Gen. Keane outlines a plan to defeat ISIS; 2014 midterm preview

This is a rush transcript from "Journal Editorial Report," August 30, 2014. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," President Obama backs off reports of airstrikes against ISIS in Syria, saying we don't have a strategy yet. We'll ask General Jack Keane what a successful strategy would look like.

Plus, two Americans are killed fighting alongside the Islamic extremists. So how many more are out there? And could they bring the terror threat home?

And Labor Day weekend is here, marking the unofficial start of the fall campaign season. So will it be a wave election for Republicans or a washout? We'll have our panel's picks for the races to watch.


PRESIDENT BARACK OBAMA: Rooting out a cancer like ISIL will not be quick or easy, but I'm confident that we can and we will, working closely with ally and our partners.


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

That was President Obama Thursday saying his foreign policy team was assembling, quote, "a range of options" for dealing with the growing ISIS threat but backing off reports that the administration was close to a decision authorizing airstrikes against the Islamic extremists in Syria.

My guest this week says a plan to take on ISIS is needed now more than ever and believes an American-led coalition can still successfully defeat the terror group.

General Jack Keane is the former vice chief of staff of the U.S. Army and Fox News military analyst.

General, welcome to the program.


GIGOT: So how formidable a military force is ISIS compared to the guerillas that we defeated during the surge in Iraq in 2007?

KEANE: Well, they're quite formidable in the sense that they operate very differently. They began activities in Iraq in 2009 and 2010, much as we had seen before, as a terrorist activity.

GIGOT: Right.

KEANE: But when they moved to Syria, they grew in size and scale, and they began to operate as quite a military organization. But, by that, I mean they would come into a town and city and dominate it much as a military organization would do. And they got additional fighters in Syria over the three years from 2011 to 2014, and that is when they made their move on Iraq. When they came into Iraq, they were clearly operating no longer as a terrorist organization just conducting terrorist activities. They were actually operating as a terrorist army. And they are quite formidable.

But also, Paul, they're very vulnerable because they control territory, and they are exposed to us, and they actually are easier for us to deal with than a terrorist organization operating in and among the people.

GIGOT: So what are we talking, 20,000, 30,000, 40,000 soldiers in that organization?

KEANE: Right now, most analysts believe it's around 10,000.

GIGOT: That's it?

KEANE: But I don't think anybody truly knows for sure.

GIGOT: OK. And they're trying to grab recruits and encourage recruits all the time. So what would be -- what role does the United States have to play in any kind of coalition, which the president says he's trying to assemble, and you agree we should assemble. What role should the U.S. play in that coalition?

KEANE: Yeah. Well, they should lead a coalition of participating in two major activities. One is an air campaign and the other is a ground campaign. The air campaign, actually, we would have the leading role with our coalition partners.


KEANE: That would mean we would conduct airstrikes in Syria and also in Iraq. The airstrikes in Syria, predominantly where this organization has its support infrastructure, would be attacking staging bases for troops and equipment, supply bases, training areas where the new recruits are coming in, also command-and-control and front-line position in Syria as well as in Iraq.


GIGOT: But you mentioned that ground campaign. That's where I think a lot of Americans begin to get cautious, maybe even including the president of the United States, who says we're not going to have any ground combat troops in Iraq. But what kind of American presence are you talking about?

KEANE: The ground campaign, as opposed to the air campaign, where we would have the leading role, we would just have a supporting role, though it would be significant. By that, I mean we're going to provide arms and training to the Free Syrian Army in Syria, which is an absolute must. We would do the same for those in Iraq that need it, Peshmerga, for sure, some of the Sunni tribe and some of the Iraqi army. The Iraqi army, Paul, would have the leading role in the ground campaign. They would coordinate the activities of the Peshmerga, Shia militia and also Sunni tribes. And we would provide air support to that. We call that close-air support where troops are operating in populated areas and also when they're operating very close to the enemy. And we have to have people to facilitate the use of the air power. They're called air ground controllers.

GIGOT: OK. So what --

KEANE: And we would also need is trainers and advisers.

GIGOT: Advisors.

KEANE: Because, as you know, much of the Iraqi army has to be reconstituted. Some are fighting very successfully now, but some of them have broke. We need new leaders and we need trainers. And that is going to take time.

GIGOT: OK, what kind of -- how large a force are we talking about in terms of American combat troops? Are you talking about Special Forces? Are you talking about Apache helicopters that are just behind the front lines that are firing on enemy armor and armored vehicles? Is that it? Are we talking several thousand Americans here?

KEANE: Yeah. A great question in terms of numbers and the capabilities. The fact is we have hundreds of advisers now and trainers. That would probably have to climb to a few thousand.


KEANE: I do believe that we need to bring in Special Operation forces. These are the forces that operated so successfully in Iraq and Afghanistan to take down the Taliban leadership and the al Qaeda leadership. They would choose where they would operate from, and they would conduct drone attacks, but also ground assault attacks against those leadership positions, as we're doing right now in Afghanistan almost every night. I think that force that we would have in Iraq would be somewhere between 5,000 and 8,000 troops.

GIGOT: What about those who say that if we do bomb the way you've described, particularly in Syria, we'd only be helping the Syrian government of Bashar al Assad and his Iranian allies and leaving them to dominate that region, and that wouldn't be in the interest of the United States either.

KEANE: No, I don't agree with that. What we'd be doing actually -- the Free Syrian Army is the only organization that is truly contesting ISIS. They have been vetted. We are now giving them missiles. We have to increase that rather robustly. What we would be doing by bringing down ISIS in Syria, we would permit the Free Syrian Army to operate exclusively, as they were once before, against the regime, against the Assad regime. If we increased the arms and increased the training for that, it's likely they'd be able to change the momentum. Quite frankly, we have not been doing what we should in helping them.

GIGOT: Right.

KEANE: And you know that two years ago the entire national security team, Clinton, Petraeus and Panetta, recommended arming them robustly, and the president and the White House said no. Now we have to get on with it.

GIGOT: All right, we'll be watching closely.

General Keane, thank you so much for joining us.

When we come back, two Americans are killed in Syria fighting alongside ISIS. So how many more Westerners are there? And how big a threat do they pose to the homeland?


GIGOT: U.S. officials confirmed this week that two Americans have been killed in Syria fighting alongside ISIS militants. The men, both with ties to Minneapolis, reportedly died in a fire fight in the suburbs of Aleppo last weekend. FBI Director James Comey estimated in June that roughly 100 people had left the United States to join the fight in Syria, leaving law enforcement officials here increasingly worried that some will return to the U.S. and carry out domestic attacks.

For more, I'm joined by Wall Street Journal columnist and deputy editor, Dan Henninger; and columnists Bret Stephens and Mary Anastasia O'Grady.

So, Bret, how serious is this threat to the U.S. homeland from these returning fighters?

BRET STEPHENS, FOREIGN AFFAIRS CORRESPONDENT: Well, we met not so long ago with William Bratton, the commissioner of the New York City Police and some of his top deputies, and Commissioner Bratton is saying that they have now added ISIS as one of the core threats to the city of New York, along with core al Qaeda, the homegrown lone-wolf terrorists. They now look at ISIS as a major threat. And as well they should because you have dozens, perhaps scores of U.S. passport holders who may be receiving very significant military training in northern Iraq or in eastern Syria. You also have hundreds of Europeans who have passports from visa-waiver countries who could also enter the country.

GIGOT: So you were at that meeting, Mary. What was your impression? I got the impression that they're really concerned.

MARY ANASTASIA O'GRADY, COLUMNIST: They're very concerned, and I also got the impression that they've done a very good job since 9/11, but it's --


O'GRADY: Yes, the NYPD, and the FBI working in New York.

GIGOT: Right.

O'GRADY: But that it's -- some part of it is luck. I mean, this is what's so frightening about this threat, is that there are a lot of them. I mean, Mike Rogers has said that there are 2,000 ISIS fighters who are carrying Western passports. That means who could get into New York City. You know, we don't have an exact science in terms of how to battle back against something like that.

GIGOT: Rogers is the House Intelligence chairman.

O'GRADY: Right.

GIGOT: So, what is it? We've thought about this phenomenon of the jihadist, for an American who goes and engages in jihad. What is it? Is it alienation from the West, adventure seeking? What is it?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Well, it's a little bit of all those things, Paul. But as much as anything, it's brainwashing by the terrorists using the web, by and large. Look, ISIS -- the "Wall Street Journal" had a remarkable story this week about the economy of ISIS in northern Iraq. They are selling oil on the black market.

GIGOT: Right.

HENNINGER: They're getting millions of dollars in revenue to finance these kinds of operations. They can afford to pay for terrorist conspiracies. And the people in the United States sit on the web looking at these terrorist videos -- John Miller one of the deputies to Bill Bratton said, look, there's a magazine al Qaeda puts out.

GIGOT: "Inspire" magazine.

HENNINGER: "Inspire" magazine, has articles about how to make a bomb in the kitchen of your mom. Sounds like a joke, but one of the terrorists they caught here, Jose Peamontall (ph), had been building his bomb based on that magazine article.

GIGOT: They had the latest iteration of how to make a car bomb.

And by the way, at 47th and Broadway, here's where you can park it. Literally, that kind of -- how do we counter that, Mary?

O'GRADY: Well, I don't think there's any one silver bullet. But obviously, intelligence is the most important element. I think what John Miller was describing is how they have been able to identify who these individuals are --

GIGOT: Right.

O'GRADY: -- and follow them for -- surveil them for up to two years. I think that's been very successful but, again, it's not an exact science.

GIGOT: And that surveillance has actually been under political pressure here at home, people saying it's intrusive. But it sounds to me like it's absolutely crucial.

O'GRADY: Yeah, I don't think the politicians have done a good enough job in explaining to the American people how serious this threat is.

GIGOT: Bret, where are the moderate Muslim voices, not just in the United States but also in Europe, speaking up and saying, look, this kind of behavior, murderous jihad is antithetical to properly understood Islam and we're not going to countenance that?

STEPHENS: The voices are out there. But sometimes the people who are describing themselves as moderates aren't moderate enough. They're too busy explaining why this sort of thing happens rather than working forcefully to prevent it. There have been people, former radicals, who have come over to a much more moderate position who are looking to counter these sorts of young fanatics. But what would be good to see is more moderate voices talking about the crisis within the Islamic faith itself, rather than going on about the Israeli/Palestinian conflict or this Western assault or that one on the Muslim faith.

I would just add, by the way, to what Mary said before.

GIGOT: Quickly, Bret.

STEPHENS: Intelligence is crucial, surveillance is crucial, but nothing is going to work better than defeating ISIS, not allowing them the idea that they got away with taking over half a country in the Middle East.

GIGOT: And we will get to that.

Still ahead, as President Obama contemplates America's next move against ISIS in Iraq and Syria, a look at how the political dynamics are playing out here at home, including a call for military action from some unlikely places.



OBAMA: Throughout this process, we've consulted closely with Congress, and the feedback I've gotten from Congress is that we're doing the right thing.


GIGOT: More from President Obama this week, claiming broad support on Capitol Hill for the administration's actions against ISIS so far.

Mary, the president claims that support. But has the ISIS phenomenon, the rise of this presumably caliphate, as they call it, has it changed the domestic politics of intervention in the Middle East?

O'GRADY: Well, I think it may have changed things for now. But I think we should remember what happened after 9/11. There was a lot of support for defeating terrorism and it slowly waned to the point where, when President Obama pulled out of Iraq, he had lots of support for that. So, yes, there's a lot of public support and Congress is responding to that by saying all the right things, but I'm not sure how deep it goes.

GIGOT: So you think it will be evanescent.

Do you agree with that?

HENNINGER: Yeah, I pretty much do. I think Congress is very leery to get involved, as is the president of the United States. He said Friday that he really does not have a strategy yet for intervening in Syria.


HENNINGER: He said this is going -- yeah -- this is going to be a long- term project and he's looking for a coalition of partners. Last time I looked, the Saudis decided they could no longer be a partner with the United States. So this is being reflected in comments in Congress. Congressman Adam Schiff, of California, supports --

GIGOT: A Democrat.

HENNINGER: -- Democrat in California. He supports doing things for protecting Americans near Erbil. He supports humanitarian interventions on behalf of the Yazidis and the Christians. But that's it. So we're at a kind of impasse here where both the president and Congress don't want to go any further than we have so far. ISIS isn't going to wait for us to make up our minds.

GIGOT: Bret, as I hear Republicans talking, with the exception I think of Rand Paul, the Senator from Kentucky, who doesn't want to do anything, I think I hear a lot of Republicans essentially telling the president, go further. You have to be more aggressive. This is a real threat to the homeland and you have to do something about it. Is that how you see the dynamics within the GOP?

STEPHENS: Yeah. With great relief, I think Republicans are coming back around to their traditional foreign policy seriousness, kind of their hawkish instincts. I think they understand that a rudderless world where America is sort of going into an isolationist shell of a sort that Rand Paul wants is going to be a very dangerous world.


GIGOT: But what about the Democrats, Bret? Because they're -- and the president -- they're the ones who have restrained this president for going back since the beginning of his administration. I mean, they've been saying -- he's been in sync with them saying don't do anything, withdraw from the Middle East. Are they changing at all now?

STEPHENS: Well, you see, I think they're changing as well, Paul. You saw that with, of course, the comments made several weeks ago by Hillary Clinton saying, "don't do stupid stuff" is not a strategy for a serious power, warning that America's failure to help arm the moderate insurgents in Syria has led to the debacle we have now. So there has always been a more serious, sober-minded internationalist wing of the Democratic Party that was really drowned out by the ascent of Barack Obama and a very left- wing progressive side of the party. I hope that internationalism is beginning to reassert itself.

The real problem, Paul, is President Obama is sounding such an uncertain trumpet that serious Democrats as well as Republicans don't trust this guy to pursue a serious strategy if he can develop one in the first place.

GIGOT: That's to your point, isn't it, Mary, that he's -- even if the public might support action, you're not sure that the president is the person who can demonstrate the leadership that people will get behind.

O'GRADY: I don't think he is. And I think he doesn't have a plan, as he admitted. But I don't think he understands the magnitude of the problem either. I mean, here's a guy who's basically said we want to help out in Iraq, but there shouldn't be any victor. I mean, how can you go into a war saying we want to have a tie, and when we have a tie, we'll come home? You need somebody who willing to lead and, by the way, continue to lead when the body bags start coming home. Because what these guys are talking about is not just dropping a few bombs on Syria. They're saying, look, we have to go in and be on the ground because, if we leave, Assad will get power, and if we don't stay there, ISIS will come back up. So it's a permanent, long-term commitment to the Middle East.

GIGOT: It is of ascent. I'm not sure we're talking about ground troops in Syria on the American side here.

HENNINGER: It's not a permanent, long-term commitment because everything one reads about Congress is if Barack Obama goes to Congress, one of the things they'll do in their authorization is put a specific time limit on anything he does. We've talk about that for years after Iraq. And secondly, I think the authorization will say that the president is in no way contradicting his core claim that the United States is no longer on a permanent war footing.

GIGOT: So should he go to Congress with this kind of authorization? That strikes me as basically hamstringing himself.

HENNINGER: I agree. I don't think I should go to Congress because it is going to -- given the reality of ISIS in northern Iraq, it is simply not going to allow the president the freedom he needs to fight them.

O'GRADY: But if you put on the table, by the way, here's when we're going to bomb, here's where we're going to lead, I'd love to be fighting an enemy like that. You can just wait them out. So it's a recipe for disaster.

GIGOT: All right. We'll be watching this debate as it unfolds in the fall.

Much more to come in this special one-hour edition of the JOURNAL, EDITORIAL REPORT.

Still ahead, the Labor Day weekend is upon us, which means the fall campaign is kicking into high gear. Will the GOP wave that some have predicted really materialize? We'll ask Republican pollster, Whit Ayers.

Plus, our panel's picks for the races to watch.



GIGOT: Welcome back to this special edition of the "Journal Editorial Report." I'm Paul Gigot.

Well, it's Labor Day weekend, the unofficial start of the fall campaign season. And as House and Senate candidates are busy courting voters in their home states, analysts are busy looking at the poll numbers and trying to determine if a much talked about GOP wave is likely to materialize.

Republican pollster, Whit Ayres, joins me with his take.

Whit, welcome back. Great to have you on the program.

WHIT AYRES, REPUBLICAN POLLSTER: Thanks, Paul. Good to be with you again.

GIGOT: So, I saw a poll this week saying Republicans at the grass roots, not in Washington, this is Republican voters at the grass roots, are expecting a big victory this November. Are those expectations fair and accurate?

AYRES: Paul, there are a lot of factors that lead to Republican victories this year. It's the sixth year of a president's term, which is historically been bad for the party in the White House. President Obama's job approval is mired in the low 40s and doesn't seem to be going anywhere but down. Support for his signature achievement, Obamacare, is similarly mired in the low 40s. The generic ballot, the sort of general preference for Republicans versus Democrats for the Senate, is roughly even and Republicans have done well whenever it's even or better.


GIGOT: But I hear you saying that, yes, that wave expectation is correct. Is that true?

AYRES: Paul, there is not the same set of figures today that there was for the Democrats at Labor Day in 2006 or the Republicans at Labor Day in 2010. It doesn't look --

GIGOT: So what's lacking?

AYRES: It doesn't look like the size of "that" wave. But what you do see is a whole lot of factors leading to Republicans. And particularly in the Senate, just the luck of the draw, there are a dozen Democrat-held seats in red or purple states. All Republicans have to do is hold Georgia and Kentucky, which I think they will, and then win half of those dozen seats, and they take control of the Senate.

GIGOT: OK. But you say there's not the same level of enthusiasm, if you will, in 2006 or 2010 from the out party. So what is the difference? What are Republicans missing this year?

AYRES: In 2006, you had real problems with Iraq. In 2010, you had real revulsion on the Republican side with Obamacare, the stimulus package, and the way the president had governed the first two years. You don't have that same sense of overwhelming support.


AYRES: But you do have a lot better candidates that Republicans have nominated this year. The National Republican Senatorial committee has done a great job expanding the map and increasing the number of chances. So I think the general pattern certainly leans toward Republicans, and it may build to be a wave between now and November. It's just not present yet.

GIGOT: To win back the Senate, Republicans have to beat Democratic incumbents, particularly from the class of 2000. Yet, Republicans, if you look back historically, haven't beaten more than two Senate Democratic incumbents in any year, not even 2010, since 1980, when they won 12. Why do Republicans have such a hard time beating Democratic incumbents when Democrats haven't had the same problem beatings Republican incumbents in some of these other Democratic years?

AYRES: Paul, it is tough to beat an incumbent. You have in places like Arkansas, Mark Pryor, or Louisiana with Mary Landrieu, candidates who have demonstrated in the past their ability to win as Democrats in red states. Not just them, but members of their family have won as Democrats in red states. They know how to run campaigns. It is a tough thing to beat them. I still think we've got a very good shot in both of those states as well as many of the other red states. But this could be very close. We could be going into December before we know who controls the Senate. And we won't know until December 6th, when we have the runoff in Louisiana, who actually has control of the Senate.

GIGOT: The other thing I hear from Democrats is that they are spending a lot of money, investing a lot of money, not just on the air waves and advertising but in turnout, and in their Affinity Voter Program, they used so well in 2012 with social media. You get five emails on Election Day saying, have you come out to vote yet? Can I get you a car? What can I do to get you to the polls? And that that investment, they're so much better on technology than Republicans, could this be the Democratic secret weapon that lets them hold the Senate this year?

AYRES: Well, it certainly helped them in 2012.

GIGOT: It did.

AYRES: I think Reince Priebus and the RNC have made major strides in improving the Republican technology. And keep in mind, the turnout mechanisms can only get you so far. They can make a difference of a point or two. They're not going to make a difference of four or six or eight points.

GIGOT: Let me put you on the spot, Whit. Are Republicans going to gain seats in the House, number one?

AYRES: They may gain a few. They won so many in 2010, there are not a lot of winnable seats left. But they may gain a few.

GIGOT: Gain a few. All right. In the Senate, will Republicans get the six seats they need to take control of the Senate?

AYRES: If you force me to say today, the answer is yes. It certainly is better than 50/50. It's probably more than a 60/40 chance today that Republicans take over.

GIGOT: Is it possible that they could even build on that and get as many as 10?

AYRES: If they have as many as 10, it really will be the result of a wave developing. When you win that many, you win a whole lot of states by a very few points. But that certainly is in the realm of possibility this year for Republicans.

GIGOT: Quickly, do you have one surprise seat you're looking at that could upset us all?

AYRES: Well, let me go with my friend, Ed Gillespie, in Virginia. He's running a great campaign, it's an uphill climb, but he is a very, very good candidate and a very, very fine strategist.

GIGOT: Running against incumbent, Mark Warner, in Virginia.

All right. Thank you, Whit. Appreciate you being here.

Much more ahead as we continue our midterm election outlook, including our panel's picks for the races to watch.


GIGOT: Continuing now with our midterm preview and a look at some of the races that could make or break Republican hopes for a wave election.

We're back with Dan Henninger. Assistant editorial page editor, James Freeman; and editorial page writer, Allysia Finley also joins the panel.

So, Allysia, Whit Ayres gave us the big picture overview. You've been following a lot of these races. Pick out one you're following that's important to watch.

ALLYSIA FINLEY, EDITORIAL PAGE WRITER: I think North Carolina is really interesting. Thom Tillis, the speaker of the House, the Republican speaker, is taking on Kay Hagan.

GIGOT: This is the Senate race.

FINLEY: Right. The polls are pretty close, deadlocked. And with Thom Tillis, he's basically been a reformer on the state level, pushing through tax cuts, reforms in the unemployment benefits and school reforms. And there's been a big blowback and Kay Hagan is trying to make the race about that.

GIGOT: Yeah, those changes have been controversial in North Carolina, and the legislature isn't popular.

FINLEY: That's right. And they're trying -- Kay Hagan is running a campaign against basically the North Carolina legislature, and trying to run from Obama. It's really interesting to watch her on the same stage with Obama at the V.A., American Legion.

GIGOT: She's not running on her record. She's running against --


GIGOT: -- the state record. Interesting.

James, what are you following?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Yeah. It's kind of a consistent theme we're going to see.


FREEMAN: These Democrats in red states where the president is not popular avoid talking about everything they've been doing in Washington. And I've been looking at Alaska where you have incumbent, Mark Begich, a Democrat, some say the most talented campaigner, the most savvy campaigner among the Democrats defending their seats. He's going against Republican Dan Sullivan. And the Begich strategy is basically to talk about everything except the big issues where he's voted in Washington. ObamaCare, he won't say directly whether he would vote for it again. He actually said the other day, on an oil tax question, that it was private, as if this is sort of a personal matter.

GIGOT: But that's a Republican-leaning state. He should be able to pull that out.

FREEMAN: Well, I don't know. Right now, it's looking tough for him. And I think the real question is, is he going to be able to get through the election without ever talking about himself.

GIGOT: Dan, you have a Republican seat you're talking about.

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yeah, well, I'm following Kentucky. That's where the Senate minority leader, Mitch McConnell, is in another tough fight with the Democratic secretary of state, Alison Grimes. Now this is one of these control-of-the-Senate battles because there is a third candidate who just qualified for the ballot, David Patterson. He is a Libertarian.

GIGOT: Ah-ha --


HENNINGER: Well, you know, Libertarians are upset because McConnell pasted their candidate, Matt Bevin, in the primary. And the questions is, will they vote for McConnell or will they stay home or vote for Patterson. It's not clear yet what they're going to do. But if they cost Mitch McConnell that seat, it puts the Senate control in danger.

GIGOT: I want to focus on one of the governor's races. Scott Walker, of Wisconsin, running for re-election, passed those big collective bargaining reforms on public employee unions. But he's in a real dog fight. In the internal polls, he's only a couple of points up. If he doesn't win, not only will his presidential candidacy be in trouble, but so will those reforms. So that's a very important fight that the nation should watch.

But, Allysia, you're following a governor face, too?

FINLEY: Yeah, right next door in Illinois, where Bruce Rauner is vying to take -- is challenging Governor Pat Quinn. Basically, this is the fight to rescue Illinois from insolvency and failed liberal governance. Quinn, a couple or a few years ago, passed -- jammed through, actually, a huge, massive tax hike, and he wants to extend it. Rauner wants to cut or phase it out over several years and he also wants to put in various other business tax reforms.

GIGOT: Is Rauner ahead in the polls? I think he is.

FINLEY: He is. Some have shown him almost up to double digits. But we're locking at more at three or four points.

GIGOT: But that would be a big blue state upset for a Republican in the state that's gone Democratic for the last dozen years.

GIGOT: James?

FREEMAN: Another race we're watching is New Hampshire. This looked like the best news for Democrats. Among the seats they're defending, until recently, is the Senate seat, Jeanne Shaheen trying to hold off Scott Brown, former Massachusetts Senator, who is now running in New Hampshire. She had about a 10-point lead in most polls. All of a sudden, it's kind of evaporated over the last month. But I think talking about this challenge of how do you run in a moderate-to-conservative state after what's been happening in Washington, her story is she had her biggest wins in the past, running essentially as a moderate-to-conservative Democrat, being a tax cutter. She now is basically going after Brown on the global warming argument, saying that he's an oil industry guy and she's the Greenland. I don't know if this is a winning formula for her. Right now, it's basically a dead heat.

GIGOT: And in Arkansas?

HENNINGER: Arkansas. Yeah, Arkansas is fascinating. You have the incumbent, Senator Mark Pryor, running against a pretty respectable Republican congressman, Tom Cotton. Harry Reid really wants to hold this seat. His senatorial PAC has put $3.6 million into Pryor's campaign.

GIGOT: Not saying nice things about Pryor --


HENNINGER: Well, this week they had an ad up -- they had an ad up this week saying that Cotton is going to cut your Social Security payments. They even ran an ad saying Cotton voted against pandemic prevention, Ebola. So they're throwing everything but the kitchen sink at him.


GIGOT: The Congressman from Ebola. Yeah, that sounds like --


HENNINGER: But this one is very close. You've got 13 percent of Independents undecided, 6 percent undecided. But Obama's approval rating down there among Independents is 13 percent. This thing should cut for Tom Cotton. But it's going to be very close.

GIGOT: I've got a dark horse for you. Al Franken, the Democratic incumbent from Minnesota. He's being challenged by Michael McFadden, a businessman. Franken is running a low-key race. If you go out there, you can't -- where's Al? You can't find him. He was on TV all those years. Now he's hiding out, trying to kind of go under the radar. But watch out. McFadden -- Obama is not as popular in Minnesota as you think. And McFadden, if he can get any kind of momentum, he has a chance to beat Al Franken.

When we come back, an iconic fast-food chain is moving its headquarters to Canada with the blessing of President Obama's favorite billionaire. So why is Warren Buffett supporting the so-called corporate deserters?


GIGOT: Burger King confirmed this week that it would buy Canadian doughnut chain, Tim Horton's, for $11 billion dollars, a move that would allow the Miami-based fast-foot giant to head north and take advantage of Canada's lower corporate tax rate. The deal is being financed by none other than Warren Buffett, President Obama's favorite billionaire, and an early supporter of his campaign to raise taxes. So called tax inversions have been a hot topic in Washington with the White House and Senate Democrats promising to crackdown on the practice possibly before the midterms elections.

We're back with Dan Henninger, James Freeman and Mary Anastasia O'Grady.

So, James, does that make Warren Buffett at least a better of corporate deserters?

FREEMAN: Well, it does take the wind out of this Democratic campaign. This has been the issue they wanted to talk about instead of Iraq and Russia and the V.A. and the IRS scandal and Obamacare. I'm probably forgetting some.


They really wanted this election to be about beating up corporations that move their headquarters. And now the ultimate Democratic authority on taxes is backing a deal with those --


GIGOT: But Buffett says I'm not -- I'm going to pay the U.S. tax rate on any dividends that they pay me on, like preferred stocks. So what is the problem?

FREEMAN: Well, the problem is he's -- the problem is a political one for the White House. He is financing this transaction. And it's not about his company, Berkshire Hathaway. They're not moving. Burger King is moving north of the border and that means that they are going to get a better tax environment in Canada.

GIGOT: These aren't really corporate deserters. That's just a --


GIGOT: -- political slogan. All they are doing is moving their headquarters overseas, so that on their foreign earnings, they can pay lower taxes. And then they can actually invest that money in the U.S. without having to pay U.S. taxes. They can invest more in the United States.

FREEMAN: And all the burgers they are selling in the U.S. now, all those profits, they pay taxes now, they will pay taxes in the future. As you said, this is all about when foreign earnings come back from overseas, are they able to invest them in the U.S. without paying an extra penalty.

GIGOT: Mary?

MARY ANASTASIA O'GRADY, COLUMNIST: The question is, why would any company not do this at this point? I mean, Canada, Ireland, the U.K., they're much better places to do business. And what startles me is the inability of our political class to understand, to grasp how futile it is to try to use draconian -- draconian --

GIGOT: Draconian.

O'GRADY: Easy for you to say.


-- methods of forcing them to pay higher taxes when they can leave. They can leave very easily. And Canada has made itself a very attractive place.

GIGOT: But, Dan, it's clear that the White House has looked at the poll and said, yeah, corporate deserters, that really scores well in the polls. People really don't like corporate deserters.


So what -- so Democrats are going to try to come up with something at Treasury to block this, unilaterally change the law, and Democrats want to force a vote in the Senate. How powerful is this issue politically?

HENNINGER: I don't think it is all that powerful politically, Paul. I mean, even Democrats -- this shows has far the issue has degraded. In Obama's first term, there was general agreement on both sides of the aisle that the corporate tax rate should be brought down below 30 percent. Obama --

GIGOT: To 35, almost 40 if you include state rates.

HENNINGER: Exactly. And they've said let's bring it down to 25 percent. Both Democrats and Republicans, by and large, said we can get this done. But Obama wanted to close the loopholes, eliminate the deductions, and take the savings and put it into an infrastructure bank rather than lower rates, as low as he could get them. So it never happened. And now the issue has fallen apart to this point where the Democrats are using something that they could have solved to hammer Republicans.

GIGOT: It seems to me Republicans have the response they need to this Democrat -- you know, Warren Buffett's doing it.


GIGOT: You know, if you don't hold it against him. I mean fix the tax code. That's the real problem.

FREEMAN: Right. And related to what Dan is talking about, the basic liberal argument is, oh, look at all this great government we get, and that is why we need this high tax rate. But as Mary has pointed out, there are a lot of places in the world that manage to have a much lower rate and also have paved roads and bridges.


Canada, you know, they actually have a rule of law and airports even.


It is possible without the highest rate in the world.

O'GRADY: And I think if Republicans are smart, they will also make the point that this isn't just about keeping U.S. corporations here. But there is also a negative incentive for new capital to come in. Nobody wants to come in and set up a headquarters here with this tax rate. And with Obama's growth record on the economy, we need fresh capital coming into this country. I think that is a point the Republicans should use.

GIGOT: All right, Mary.

Thank you all.

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.

Dan, start us off.

HENNINGER: Well, Paul, I'm going to give a miss to Germany's Energy Revolution Program. This is something they announced in 2011. The idea is that Germany is going to end, end reliance on nuclear power and fossil fuels and transition to solar and windmills. They have filled northern Germany with windmills. Unfortunately, they haven't built the electrical lines to get it down to southern Germany.


Secondly --

GIGOT: Small detail.

HENNINGER: Small detail. Energy costs have skyrocketed in Germany for both consumers and producers. And by 2040, energy costs could equal half of German GDP. All I can say is I'm glad they're doing it to themselves so we don't do it to ourselves.

GIGOT: All right.


FINLEY: I'm giving a miss to the California State Senate, which has a higher arrest rate than the general California state population --


-- and all of those major cities, including Oakland, San Francisco and L.A., which just proves that what you suspect, that the politicians are more crooked than the general population.

GIGOT: What is their arrest rate?

FINLEY: It is -- well, it's 1.6 per 20.


All those arrests were of Democrats this last year.

GIGOT: All right.


FREEMAN: Strange coincidence.

If we could go from the worst members of society to some of the best, I'd like the give a hit. Kudos to Dan Rooney and the charity he founded, Folds of Honor. Across the country, this weekend, the golf courses are sponsoring Patriot's Golf Day and the greens fees are going to scholarships for the children of our fallen warriors. So a great cause, and this available at thousands of golf courses across the country this weekend.

GIGOT: You know, the Germany GDP is $4 trillion. They are betting $1 trillion, 25 percent on that on this.

HENNINGER: Windmill energy.

GIGOT: Yeah.

And remember, if you have your own hit or miss, be sure to tweet it to us, @jeronfnc.

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

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