This is a rush transcript from "Journal Editorial Report," October 11, 2014. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," ISIS on the march. As Islamic State fighters make alarming gains in northern Syria and western Iraq, new questions about President Obama's plan to degrade and destroy the terror group.

Plus, as more than a dozen states brace for policy cancellations, will ObamaCare take center stage in the final weeks of the midterm campaign?

And blue state blues. Why some incumbent Democratic governors are in the fight of their political lives.

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

New questions this week about whether President Obama's plan to destroy and degrade ISIS is working as Islamic State militants made alarming gains in Syria and western Iraq. Secretary of State John Kerry defended the strategy Wednesday suggesting that protecting the Syrian town of Kobani was not a priority of the U.S.-led coalition.


JOHN KERRY, SECRETARY OF STATE: Notwithstanding the crisis in Kobani, the original targets of our efforts have been the command-and-control centers, the infrastructure. We're trying to deprive the ISIL of the overall ability to wage this, not just in Kobani, but throughout Syria and into Iraq.


GIGOT: Joining the panel this week, "Wall Street Journal" columnist and deputy editor, Dan Henninger; foreign affairs columnist, Bret Stevens; and editorial board member, Matt Kaminski.

So, Matt, let's start with you. What do you make of John Kerry's explanation for why we're doing so little to stop the assault on Kobani?

MATT KAMINSKI, EDITORIAL BOARD MEMBER: I think they have sort of given up on it, obviously. And they're trying to explain themselves but it really won't fly because this is going to be a very major below to American credibility above all.


KAMINSKI: Because we have committed the greatest military in the world to destroying ISIS. Since that happened four weeks ago, ISIS has continued its march in Iraq but is taken taking over a really important town on the Turkish border.

GIGOT: Kobani, to be clear is in Syria.

KAMINSKI: It is, of course.

GIGOT: In Syria.

KAMINSKI: But it will be, again, a coup for ISIS. They will have shown that they can stand up to the super power and take it down.

BRET STEPHENS, FOREIGN AFFAIRS COLUMNIST: But it's not just -- it's not -- there's a symbolic element --


GIGOT: You don't disagree with him?

STEPHENS: I agree with everything he said. But there's also a political element, which is that if we are going to succeed without putting major forces on ground, we need the help of our Kurdish allies. The Kurdish Peshmerga right now is the most effective fighting force on the ground opposing ISIS. And this is sending a message to those Kurds in northern Iraq and other Kurdish regions that we really don't have their back, that we are not going to be their firm allies.

GIGOT: Why is Turkey, Dan -- they've got tanks on the border, their troops are there, it's a very powerful military, particularly relative to that region. Why are they not doing anything?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: I think, in large part, because the Turkish foreign minister said we're not going to commit ground troops to Kobani on our own. We would only do it within the context of the alliance. Shorthand for saying, look, United States, if we're not going on the ground, we're not going on the ground because we're not going to get hung out there by ourselves. That reflects the basis thing we've been talking about. The United States has half a strategy in Iraq and Syria. They are not acting as though they are committed to fully defeating ISIS. That was clear from what Secretary Kerry was saying. It was a very confused statement.

GIGOT: But the Turks are basically saying we also want the United States to take down Bashar Assad in Syria rather than bomb in a way that might help him. And they want a buffer zone inside Syria so the refugees can stay there protected rather than have to flow into Turkey. Don't they have a point? And instead, why do we have this quite unseemly, for a coalition, fight back and forth with the U.S. blaming Turkey and vice versa?

KAMINSKI: It is unseemly but this goes back years, over the difference between the U.S. and President Obama and most -- and actually all of America's allies in the Middle East. Since 2011, they've called on the U.S. to intervene in Syria against the Assad regime. We're finally acting now but we're not acting against the Assad regime. We're acting against ISIS, which is an important thing to do. But they say, why not Assad? Syria will not be solved unless Assad is also toppled.


GIGOT: You agree with that?

STEPHENS: Of course. That's right. And we're not going to be able to generate a moderate Sunni opposition if we're simply hitting ISIS and allowing Assad to gain that way. But with the Turks, there's a cynical element to what they are doing. Turkey has a large Kurdish minority population of its own.

GIGOT: Right.

STEPHENS: It has had to deal with Kurdish terrorist groups for many years. And there's a view in Turkey that this destruction of another Kurdish enclave solves a problem for them, basically diminishes what they see as a Kurdish threat.

GIGOT: But here's what the administration would respond to you guys. It would say, Dan, look, yeah, this is limited. John Kerry said, we're not going all in. We're going to degrade and destroy. We're not -- and if we follow your strategy, we'll be dragged into gradual escalation, and before you know it, we'll have ten thousand troops on the ground.

HENNINGER: Even at that level, Paul, degrade, perhaps, destroy, not even close. Let me give you a perfect example this week. The Syrian Kurds in Kobani, who are good fighters and have been standing up to ISIS, have been say this is city fighting. We need heavy weaponry to fight back against these guys. We don't have it. They do. Similarly, we would not arm the Free Syrian Army three years ago when we knew who they were. So we have just gone in with half measures and not to win.

GIGOT: But what's the response to the limited war point? We are fighting --


STEPHENS: But we are not degrading them. They are winning. If they are winning, we are not degrading them. So what we are doing is we're adding a propaganda victory to the strategic and military victories they are already gaining by saying not only have we consolidated our control over northern Syria, are consolidating over an bar province but we are doing so in the teeth of American military --


GIGOT: Are we going to be, therefore, facing a choice, the president facing a choice of either escalating this effort or essentially seeing it fail?

KAMINSKI: I think the problem is the less we do now, the more we'll inevitably have to do. This is sort of their response to the escalation argument that not doing it properly now for the last three years is setting us up for much more trouble down the road.

GIGOT: Do you agree with that?

STEPHENS: Yeah, of course. And this is the tragedy of the entire -- if we had maintained a trip-wire presence of 10,000 or 15,000 troops, we would not have the ISIS crisis we have now. If we had gone in early and decisively, they wouldn't have gotten this strong. We're just building our way up the ladder of chaos.

GIGOT: All right. A pleasant message, Bret.


All right, thank you.

When we come back, just in time for the midterms, the nation's largest retailer announces health insurance cuts. And residents in more than a dozen states brace for policy cancellations. So is Obamacare about to make a return to the campaign trail?


GIGOT: More than a dozen states plan to cancel health care plans not in compliance with the Affordable Care Act in the coming weeks effecting thousands of people just before the midterm elections. In Virginia alone, a quarter of a million plans are set to be eliminated, putting ObamaCare back on the front burner in the campaign's final weeks. That news comes as Walmart says it's dropping benefits for some 30,000 part-time workers, citing higher than anticipated health care cost.

Wall Street Journal editorial board member, Joe Rago; and Potomac Watch columnist, Kim Strassel, join me with more.

So, Joe, let's start with the Walmart decision. 30,000 part-timers. Walmart was a big supporter of the law in 2009. Now it says it can't afford to pay health insurance for its workers?

JOE RAGO, EDITORIAL BOARD MEMBER: Right. I mean, they endorse this law saying it would bring down health care costs. Now here they are saying we've got a big problem here. We're going to dump all of our part-time workers. What they are really doing is they are responding to the laws, which is for industries like retail, with large numbers of low-wage and low-skilled workers, the exchanges, insurance exchanges are designed for that industry. So --

GIGOT: Is this widespread beyond Walmart?

RAGO: Absolutely.

GIGOT: Who else is doing it?

RAGO: You've got Home Depot, Target, Trader Joe's, other grocery stores, hospitality industry, seasonal industry like ski mountains.

GIGOT: You're talking about potentially millions of people here?

RAGO: No question.

GIGOT: A lot of people look at Walmart, that's great, that's wonderful because they'll be on the exchanges. That's going to be more customers for the insurance companies, more incentive for the insurers to come in, so this is actually a good thing for the reform.

RAGO: I mean, if you're pro-government health care, of course, this is a good thing.

GIGOT: Because the government and taxpayers will be paying for these new customers.

RAGO: Right. Of course, that's a good thing if you think that government should provide health care to everybody.

GIGOT: So is it a larger taxpayer burden?

RAGO: Absolutely, no question.

GIGOT: All right, so, Kim, what about the cancellations here that are going on in these states, including your state of Virginia? What's behind that?

KIM STRASSEL, POTOMAC WATCH COLUMNIST: Well, Democrats have benefited from a lull, pretty much ever since the blowup of the healthcare.gov website. Now you see this coming back and right before the election. What we're hearing there are a least 12 states, potentially more, that are going to be cutting these health insurance plans, canceling them because they no long comply with ObamaCare requirements. This is happening, Paul, I mean, we're talking about hundreds and thousands of people. And interestingly, many of them in states where there are really competitive elections going on. So places like North Carolina, Kentucky, Alaska, Colorado, and as you mentioned, Virginia, we're up to a quarter million people may be losing their policies.

GIGOT: But I thought this was supposed to have been settled last year. You had the initial transition, people were going from the pre- ObamaCare policies to ObamaCare policies and compliance. Now we're a year into this and these cancellations are hitting again. Why?

RAGO: Well, to solve the political problem, last year, they created all kinds of regulatory deferments.

GIGOT: This is the administration?

RAGO: This is the Health and Human Services Administration and particularly the White House. What they said was, well, if your policy is going to be canceled, you can do it a year later or two years later. Now that's kind of catching up with them.

GIGOT: That's what we're seeing now is this next wave. And what share of these cancellations will happen before the election and what after?

RAGO: Most of them before. They've got to announce it by November 1st. So everything is going to happen right before the election.

GIGOT: All right, Kim, let's talk about the role that ObamaCare is playing in the election. You said these cancellations happening in states where they have competitive elections. But Republicans were saying a few months back that ObamaCare was their killer issue. They were really going to run on this. It'll be the number-one issue. Democrats are saying, hey, we don't see any signs, if that's the case, preventing Republicans to kind of back down. And it's really been neutralized. What's the truth here?

STRASSEL: So, what you have is a lot of Republicans who are still running ads and outside conservative groups running ads in states. Are people a little burnt out on this issue? That's why this newest news actually really matters. Because when you have a Senator, for instance, like Kay Hagan in North Carolina, and you've got commercials of her saying, hey, if you like your health care plan, you can keep it, which she said many times, and now suddenly, there's going to be another wave of thousands of people in her state who lost their health care plan, it really has the potential to super charge it.

One more thing, too, Paul, we have got another controversy coming up, too, which is the fact that the administration has got all of the rates it is going to put out for the next wave of plans.

GIGOT: Right.

STRASSEL: And they are sitting on them. This is becoming a bit of a news story as well, too. They don't want to release them before people go to the polls. And this is also cropping up as an issue in the states, too.

GIGOT: Briefly, Kim, is ObamaCare still a net plus for Republicans in this election or not?

STRASSEL: It absolutely is because there are a lot of Americans who simply are unhappy over it. It may not be the thing they are getting up and fuming over every day, except it is baked in now to their disaffection with current members of Congress.

GIGOT: All right, Kim, thank you.

When we come back, blue state blues. Democratic governors are in the fight of their political lives this election season. We'll tell you why and which races to watch, next.


GIGOT: Less than a month now until Election Day and as many as a dozen incumbent governors are fighting for their political lives. This week, we look at the Democrats who are facing uphill re-election battles in Colorado, Connecticut, and even the deep-blue state of Illinois, where, this week, Governor Pat Quinn called in the big guns with First Lady Michelle Obama returning to her home state to stump for the embattled incumbent who is locked in a tight race with political newcomer, Bruce Rauner.

We're back with Dan Henninger, Joe Rago and Kim Strassel.

So, Dan, these are not right wing states. These have had Democratic governors for a while. Most of them voted for President Obama. What's going on?

HENNINGER: I think something is going on in all of the states that we can generalize about. One is that even blue states cannot pull themselves out of the real world. The real world right now suggests that there's a lot of economic anxiety in the United States. And those blue states, like Illinois, Connecticut and Massachusetts, are in big economic trouble.

The second thing that's going on is Barack Obama's unpopularity. It has shown to be a factor in almost all these states. Note that Barack Obama was not in Illinois, his wife was in Illinois.

GIGOT: Even states that voted for him, there's a real -- an undertow from the president.

HENNINGER: And Independent voters, who generally turn out in midterm elections, have been trending towards the Republicans, even in these blue states. You get a governor like Pat Quinn whose strategy has been now to Romneyize his opponent, Bruce Rauner --

GIGOT: -- private equity --


HENNINGER: Rich guy, doesn't understand the middle class, but he doesn't want to talk about the bad state of Illinois.

GIGOT: Well, then their corporate tax rate, Illinois, 9.5 percent, fourth highest in the country. They've got subpar income growth, subpar job growth compared to his neighborhood in the Great Lakes region. The question is in my mind is, how can this guy win? He's really got a record here that is one of the worst --


HENNINGER: He's in big trouble. He's in big trouble. Companies are migrating out of Illinois and people know it.

GIGOT: Let's talk about New England, Joe. Because that's supposed to be basically a foreign country for Republicans.


Yet they are supposed to -- they are competitive in Massachusetts governor's race, very competitive in Connecticut. They may even have a chance to pick up some House seats. What's going on?

RAGO: One thing, if you look at Connecticut, worst state for economic growth in the country. Dan Malloy is the current governor, running for re- election. He has passed the largest tax increase in Connecticut history.

GIGOT: Which is saying a lot.


RAGO: Absolutely. And so you are really look at what is essentially a failed state. Dan Malloy is pushing for a hedge fund tax. That's basically the last industry left in Connecticut.


And same thing in Massachusetts.

GIGOT: That's an open seat. There's no incumbent running. Duval Patrick is leaving office.

RAGO: Right. You've got Coakley, who is --


GIGOT: Martha Coakley attorney general.

RAGO: Attorney general, running for governor. And --


GIGOT: She's the Democrat.


RAGO: She's the Democrat, running against Charlie Baker, former CEO of Harvard Pilgrim, which is a health insurance company. Turned that around. Health care costs have really become a big issue in Massachusetts. About 60 percent of all health care in the state is financed by the government increasingly -- increasing rapidly, and so he's really pushing her on that.

GIGOT: Charlie Baker is saying, look, I'm the guy that can come in and do something about it.

RAGO: That's right.

GIGOT: All right, Kim, let's turn to Colorado, because John Hickenlooper, the governor, was a rising Democratic star. He passed gun control legislation. He got hosannas from the MSNBC crowd, "The New York Times." And suddenly, he's fighting for his life against former Congressman Bob Beauprez.

STRASSEL: Yeah. This is a slightly different scenario. Not a deep blue state. But rather a state that Democrats, nonetheless, felt was marching towards their column. And they got this governor who claimed to be a centrist. Very high approval ratings. The problem for John Hickenlooper over the last couple of years is that he has taken some decisions and allied himself with the liberal wing of his party. You're seeing a backlash among voters there. He signed on with these very controversial gun control measures. The death penalty has become an issue because he granted a stay of execution for a very controversial figure there. There's a lot of frustration, too, that he has not taken a stronger stand on what could be the biggest economic driver in Colorado, which is fracking. He's tried to play both sides of the field there, and people want someone a little more decisive in terms of better jobs and growth.

GIGOT: Right, because the fossil fuel drilling, including for natural gas, is one of the issues that divides the Democratic coalition. So he's been on the fence, even though he's not banned fracking like the New York governor.

I want to ask you about why these governors are struggling but not New York and California governors who are also incumbents and, yet, particularly in New York, the economic record is almost as dreadful as Connecticut's?

STRASSEL: I think part of it is they are a very strong candidates running against them in these states. So you have Bob Beauprez in Colorado and some of these other people that you mentioned, so that's a big defining difference.

GIGOT: Yeah. Also, they're much more expensive states to get competitive because they are so large. You need a lot of money.

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


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

Kim, start us off.

STRASSEL: A hit to Canadian Prime Minister Stephen Harper for sending the Obama administration a message. The U.S. has been snubbing Canada for six years over the Keystone Pipeline. Now comes news Canada is developing its own pipe line to its own territory to his own refinery. Moreover, Mr. Harper recently told business leaders that he thinks the United States won't be a fast-growing economy for years and Canada should change its entire mindset about even doing business with us. When you've lost Canada, you've got a problem.

GIGOT: You sure do. They are out beating us on economic policy.


KAMINSKI: Paul, here's a miss to all women's college, Scripps College, in California, which, this week, pulled an invitation for conservative columnist, George Will, to appear at a program at Scripps, an annual program which is specifically designed to bring alternative viewpoints to Scripps because this leads to a better educational experience. Now the offending -- George Will offended Scripps College by writing a column earlier this summer where he said, "It is salutary that academia, with its adversarial stance toward limited government and cultural common sense, is making itself ludicrous." QED.



HENNINGER: Paul, this is a pretty sad miss. Boko Haram in northern Nigeria, the people who kidnap all of the women, they are still on the rampage. In recent weeks, they have burned down 180 Christian churches with the killing that goes with it. Boko Haram is part of an Islamic terrorist network. We need to understand that the fight is not merely in Iraq, it is elsewhere in the world.

GIGOT: All right, thanks, Dan.

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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