This is a rush transcript from "Journal Editorial Report," November 10, 2012. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," our complete post-election wrap-up. A look at how President Obama won a second term and what he's likely to do with it.

Plus, how should Republicans respond and regroup for 2014 and beyond?

And from tax hikes to collective bargaining to gay marriage, how some big ballot measures faired Tuesday in states across the country.

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

A divided country gave President Obama a second chance on Tuesday, handing him a narrower but still decisive win over Republican rival, Mitt Romney.

Here with a look how he did it, Wall Street Journal columnist and deputy editor, Dan Henninger, Political Diary editor, Jason Riley; and Washington columnist, Kim Strassel.

So, Kim, let me start with you. When you get a defeat like this, there's no one thing necessarily that explains it. But why don't you pick out your most important?

KIM STRASSEL, WASHINGTON COLUMNIST: Look, I think there were two things key to the Obama victory. One was that, very early on, they ran this very high-dollar attack campaign against Mitt Romney, a bit of a character assassination. This was throughout the summer. Mitt Romney didn't respond to it and, in fact, we now know he didn't really ever recover from it. When you combined that with the president's brutally efficient, we now know, turnout operation, and in particular in core states like Ohio, Virginia and Florida. When you look at the popular vote there, pretty close in the end. But in the end, he got out his partisans in much the same numbers as in 2008 and that's what won it for him.

GIGOT: So, Kim, you're saying that's about $100 million or more that the Obama campaign poured on Mitt Romney, on Bain Capital, on his tax returns, on the fact that he's a plutocrat, sort of making him to be Gordon Gecko without the social conscious.

STRASSEL: Yes. Right.

GIGOT: And Romney's campaign, if your view, would you agree they made a fatal strategic mistake in not countering those attack ads?

STRASSEL: I think it was the mistake. And there was a belief in the Romney campaign that somehow if you were responding, you were losing, but by sitting back and not doing anything -- and one of the problems, they didn't have a lot of money. This was still the primary season. They hadn't been opened up to the general campaign dollars yet. But by sitting back, they did allow the president to brand him that way. And when you looked at the exit poll numbers and questions people asked, that was certainly the impression left with lots of Americans.

GIGOT: And, Jason, the Romney camp told me, I remember, in August, they didn't feel they had enough money to respond at the time to make either both a positive and defensive message to those ads, so they went with the positive one, here is what Romney will do on day one.

I also think those attacks had a kind of voter suppression impact on some of these lower-middle class voters, and explains maybe, in part, Ohio, why Romney didn't even get the same number of votes -- two million votes, 2.5 million votes lower than John McCain.

JASON RILEY, POLITICAL DIARY EDITOR: I think what stands out about Obama's victory to me is how ugly it was. this was identity politics on steroids, Paul, telling black people Republicans want to take away their right to vote and telling women there's war on them, tell seniors that Paul Ryan wants to push granny off the cliff in a wheelchair. This was real -- this was not the hope-and-change Obama. This was not the "there's no red state and blue state" Obama. He won ugly. It's divisive. And if this is the template for how Democrats want to win elections going forward --


GIGOT: But, Jason, I can tell you what the reaction in the White House would be if they heard you say that. They would say, oh, get over it, grow up.


This is politics, Republicans got a -- you know, put on their boxing gloves and get over it.


GIGOT: This is -- so what? You know? I won. You know, suck it up.



This is the new benchmark in the way you win a presidential campaign. No question about it. It's too bad. But that's the way it is.

Now, I want to elaborate on one of Kim's points, about the brutally efficient Obama turnout machine. This turnout machine did not materialize after the convention in August.


HENNINGER: We need to pay a lot more attention to the so-called Obama ground game. It's in some ways -- we try to talk about this in neutral terms. It's somewhat analogous to a corporation's marketing campaign for a new product. And they don't just do that overnight. Obama kept offices open after the 2008 campaign in Iowa, in Ohio, in Florida, in Virginia. These people were working full-time and targeting campuses and they were targeting minority neighborhoods, and their target groups. And they were feeding --


GIGOT: You've got to give them credit for that, don't you?

HENNINGER: I am giving them credit for that. But you have to understand that Obama's policies on things, the sort that Jason was just describing, was essentially a propaganda campaign to drive these voters away from the Republicans. And they did it by sending them e-mails every week, by talking to them, by holding meetings, and by literally, physically taking them to the polls.

GIGOT: But why -- when Romney was saying -- the Republicans were saying we're going to be able to match that, Kim. You know that. They were telling you they had a ground game every bit as formidable. And in the end, not only do they not match Obama, they didn't match John McCain.


They fell short of John McCain by a couple million votes. So is this all --

STRASSEL: Look, I think --

GIGOT: So what happened?

STRASSEL: Yes. Look, I think their organizational structure was in place, but this, again, to get to the way Mr. Romney ran his campaign. Somebody made an interesting point to me this week and said, you know, at the very end, he was enthusing big crowds. The problem was he was enthusing those people who should have been with him from the start. And he just didn't have the time. And when he finally turned after the Denver debate, finally got some momentum. There wasn't enough time to bring in all those undecided voters, the people that were sort of marginal in the end because he spent so much of this time, campaign, instead letting Obama define him and deciding to run a referendum campaign on the president.

GIGOT: What about the minority vote, Asians, Hispanics? Jason, they went even bigger numbers for President Obama this year, than four years ago.

RILEY: Oh, sure. I mean, that's -- he got particularly Latinos. There were more of them. They made up a larger percentage of the electorate and won more of them. That may have been the key, particularly in the swing states in the mountain west that George W. Bush did so well in, Colorado, Iowa, Utah, Nevada, New Mexico. Romney didn't play out there.

GIGOT: To give you a sense of the magnitude, there were 8 percent of the Hispanics in 2008. There 10 percent this year. And Romney's share went from -- Republican share went to 27 from 31.

HENNINGER: And the Romney campaign thought they needed 37 percent of that Hispanic vote for their numbers to win and they got 27 percent. The arithmetic on the Latino vote is just brutal and obvious. They have to do something about that.

GIGOT: Quickly, Jason?

RILEY: I want to make one more point about the type of campaign that Romney ran. He focused on the economy.

GIGOT: Right.

RILEY: He wanted to make this the Obama economy.


RILEY: But he woke up Wednesday morning and probably saw an exit poll figure that had him devastated, which is that, for people -- 50 percent of the electorate still thought this economy was George W. Bush's fault.

GIGOT: It's astonishing.

RILEY: It's absolutely astonishing.

GIGOT: And that suggests one of the failures was not making a distinction in the campaign, the thematic explanation of why he would be different than George W. Bush.

All right. When we come back, the soul searching begins as Republicans face another four years of a Democrat in the White House and at least two more in the Senate minority. What the party needs to do to regroup for 2014 and beyond, next.


GIGOT: Another White House loss for the GOP, coupled with their failure once again to take back the Senate leave many in the party calling for change. What can Republicans do to regroup for 2014 and beyond?

Jason, it's a wonderful time of the season, called recrimination.


Otherwise known to journalists as "shooting the wounded," which is our specialty.


So, what --


How much trouble is the Republican Party in?

RILEY: They're in a lot of trouble.


The coalition needs to expand. It's that simple. There are demographic trends in this country that the GOP has to wake up to and adjust accordingly. And I think you have to start with the Hispanic vote. And this is doable, Paul. Between 1996 and 2004, the GOP doubled its percentage of the Hispanic vote to more than 40 percent. The Hispanics are not natural Democrats. They're not lost to the Republican Party. They need to be courted appropriately.

GIGOT: Are you saying they don't all naturally want to be part of the 47 percent, to sit on the goal?


GIGOT: Is that what you're saying?


GIGOT: Some Republicans talk like that's what they do.

RILEY: And this is irrespective of immigration policy, Paul, because these demographic trends are being set by immigrants or by Hispanics already in the country, not new people coming.

GIGOT: You're saying if you shut down the border now, for the next 50 years --

RILEY: You would not stop this wave.

GIGOT: -- you would still have --

RILEY: You would not stop it.

GIGOT: -- you would not stop it?

RILEY: Their percentage of the electorate --

GIGOT: All right.

RILEY: -- continues to grow.

GIGOT: So what should Republicans do to appeal to that vote?

RILEY: Make them feel welcome in the party, I think, is the way to go. And of course, they don't only vote on issues of immigration.


RILEY: That's not the top issue that they vote on, but it's symbolic.

GIGOT: But is this a symbolic threshold issue? In other words, if you don't appear open to immigration, then they won't listen to you on the other things?

RILEY: I wouldn't go that far. It's just a sense of making them feel welcome in the party. And when you have primary debates about whether the fence should be electrified --


-- or a hundred feet tall, they get a sense they may not be welcome.


GIGOT: All right, Dan, what about other parts of the coalition? Or - - to what extent is the core Republican Party principles of small government, traditionalism on social issues, to what extent were those costly here for the party, if at all?

HENNINGER: Well, it was a close election. Let me see if I can talk about this without it being taken in the wrong way. The white vote in the United States is almost -- not wholly Republican, but overwhelmingly Republican.

GIGOT: Romney got, I think, 60 percent of that vote, 61.

HENNINGER: Sixty percent of the vote. Even among 18 year olds, he got 52 percent of white 18 year olds.

Now, the idea -- the media keeps talking about the white vote as though there's some weird sort of racial story beneath it. There's nothing racial about this. It's about your perception of your own economic self- interest. And I think the -- there is no evidence in this election that the Republican Party's ideas on tax efficiency or certainly even Medicare and Social Security reform did not hurt them among elderly voters at all in Florida, that those ideas are not the problem in this campaign. It had more to do with a certain technical way that Mitt Romney ran that campaign and the overwhelmingly -- the power of the Obama turnout machine. But the Republicans should not, I think, stand back and say, how do we reengineer our ideas? That was not their big problem in this campaign.

GIGOT: Yes. If you step back, Kim, the election was, what, Romney lost two percent of the popular vote.

STRASSEL: Right. Right.

GIGOT: It was a landslide in the Electoral College. But if you changed 300,000 votes in four states, Mitt Romney would be president.


GIGOT: Now, that's, in some way, a fool's game because that's the way it always is. And I'm not trying to sugar-coat the defeat. But the Republicans now own, I think, 30 governorships around the country.

STRASSEL: Right. Right.

GIGOT: So -- and, of course, they kept the House, which they -- and they lost only what, about five, six seats after having won 63 two years ago, and despite this being a Democratic year. So, can you overdo the Republicans "woe is us" panic here?

STRASSEL: Oh, you bet. And Democrats, by the way, are going to be pushing that. This is a sound track they roll out. This is -- the Republicans lost because they're too extreme. First they said that back in 2008, right before they got in the 2010 midterm elections.

But the problem here was not the GOP agenda. The problem was Romney didn't talk about that agenda much until the last month of the campaign. And as you said, you have had the big success story for the GOP, which was continued on Tuesday night, is this ownership of a growing number of states in terms of the governorships, state assemblies, the legislature, and those are pro-reform governors out there running on the very things, tax cuts and spending cuts and pro-growth policies. Voters are listening to that. They're responding by electing these people, but they have to hear the message.

GIGOT: All right.

Jason, one other thing, the youth vote.

RILEY: Yes, I think that's another area where I hope the GOP focus is going forward. Romney lost the youth vote -- these are 18 to 29 year olds -- to Obama by about 20 points this time. I mean, Bush only lost the youth vote -- and the youth vote typically does go Democrat, so it's just about being competitive.

GIGOT: Right.

RILEY: But Bush only lost the youth vote to Kerry in '04 by about nine points, and Bush lost it to Gore by less than that. Reagan won the youth vote. The trend is in the opposite direction --


GIGOT: Is that a cultural focus, miss on several of he gay marriage issues --


RILEY: It's -- it's --

GIGOT: -- or not hip enough?

RILEY: I don't know.


I'd love to have a conversation with a strategist about this. I think that the youth tends to vote on social issues, which is particularly surprising since so many are coming out of college and this economy looking so drab, but.

GIGOT: All right, Jason, thanks.

When we come back, House Speaker John Boehner extends an olive branch, promising to work with President Obama to avoid the fiscal cliff. So how much will they give and how will the White House respond?



REP. JOHN BOEHNER, (R-OH), SPEAKER OF THE HOUSE: The American people have spoken and they've reelected President Obama and they've again reelected a Republican majority in the House of Representatives. If there's a mandate in yesterday's results, it's a mandate for us to find a way to work together on the solutions to the challenges that we all face as a nation.


GIGOT: That was House Speaker John Boehner on Wednesday vowing to work with President Obama on the big challenges facing the nation. The first of which is to void the so-called fiscal cliff, a toxic combination of tax increases and automatic spending cuts, especially in defense, set to take effect January 1st.

So, we pointed out in the last segment, Republicans held the House with minimal losses despite a big Democratic year. Can Boehner think, look, I've got as much mandate as the president?

HENNINGER: I think he should absolutely think that, Paul. The president, it was made clear, didn't really run on his second-term agenda, didn't talk about it much. I'll tell you what the mandate is right now. The mandate is that fiscal cliff, the bipartisan mandate.

GIGOT: To go off it, is that the mandate or to stop -- not to go off it?

HENNINGER: Well, I think since the stock market went off --


HENNINGER: -- in the last week, people are saying, pretty clearly, you've got to do something about this now.

I think they have a lot of leverage here, because if something isn't done, the economy is going to decline, maybe go into recession. I think employment can get as high as 10 percent new year.

GIGOT: If we had another recession, it would.

HENNINGER: If you're the president of the United States in a second term, you do not want, as your legacy, an economy that had 10 percent unemployment --


GIGOT: Well, what if --


HENNINGER: -- for 10 years.

GIGOT: But the left is saying to him, look, don't give in at all. you won --

HENNINGER: Yes. And you know what?

GIGOT: And if you go off a cliff, you blame them, and they'll get the blame.

HENNINGER: He has no other term. I think Obama's going to start thinking about his legacy. And I predict, Paul, he may throw the left over the side to do a deal with the Republicans that enhances his legacy.

GIGOT: Kim, is there any evidence from the first term that the president is about to slow the left over the side? And working -- he governs to the left in the first term. Is he going to change?

STRASSEL: Yes. And he campaigned to the left, too. One of the problems was that he spent all of this election -- the only thing Barack Obama campaigned on, really, for a second term agenda was his vow to raise taxes on the wealthy. So, now we come back, the day after the election, the White House has already come out and said we're not negotiating on that principle at all. And Boehner said we're not negotiating on that principle at all. So we're going to find out in the next two weeks whether or not there's really any room here or if it's a repeat of the debt-limit talks in 2011.

RILEY: Speaking of that, I don't think, Kim, that Boehner wants a repeat of that. There was a sense last year that he got out a little ahead of the caucus. Obama was able to exploit that.

GIGOT: In negotiating ---


RILEY: With negotiating.


RILEY: This time, I think he's making sure that they present a united front. That's good. He's said he's open to some increased revenue. I hope he holds on the rates, though, Paul. I don't think we need marginal rate tax increases in this economy. But I think -- he wants to negotiate and cut a deal. And I'm with Dan. I think that Obama will be inclined to play ball.

GIGOT: This is the thing. If you look at -- second terms are notoriously not very effective. What he needs is economic growth.

The other thing is Democrats still control the Senate, Kim. Now they control the White House. The control the Senate with an enhanced majority there. Republicans are the minority of the government.


GIGOT: They don't really have an obligation to govern --


GIGOT: -- the way they did with the Tea Party coming in in 2010. they don't have to pass Medicare reform. They don't have to come in with any super agenda themselves. Doesn't the president and Senate Democrats have an obligation to say, here is what we would like to pass, and then see what -- if they can actually get it through?

STRASSEL: And the president absolutely does that. And also, too, if there is a potential option in sight to get the Senate Democrats to go along with it.

Here's one of the remarkable things, Paul, to me is that they're talking about this standoff. You have actually seen movement over the past year. Republicans, remember, started the debt-limit talks in 2011 saying no revenue, never. You will not get it. This needs to be solved through spending cuts alone. They've slowly changed that --

GIGOT: Right.

STRASSEL: -- saying, look, we're open to revenue, if it's done via larger tax reform in a way that doesn't hurt the economy.

The question, the people who are now being incredibly obstinate about this, and in a totally ideological way, are the president and Democrats, saying we will not take any revenue unless it's from tax rate hikes.

GIGOT: Right. And that's going to be part of the showdown.

Dan, briefly?

HENNINGER: Try to keep the capital gains at 15 percent. That would be the one thing I would take going into the negotiations because I think it would be the one tax break that would be most productive for the economy, if we start talking about looking for revenue elsewhere.

GIGOT: And if you want the investment down the road.


GIGOT: All right.

Coming up in our second half hour, a promise of bipartisanship on Tuesday, but are we likely to see a different President Obama in his second term?

Plus, a good day for Democrats, but not necessarily for unions. Big labor had some big losses on state ballot measures. We'll have an update.



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

Coming up in this half hour, the president's second-term agenda, from taxes to energy to immigration. Are there any signs that Mr. Obama will move to the middle?

And Tuesday was a good day for Democrats, but not always for unions. Big labor suffered some big losses on ballot measures across the country. We'll tell you where.

But first, I'm joined by Wall Street Journal columnist, Peggy Noonan.

So, Peggy, why do you think Mitt Romney lost?

PEGGY NOONAN, THE WALL STREET JOURNAL: Oh, I think already we know some of the usual suspects even just a few days after the election, the get out the vote effort on the Democratic side was, appears to have been a small masterpiece that will probably have impact on national elections going into the future. Republicans have a lot to learn there. There have been demographic changes in America. At the end of the day, I think my surprise about the election was that it was not so close in a way everybody was thinking we'd all be up until 4:00 in the morning or maybe we'd be counting Ohio votes for two weeks. That didn't happen. This was a solid win for the president, and I think the Republican Party has much to think about here going into the future.

GIGOT: Thinking is always good. Maybe step back and give it at least some time to think. But you wrote in your column this week, the Republicans really don't need to change their principles, their fundamental principles, belief in small government and so on, but maybe the way they present those principles. What do you ...

NOONAN: The way, the way they -- the way the party goes forward sometimes, it is the way -- is the way that unnecessarily, I think, occasionally turns people off. I also think something big, a big lesson for the Republican Party in this election is to look at America, see the Republican base, the famous Republican base ...

GIGOT: Right.

NOONAN: And see that, oh, this is not expanding anymore. This is where it is, maybe it's beginning to contract. The attitude of political professionals since I was a pup on the Republican side, has always been, every election is an opportunity to turn out the base, that's what we do, excite the base, press their buttons, that's the story. Well, long-term that's just never a strategy that will work. One of the things I think the party will have to do now is listen to certain voices, such as up here in New York, Heather Higgins of IWV.

GIGOT: Independent Women's Forum.

NOONAN: Yeah. Yeah. Sorry, IWF. She has been saying for some time to party political professionals, the answer is not to drill deep into the base. The answer is to expand the base. And that is through going to people, that's through conversation, that is through talking to them about - about the issues they care about. It is not operating from up here with big ads that just press people's buttons, it's operating in a way like the Obama campaign did, it's going down on the ground and talking to people, it's labor intensive, but it's a way of growing. It's a way of persuading people ...

GIGOT: So ...

NOONAN: Which, I think the Republicans have gotten kind of bad at.

GIGOT: Is it a way of saying, I mean, that at its simplest almost crass terms, we actually care about you, in a more fundamental way than Republicans have been doing that, I mean Republicans talking too much in abstractions, you know, we want to cut this tax or that tax or we have this grand reform idea without being able to connect it in some tangible way to voters lives?

NOONAN: Yes, all of what you said, I think, is true, but it's also just this top down thing where we are communicating from you on high, through big buys of advertisements, that say things that are sometimes essentially banal, that aim to move you or get you mad, that's not how to talk to people. You've got to go down there and talk from the bottom up.

GIGOT: How do you think president ...

NOONAN: And also as Jason Riley said, make people welcome. Let them know that they are welcome in this party.


NOONAN: Don't give this hectoring tone, I don't know, about things like marginal tax rates which is sort of a language normal humans don't speak anyway.

GIGOT: But we speak that at the Wall Street Journal.

NOONAN: Well, we do.


GIGOT: How do you think President Obama emerges from this? I mean it was a negative, relentlessly negative campaign in many ways, to see him emerge enhanced other than the fact that he was reelected. What lesson should he take in terms of governing for a second term?

NOONAN: Well, I'll tell you, he was an incumbent president, he just won by a smaller margin than he did the first time out, this is the first time since Woodrow Wilson ...


NOONAN: A second termer won by fewer votes. In a funny way, it is possible that the president, looking back now on everything, might, might feel a growing humility, and that would be a lovely thing. Yes, I know, I do ...


NOONAN: Let me -- let me try this.

GIGOT: It's not his trademark.

NOONAN: No, it is not. Never has been.

However, a shrewd political move right now would be magnanimity ...

GIGOT: Right.

NOONAN: Be magnanimous. He's had a problem working with Republicans on the Hill. People have written books about them. It's all over, everybody knows he's not a good negotiator, he's fumbled the first times out. Change your way. Go to the Hill, go to the Republicans, and mean it, and say I want a deal. The president's people are said to talk sometimes about his legacy -- nothing would enhance his legacy like making a peaceful deal with Republicans on the Hill now about the fiscal cliff issues.

GIGOT: Make some substantive accommodation with them ...

NOONAN: Oh, yes.

GIGOT: Or -- and -- or -- or put some -- maybe make -- name a Republican Treasury secretary, say, or cabinet appointee or something like that?

NOONAN: Well, that may be good. A Republican Treasury secretary -- that may be going a little bit far. You may know something I don't. Look, I think the American people would like to see Washington begin to handle successfully some of the problems that only Washington can handle.

GIGOT: Right.

NOONAN: Federal budget, budget issues, et cetera. It would be good for the country and I think it would be good for the president if he started out now not with the old stuff and the old fight and the old don't push me on that, Eric, you know, I'll go to the people and make you back down.

GIGOT: I won, you lost, my way or the highway.

NOONAN: Yeah, none of that stuff. Something new. The left would accept it. They're feeling so good. The right would be shocked and think, wow, maybe progress can be made. It would be a good thing.

GIGOT: All right, Peggy, thank you so much for being here. Still ahead, from taxes to immigration to energy, a look at President Obama's second term agenda. Is a move to the middle likely?



PRESIDENT BARACK OBAMA: And in the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together, reducing our deficit. Reforming our tax code, fixing our immigration system, freeing ourselves from foreign oil.


OBAMA: We've got more work to do.


GIGOT: That was President Obama Tuesday night promising to work with Republicans on some big issues. The president wasn't exactly known for his bipartisanship in his first term, so will the second one be different? We're back with Dan Henninger, Jason Riley and Kim Strassel. And assistant editorial page editor James Freeman also joins the panel. So, the presidents' second terms are usually not very successful.


GIGOT: There are exceptions, but what does the president need to make his better than the first?

FREEMAN: Well, I'm certainly hoping that he was telling the truth when he spoke to the "Des Moines Register" and he told them that he was going to push corporate tax reform to lower the rates and eliminate deductions, simplify it without collecting new revenue. He also said he was going to get rid of --work with Republicans to get rid of unnecessary regulation. So if that's true, and there is nothing in the first term to suggest that it is, then he might have a decent second term.

GIGOT: Well, that's the thing, I mean, the question that I was talking to Peggy Noonan about, is this, you know, is he going to be magnanimous. Peggy seems to think it would be a very good thing to do. Jason.

RILEY: Well, I wouldn't expect some sort of Clintonian pivot.


GIGOT: No, no, I don't.

RILEY: But he does have a vested interest in getting some things done in a second term. Some of the things I'd buy, some of the things I don't. I mean he talked in the acceptance speech about getting off -- getting us off of foreign oil.

GIGOT: Yes, but how?

RILEY: You know what that means ...


GIGOT: Yes. That's what he means.

So, or maybe, maybe -- he didn't make a plan, I would predict this, you will see floated during this term, a carbon tax idea.

RILEY: Sure. Sure.

GIGOT: Some kind of tax on carbon.

RILEY: But on something like immigration reform, I think he could be serious about trying to do something like that.

GIGOT: And you think Republicans -- Kim, would Republicans be willing to work with the president on immigration reform? There's a lot of bad feeling from the first term on that because of the way the president attacked the Arizona law and tried to make Republicans looks like they were anti-Hispanic.

STRASSEL: That's right. And I think some of this will depend on what lessons the Republicans take out of this election, demographically as we were talking about, about whether there isn't some self-interest to them, and maybe actually even taking a lead on immigration reform, although there's a lot of bad blood there. Look, I would just say this, what we did on Tuesday is we basically returned the status quo to Washington, divided government. And I think as a result, I don't see a huge amount of willingness on either of these sides other than the immediate things that they are going to have to deal with like the fiscal cliff, to work on anything really big together. I think when said ...


STRASSEL: Yes, sorry, go ahead.

GIGOT: OK, I mean, Dan, if you look at Reagan's second term and Clinton's second term, I mean they had ups and downs, obviously, Clinton was impeached. But you had -- and Reagan Iran-Contra, but the thing that defined them, the second terms most was growth ...


GIGOT: Rapid economic growth, and the era of good feeling sort of developed in the country about their presidency because of that. Obama needs, above all, in my view, faster growth. Not this one percent, two percent persistent thing, but get it up to three, to four percent, for a sustained period of time. Can he -- will he be able to get that? Does he understand that, do you think, and try to shift a lot of his policies in a way that aim for that goal, because that would leave him with much more popular four years from now.

HENNINGER: I think he has no clue, very simply. Look, we have discussed many times on this show how Obama wants to take federal spending from a historic 20 percent of GDP up to around 24 percent because he needs it up there to do all the things he promised in the campaign, which is to subsidize education ...

GIGOT: Right.

HENNINGER : ... subsidize energy and so forth, he needs a higher level of spending. The idea is that if you have large levels of federal spending, you get this Keynesian response, and it stimulates the economy. The first term proved that it doesn't work. If he does it again, there is no way he's going to get high growth in the U.S. economy.

GIGOT: What signal, James, you are going to be looking for politically from the president, to help our viewers say, OK, he -- this is a move to the middle.

FREEMAN: Well, I think we can look and see how he responds to John Boehner, who said this week, signaled that he's willing to accept that maybe the government will collect some more revenue, but let's not raise tax rates. If anything, let's get rid of some deductions, at least you get a benefit of simplicity there as you are thinking about trying to get some economic growth. So I think if the president responds by saying let's do a bipartisan reform instead of demanding trillions in new tax revenue, then I think that would be a good thing.

GIGOT: One of the things Boehner, my sources, Republicans, are saying, is what they would like to do is get the president to extend the Bush tax rates for another year, both to avoid an immediate blow to the economy and also to give time to negotiate a larger tax reform and entitlement deal. If the president insists, said, look, I litigated taxes in the election, tax rates are going up right away as they automatically are, and I'm going to insist on that, then do you think we're back to the barricades?

FREEMAN: That's a sign that the first term was instructive and "The Des Moines Register" interview was not, that he's going to stay to the left. He's also -- he's facing another enormous challenge, and this is even if he doesn't get buried by Benghazi hearings. The interest rates are not going to stay low forever. They're going to rise. The government is going to struggle to come up with its financing.

GIGOT: You mean zero interest rates aren't perpetual? I didn't -- how can you -- I can't ...


GIGOT: When we come back, from collective bargaining in Michigan to gay marriage in Maryland, to a tax hike in, of course, California. Look at how some big ballot measures fared in states across the country.



GOV. JERRY BROWN (D ), CALIFORNIA: We have a vote of the people. I think the only place in America where a state actually said, let's raise our taxes for our kids, for our schools, for our California dream.



GIGOT: Tuesday was a big night for Democrats, including California Governor Jerry Brown, whose plan to balance the state's budget or try to with a $6 billion dollar tax hike passed with 54 percent of the vote. But it wasn't such a big night for unions everywhere. Their greatest defeat perhaps, came in Michigan, where 58 percent of the voters rejected a measure to enshrine collective bargaining in the state constitution. We are back with Dan Henninger and Kim Strassel, and senior editorial page writer Collin Levy joins the panel. So, Collin, you covered the Michigan results. That's a big union state. What happened?

COLLIN LEVY, SR. EDITORIAL PAGE WRITER: Boy, Paul, this is a huge defeat for the unions in Michigan, there is no question about it. Basically the voters looked at this and they said they weren't willing to be union's guinea pigs for this plan to get their interests written into state constitutions as a way to end run any reforms that states may try, like what happened in Wisconsin.

Now, what's really interesting about the Michigan numbers, looking at them now, is that the no vote on Proposition 2, which was the unions -- unions initiative, got about 500,000 more votes than President Obama did in the state and even more votes than Mitt Romney. And what that tells us is that the moderates and Democratic support for the unions and their interests in Michigan may be weakening, so that's something very significant, it's something that's going to be really key for Michigan's state lawmakers, too, going forward if they start to look at things, like, oh, say, a right to work initiative.

GIGOT: A right to work initiative. Yeah, that's right. OK, the other big -- the biggest, probably, result was the California tax increase, Kim. That's a huge tax increase that's going to go ahead, easing the pressure and fiscal pressure on Jerry Brown right away, but they also -- he also got a little surprise, which is California is now going to have a super majority for Democrats in the assembly and the senate, state senate, which means they can pass tax increases to their heart's content. And only -- Jerry Brown is the only chaperone at that -- at that spring break in Sacramento. What'd -- what does that mean for the state?

STRASSEL: Well, remember the "Superman" movie, where Gene Hackman's plan was to just push California into the sea? I mean, you kind of have to wonder if the Democrats aren't the Lex Luthor out there sort of to the California's future. I mean, they have now raised highest rates -- top marginal rates in the state, 13.3 percent. Jerry Brown did that by threatening to dramatically cut funding from school -- as a result he got a lot of young voters who came out to vote for this because they were worried -- but the business climate in California just terrible. And now, as you said, for the first time ever, they're going to have the super majority they need to raise taxes even further, they don't even need to go to the ballot anymore.

GIGOT: Yeah.

STRASSEL: And I think that bodes very ill for California.

GIGOT: Collin, what other initiatives did you think were significant?

LEVY: Well, you know, some of the other initiatives that were really interesting were the ones about gay marriage.

GIGOT: Yeah.

LEVY: And obviously, you know, these initiatives, I think, are going to be important, especially because the Supreme Court is going to be looking at considering the constitutionality of the Defense of Marriage Act later this month. They are going to be looking at taking a few cases on the Defense of Marriage Act. And I think the fact that some of these initiatives passed may actually influence the court in some ways, whether or not they're going to take these cases. You could have, say, Justice Kennedy coming in and saying, you know, why really get the judiciary involved in this kind of thing and create a new culture war, when these things are already being worked out in the states, so I think that that was actually very ...


GIGOT: Well, they passed for the first time, I think, in Maine, Maryland and Washington State, and in Minnesota, they ...

LEVY: Right.

GIGOT: They've refused to define marriage as between a man and a woman, which means the legislature could now legalize gay marriage if it wanted to. This means that this issue -- this is the first time, by the way, that those -- first, after 32 decisions in the other direction at the state level, where gay marriage was approved. This means this is being settled -- on the road to being settled democratically.

HENNINGER: Well, it also means it's being solved at the federal level. I mean, the other big such ...

GIGOT: At the state level.

HENNINGER: At the state level. Federal -- yes. The other referendum that was interesting in this respect was to legalize marijuana generally. That passed in Colorado, in Washington. If you add the fact that gay marriage passed in Maryland and Massachusetts and Washington, what you see is this -- a cultural divide occurring in the country. These things will never pass in the South. North Carolina, I believe, had a referendum saying that marriage was between a man and a woman. Nor will they pass in the mountain states, so you see the country dividing that way culturally.

GIGOT: We'll see where marijuana goes. All right, we have to take one more break. When we come back, our hits and misses of the week.


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

RILEY: This is a hit for the voters and education reformers in Georgia and Washington State, who passed pro charter school ballot initiative on Tuesday. This is a big deal for all kids, Paul ...

GIGOT: All right.

RILEY: ... but especially for poor blacks, who need school choice, frankly, much more than they need a black president. Especially one who is going to, you know, favor the teachers unions over kids and failings schools. So good for them.

GIGOT: All right. Collin?

LEVY: Well, this is a hit to Bruce Springsteen, who recently gave New Jersey Governor Chris Christie, a Republican, a hug in the aftermath of Hurricane Sandy. And as you probably know, as you probably know, Mr. Christie has been pining rather publicly after his favorite musician, and he said that after this happened he felt so strongly about it, he wept for joy. And that it was even better than talking to President Obama, if you could imagine that. So I'm glad that he got a little bit of love from the Boss here, since he may be a little bit short on hugs going forward.

GIGOT: Yeah, well, he is like a teenager with Justin Bieber. OK, James.

FREEMAN: Yeah, it's pathetic.


FREEMAN: I want to do a rebuttal to Collin. So ...


FREEMAN: This is a miss to Chris Christie, Bruce Springsteen, Barack Obama -- they are loving each other, congratulating each other, and meanwhile people in New Jersey this week are going to close to two weeks without power. I'm wondering why they are all congratulating --

GIGOT: Including your household, right?

FREEMAN: Well, yeah, you know, I don't think it's the government's job to provide power, but if you are going to go out there as he does and make a public show of leading this effort and take the credit, I think he ought to be politically accountable. And I don't -- I don't see the great results. I also see a lot of private people doing the relief effort.

GIGOT: All right. Kim.

STRASSEL: This is a miss to the news, that even as Hurricane Sandy raged, that New York Governor Andrew Cuomo's chief of emergency management, Steven Kuhr, was diverting state workers away from the crisis into his own driveway to remove a tree.


STRASSEL: So, to put this another way, as Governor Cuomo had spent the past ten days promising to take a stick to everyone in the private market, the insurers, the utilities, price gougers, the worst case of gouging and of self-abuse -- of people abusing their power has been a government official.

GIGOT: OK, Kim, thanks. That is 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 right here next week.

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