use chemical weapons and Egypt moves closer to civil war. Can the U.S. stay on the sidelines much longer?

And a military judge removed from the trial of Fort Hood suspect, Nidal Hasan, after demanding the Army major shave. Did the order show bias?

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

Little progress this week in efforts to avoid January's looming tax hikes and across-the-board spending cuts, commonly known as the fiscal cliff. Despite a phone call between President Obama and House Speaker John Boehner, the two sides appear to be no closer to a compromise. But are Republicans working behind the scenes on a Plan B?

Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; assistant editorial page editor, James Freeman; and Washington columnist, Kim Strassel.

So, Kim, you have been working the phones the week. Are the talks as dead in the water as people say or is there something here that's really going on between Speaker Boehner and the president?

KIM STRASSEL, WASHINGTON COLUMNIST: No, I think that they are nowhere. And it's because the president is refusing to budge at all on the top tax rates. In fact, they hardened their language this week, saying, oh, absolutely, we'll go off the cliff if the Republicans don't accede to that demand. And since Republicans had drawn a bright line around that, we're still at a standstill.

GIGOT: But, Kim, why is the president so insistent on increasing tax rates? Boehner has already put on the table a comparable amount of money to be gained from putting a cap on deductions, about $800 billion over 10 years. Why insistent on rates?

STRASSEL: Look, Paul, there are two reasons. The first is ideological. His partisans, his liberal base believe this is somehow a symbol of winning the tax fight, and you can only do that by raising the rates on the wealthy in the country, and so they're insistent on that.

The other thing the president is interested in is he wants a double deal here. He wants to both raise tax rates and also take the deductions, the closing of tax deductions that the Republicans have offered. So he is trying to up the ante. And he feels that if he gives on tax rates now, if he doesn't demand that, that he's looking at a much lesser pie of tax revenue down the line.

GIGOT: So he's raised the ante, Dan, not from $800 billion to $1.6 trillion over 10 years.


GIGOT: So he gets 800 -- you only get $800 billion even on the best scoring from the raising of the rates he wants to raise. So he's got to get the rest from deductions, but that's a huge revenue hit.

HENNINGER: Of course, it's a huge revenue hit, but that's what the president wants. I think what he really wants is to enact these tax rate increases and make them permanent.

There's a kind of conventional wisdom that we'll do these things and then sometime next year, even the president says, we'll do a more extensive tax reform. That's not going to happen. This is Barack Obama's tax reform. He's going to raise these rates, raise the rates on capital gains and dividends, possibly even the estate tax, and the deductions and exemptions, and he'll be done with tax reform. Tax reform is very hard to do. I think his goal is to make this set of tax changes permanent.

GIGOT: I think he wants one other thing else, one other thing, too, James, and that is he wants Republican fingerprints, that is votes, in favor of raising rates, because he knows, if that happens, he divides the Republican Party and he offers some protection for Democrats for raising taxes in the next congressional election.

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Absolutely. Breaking the Republican Party would be a benefit to this plan. Also, I don't think Barack Obama minds if the tax rates go up on the middle income people as well.

GIGOT: But he's promised so insistently that he doesn't.


GIGOT: You're saying that privately --

FREEMAN: For him, the ultimate win is to have all of that new revenue for the government and being able to blame it on the Republicans. So --


GIGOT: Hold it. Wait a minute. Are you're saying that if we go over the cliff, nothing happens in December, come January, the president will not turn around and not insist on the middle class portion of these tax cuts?

FREEMAN: I think he would be happy is there was no deal and --


FREEMAN: all of the taxes went up and he was allowed to say, look, Republicans wouldn't come along on this.


GIGOT: Wait, wait. Hold, hold. Twenty million people will be hit by the alternative -- more people would be hit by the alternative minimum tax, for example, if nothing happens. That's -- that -- and you know where the taxpayers are, James. I hate to tell you this. They're in your state --


-- in New Jersey, Connecticut and in New York, and they're in California and Illinois, a lot of places where Democrats govern, because they have the most deductions at the federal level.

FREEMAN: Well, as we've explained many times, the amount of money he can get from his tax rates on the rich, even if he got his Buffet tax, it does nothing to solve the deficit problem. So, he knows eventually taxes are going to have to hit the middle class.

There's a number of ways to do that. One is a VAT tax, a carbon tax on energy. And another way is just raising income rates on everyone. And if he can blame that on Republicans, this might be the way to get that started.

GIGOT: I'm going to have to disagree on the politics of what James says, Dan. I think the president can't let that alternative minimum tax hit because the pressure from his own party and from senators up for reelection in 2014, the Democrats, would be enormous.

HENNINGER: Yes, I kind of agree, James. I think that would be an Achilles heel for the Democrats. The one place -- the third rail, as we say, they don't want to go.

I agree with you, Paul, that the game here is to hang this on the Republicans, and then pitch that forward -- I've said this before -- to those mid-term elections. They want to bring the Republicans down in the House. And I think that's the strategy behind what's going on here.

The idea that you're going to do all of these tax changes in two weeks before the end of the year? Tax policy has never been written that way.

GIGOT: Kim, do the Republicans have more leverage here than they think because of the alternative minimum tax and some of these other issues?

STRASSEL: Right now, the president has remained firm. I think that the leverage that Republicans have is not allowing him to drag them and -- look, the general view out there among Republicans right now is if tax policy is going to go up -- either way tax rates are going to go up, either because we go over the cliff or because the president pulled them along into a panic, the last minute deal, then the best thing to do, as you're saying, is try to minimize their political responsibility for this. And, maybe, for instance, just come up with a Plan B that says to the president, you want the top two tax rates extended? Here, here is a bill extending everything else for the lower class. The top two tax rates are going up, but you're getting nothing else from us. And you own the consequences to the economy and everything.

GIGOT: All right, we'll see how it goes.

When we come back, the Middle East grows messier by the day as Egypt slides closer to civil war and Syria prepares chemicals to use perhaps on its own people. Can the U.S. stay on the sidelines much longer?


PRESIDENT BARACK OBAMA: The world is watching. The use of chemical weapons is and would be totally unacceptable.



GIGOT: Well, things in the Middle East went from bad to worse this week with reports that the Syrian military is preparing chemical weapons that could be used against its own people. It's awaiting final orders from President Bashar Assad. This, as protesters clash with supporters of Mohamed Morsi outside the presidential palace in Cairo Egypt, in that country's largest confrontation since the uprising that ousted Hosni Mubarak almost two years ago.

We're back with Daniel Henninger, Wall Street Journal foreign affairs columnist, Bret Stephens; and editorial board member, Matt Kaminski.

So, Bret, we were told if we didn't intervene in Syria, we -- if we did intervene in Syria, we could see chemical weapons perhaps being used, civil war, the radicalization of the Islamist rebellion, and perhaps a larger regional conflict. We did not intervene.


GIGOT: All of those.

STEPHENS: -- all of those things. You have to imagine what might have happened if the Obama administration had intervened early by imposing a no-fly zone at very little cost and risk to the United States over Syria if Bashar Assad had been gone 12 months ago, if we were now in the midst of a transitional process with an opposition that hadn't been radicalized by the influx of radical fighters from Jordan, from Iraq, from elsewhere. Instead, we're having not only the Syrian meltdown, with very serious consequences, but hundreds of thousands of refugees in Turkey, the destabilization of Jordan, increasing inability in Lebanon. This is spilling out all over the region, Paul.

GIGOT: What about the president's red lines on -- President Obama's red lines, so-called, on Syrian chemical weapons. Before he said, if they move these chemical weapons, there will be consequences. Now, they've dropped the "moved" argument and they're now saying, if he uses those chemical weapons. Are we seeing a backtracking from the United States?

MATT KAMINSKI, EDITORIAL BOARD MEMBER: I think the backtracking basically to our default position, which is to do nothing at all. I think it's justifiable that -- they may have moved these weapons. We don't know why. Maybe they moved them to get them out of the hands of the rebels.

But I don't see why using the chemical weapons has to be the standard by which we should say, ah. We should actually maybe take an interest in what's going on in Syria. We've had 40,000 people killed in Syria over the past years.

GIGOT: OK, fair point. But the president made this the standard. OK? He's the one who said there will be consequences if they do something with chemical weapons. Now, when you put that standard forward, aren't you obliged to do something?

KAMINSKI: Well, you would think -- I think, if they do use the weapons, it will be a game changer, if there are images of a destroyed village somewhere in Syria. But it's baffling to me to think that why you need to have some mass murder on top of the mass murder that you had throughout the last two years to really get the U.S., which is supposed to be the world's leader, to act here. It's a real moral abdication on our part.

HENNINGER: Well, as Matt says, supposed to be the world's leader. Instead, what we're talking about here is a nightmarish case study of what happens in an area of the world when the United States is simply not engaged. The specific incident was when Barack Obama decided at the end of the Iraq War to pull all American troops out of Iraq, an unprecedented step at the end of a conflict like that. And I think everybody in that region saw that and went, we can step forward. And this is the result.

GIGOT: Do we have any options, Bret?

STEPHENS: Look, with a more engaged administration, we would be imposing a no-fly zone over corners of Syria. We could destroy Bashar Assad's helicopters, which he's using against his own people. We could try to secure the chemical sites. We know, with a high degree of precision, where they are. And unless we do that, we're going to be facing a deepening nightmare there.

GIGOT: Let's turn to Egypt, Matt. Is Mohamed Morsi and the Muslim Brotherhood staging, in essence, a coup?

KAMINSKI: They're trying to continue -- they're trying to -- I mean, it's been a blocked system in Egypt since President Mubarak fell about two years ago. Mohamed Morsi is trying -- in his way, he would say to unblock it, to get rid of the courts, the military, in his way. He said, I've won elections. It's time to govern this country. But the problem is that half the country does not agree with him. And the other problem is that what he's trying to do will essentially continue an authoritarian system in Egypt, which is why we should oppose it and should speak -- talk loudly about it.



STEPHENS: -- been coming for a very long time. I mean, the Muslim Brotherhood was always going to do pretty much exactly what Mohamed Morsi is doing. And the only surprise is that people should be surprised at all.

This is the pattern of most revolutions, Paul. In order to achieve full democracy for the people, the leader has to assume dictatorial powers. It's Robespierre. It's Lenin and the dictatorship of proletariat. That's precisely what he's done.

And by the way, have a close look at the new Egyptian constitution that he's now tried to shove down the throats of the Egyptian people. This is a constitution that ratifies Sharia as a governing principle. That all manner --


KAMINSKI: The problem is not actually the constitution. The problem is the process that he's going through. And this goes back to the -- you know, the military's screwed this up from the beginning because they didn't create an inclusive process to bring all the parties in and to say we're going to sit down and agree how this goes forward. So you've opened up the government for polarization.

I think it's premature and wrong to say, it had to be this way, because they're Islamists. I think you assume that the Brotherhood can change. And the country is changing. And when you're seeing -- there's real push back at him. I think that shows there is a spirit still in Egypt that hasn't been killed.

GIGOT: All right.


GIGOT: Well, either way, it's deteriorating inside Egypt.

When we come back, the military judge in the Fort Hood massacre is removed after ordering the suspect, Army Major Nidal Hasan, to shave his beard. The latest on that. And the efforts three years later of survivors and victims' families to get the attack labeled an act of terrorism.


GIGOT: A military appeals court this week threw out a judge's order to forcibly shave Fort Hood shooting suspect, Nidal Hasan, and has removed the judge from the case. The U.S. Court Appeals for the Armed Forces ruled Monday that Colonel Gregory Gross didn't appear impartial while presiding over the trial of Major Hasan, who faces the death penalty if convicted in the 2009 shootings on the Texas Army post that killed 13 people and wounded more than two dozen. Hasan appealed after Gross ordered that he must be clean shaven before his court martial. Hasan says his beard is a requirement of his Muslim faith, but facial hair violates Army rules.

Wall Street Journal editorial board member, Dorothy Rabinowitz, joins us with more.

So, Dorothy --



GIGOT: I assume you did not agree with the appellant court's decision.

RABINOWITZ: That is correct. It is only the last in a long line of very strange treatments of Major Hasan, who was in his career pushed ahead despite the fact that anybody else would have been thrown out of medical school, to the moment when they declared at the Department of Defense that, after the shooting, this was work place violence. To see this latest installment now is just one long line. It should remind us, all of it, of all of our problems with Libya, and with the false stories of what that was about, the attempt to immerse us in political correctness, as this court's decision did. Decision.

GIGOT: But what about the issue of his religious rights, which is the essence of his claim here, that, in fact, it violates his religion to make him shave his beard?

RABINOWITZ: Let me tell you that, some years ago, a rabbi was told he could not wear a yarmulke on a base. And that went before the high court. And still, that court was reversed, which had given him permission.

No, you cannot wear, against Army regulations, anything like that.

GIGOT: So, this is going overboard in order to --


RABINOWITZ: Overboard, indeed.

GIGOT: -- to appease, in essence, a political correctness about the Muslim faith?

RABINOWITZ: This was civilian judges on this court. You know, these are not Army judges who made this decision.

Yes, that's correct. And this is the thing that no one dare speak its name. The same long line.

If I could just to leave this spot to show the brink of insanity over which we hover. General Casey immediately after the shooting announced --


GIGOT: Secretary of the Army.

RABINOWITZ: Secretary --


GIGOT: Not secretary of the Army, but --


RABINOWITZ: Secretary --


GIGOT: -- in charge of the army. Chief of staff for the Army.

RABINOWITZ: The chief of staff. He said, this was a tragedy, of course, but the greater tragedy would be if we should have our diversity taken away or undone by this event. And you look at that, it sounds OK for a second, and then you realize, what is he saying? Thirteen people killed and this was most important?


GIGOT: Let's get to the issue of this work place violence versus an act of terrorism. The victims and their families are saying it's obviously an act of terrorism, but the Pentagon won't define it as such.

HENNINGER: Well, I suspect they don't want to define is as such because they don't want to set the precedent. I think, in this case, since it happened on a military base, and most of the individuals who were killed were members of the military, that you could say that, in that, these are the ones who are supposed to protect us from terrorism --

GIGOT: Sure.

HENNINGER: -- that they deserve compensation. The idea that anybody who is involved in a terrorist act in the United States and dies deserves compensation, I think that compensation would be going a little bit too far.

GIGOT: And that's what comes with the definition of an act of terrorism.


GIGOT: So this may be one motive. But you would argue that it's actually --

RABINOWITZ: Well, I would argue that everybody who is shot doesn't have the instance of having the perpetrator shout Allahu Akbar in the face of all reason. And then it's called workplace violence?

STEPHENS: I mean, this is the sign of a kind of civilizational dysfunction. Whether it's terrorism or Jihadism -- as I understand, terrorism is something that takes place against civilians. These were soldiers, OK? It was a jihadi act. It becomes a question - this question arises really because it's a matter of compensation. Who gets what for what particular kinds of violence defined in the regulatory structure we have.

The second issue is the ability of the Army to deal with this specific jihadi threat. In 2000, police in London discovered a document that said jihadis are going to play these games with courts. And guess what? They're succeeding.

GIGOT: All right, thank you all.

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


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

Kim, first to you.

STRASSEL: A miss to Bob Costas who used Kansas City Chiefs linebacker, Jovan Belchers murder of his girlfriend and suicide as an excuse to go a rant about handguns on NBC "Sunday Night Football." The problem here isn't just what Costas said, which is the usual nonsense about gun violence, but the fact that he said it at all. Americans are beat over the head daily with political fights over tax cliffs, taxes, spending, elections. We turn into football precisely for escape and so we do not have to hear anybody's political opinions. So do us a favor, Bob, and stick to sports.



KAMINSKI: When Lance Armstrong was stripped of his seven Tour de France titles this fall, it left Greg LeMond as the only American to have won cycling's biggest race. Now Greg LeMond has started a new group called Change Cycling Now, and he's pushing to take over the International Cycling Federation. He won fair and clean in the '80s, and quite dramatically. And now he wants to sort of change cycling. And if anyone can do it, and if anyone can actually change the culture of doping in sports, it could be someone like Greg LeMond.

GIGOT: All right, thanks, Matt.


FREEMAN: This is a hit to Michigan Governor Rick Snyder, who said this week that he would sign Right-to-Work legislation which will soon be on his desk. Anyone in America should have the right to joins the union and to pay dues to support it or to choose not to. And that's what this would do in Michigan.

GIGOT: All right. No, this is big news, and big news, potentially, economically, for Michigan, as well, because this means that a lot more companies might be willing to locate in Michigan.

All right.

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

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

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