This is a rush transcript from "Journal Editorial Report," June 30, 2012. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," a Supreme Court stunner as Chief Justice John Robert joins the liberal wing in upholding the health care mandate. We will look at the legal arguments, is it really a tax? The political implications, who benefits come November and the economic fallout, what it means for the health insurance industry and your bottom line.

Welcome to the "Journal Editorial Report," I am Paul Gigot. Well so much for that radical right-wing Supreme Court, Chief Justice John Roberts joining the four liberal members voting to uphold the core of President Obama's health care law this week saying the controversial individual mandate is constitutional, not under the Commerce clause but as a tax.

Our panel is here with complete coverage of the legal arguments behind the decision and the political implications for November and beyond. I am joined by Wall Street Journal Columnist and Deputy Editor Dan Henninger, Editorial Board Member Joe Rego and Editorial Board Member Dorothy Rabinowitz and Opinioneditor.com Editor James Taranto.

So James, while all of us were spending months debating the commerce clause, John Roberts slipped us a Mickey and upheld the health care law on the tax provision. What do you make of the argument?

JAMES TARANTO, THE WALL STREET JOURNAL: Well, we can all think of Supreme Court cases where the court has reached the right result but done so with bad legal reasoning, bad constitutional reasoning. In a way, this case is sort of the opposite, because what we got from the Court, and by that I mean Chief Justice Roberts, who was in a position to decide this thing unilaterally was, a really good exposition on the commerce clause, which was the central constitutional argument, and then a lot of really labored statutory interpretation to somehow turn this into a tax. In the bill that passed the Senate, there was actually a list of new taxes that ObamaCare contained, this wasn't in it.

GIGOT: The mandate tax wasn't in it. Joe, what do you think of the persuasiveness of the tax argument per se, on a constitutional basis?

JOE RAGO, THE WALL STREET JOURNAL: Well, one problem, as James said, they didn't structure it as a tax--

GIGOT: They called it a penalty.

RAGO: So Chief Justice Roberts had to essentially re-write the law to come to this result. The larger problem is, that whatever concessions they made on the commerce clause, if you can say well, you can do the exact same thing with the tax, it is a huge loophole in terms of limiting Congress's power.

GIGOT: That is right, they are saying under the commerce clause, a mandate is unconstitutional unless Congress decides to assess a penalty on that mandate and call it a tax, or even not a tax, the judges can interpret it as a tax and therefore, it is constitutional. So that would seem to essentially eviscerate any limits that they have imposed here on the commerce clause.

DANIEL HENNINGER, THE WALL STREET JOURNAL: I would say so, Paul. I mean, there is much about this opinion by John Roberts, as we said in our editorial, usually it is a 5-4 opinion and this is a 1-4-4 opinion. The chief justice writing the whole thing, and basically re-writing the statute, as James was suggesting, that mandate tax was not in the statute. He basically has had to re-write the statute to arrive at this decision and the question is, why did he do that, why did he pull out an argument that basically no one virtually had not been made in the oral arguments before the Court.

GIGOT: Answer that question, Dan, why do you think he did it?

HENNINGER: I think because he was intimidated by the idea that if after Citizens United which the left had described as a purely political decision, he went five-four with the majority that the left was going to attack and try to delegitimize the Court, and the idea here is that Justice Roberts is protecting the integrity of the Court.

GIGOT: Dorothy, what about the argument we have read both on the left and some on the right saying this is actually an act of genius on the part of Justice Roberts. He is playing chess because he put limits on the Constitution in the long run, and the commerce clause, but in the short run you have to accept ObamaCare, but that is worth the price.

DOROTHY RABINOWITZ, THE WALL STREET JOURNAL: Yes, I have heard nothing, but it was the only amusing thing, the most monumental farrago of rationalizations for what was essentially, the justice caved before the threat of what Dan just said.

GIGOT: So you think it was the intimidation by the press--

RABINOWITZ: Yes, I think it was quite clear--

GIGOT: And the politicians.

RABINOWITZ: Yes. He was covered by the most extraordinary explanations, for example, what was it they said, he was burnishing the stability of the status of the Court which was his to keep so that it wouldn't look like a political instrument. Well we should ask then, is it the business of the Chief Justice to worry about burnishing his Court's credentials rather than doing justice and providing a sane and rational and not extraordinarily bizarre piece of reasoning?

GIGOT: James?

TARANTO: Whether this strategy he has adopted is genius or too clever by half only time will tell. Let's get together in 20 years and look back. But I will say, he was very good on the commerce clause. Let me read you a passage. Quote, "The commerce clause is not a general license to regulate an individual from cradle to grave simply because he will predictably engage in indictable transactions. That decisively strikes down the argument that the left had taken for granted for decades."

GIGOT: But the price of that is expanding the taxing power.

TARANTO: I am not sure how much the taxing power has expanded here. There are lots of taxes that can be influenced by individual behavior. Even if one says okay this goes too far, you can't impose a tax in order to, in effect, force people to do something, they could have done it through a tax credit.

GIGOT: They could have done that but they didn't, and you are only supposed to be able to apply taxes on behalf of methods that are constitutional. In this case he said the mandate is unconstitutional but we can apply a tax on it and therefore make it constitutional. That seems to me to be an expansion of the taxing power and one that will be very hard to limit in the future.

HENNINGER: Yes, I think future congresses will take the basis for his reasoning to impose taxes for other purposes, let's say in the area of the environment, it will be litigated and liberal justices will cite Justice Roberts' interpretation of the taxing power to support those legislations.

GIGOT: Joe, there was one other limitation on the Congress that was part of this opinion and that was on Medicaid, giving an opt-out provision for the states. Is this potentially a limitation on federal power going forward?

RABO: They said the federal government can attach conditions to funds, they can't coerce the states, they can't commandeer their resources. That is a step forward, it is the first time in history the Court has limited the spending power. It is a significant seven to two win but in practical terms, I am not sure how far this goes.

GIGOT: James, what do you think of the argument that we have heard from some people that John Roberts may have changed his mind in making this -- first he sided with the conservatives trying to overturn all or part of it and then under pressure, changed to his 1-4-4 opinion.

TARANTO: I have no sources close enough to give direct knowledge, but the clue I found in the case was, if you read Justice Ginsburg's concurrence, it is full of snarky references to the Chief Justice, it is written like a dissent, and a bitter dissent. And the dissent is signed by all of them jointly which is very unusual so that suggests that something happened at the end there.

HENNINGER: --The fly by night briefing of the majority opinion, which is really signaling that Justice Roberts at the last, James, was suggesting on the commerce clause, was very strong, thoughtful material, this was just made up at the last minute.

GIGOT: Looks to me like he was looking -- Justice Roberts was looking for a reason to uphold this bill and he found it.

RABINOWITZ: That's right. One of the most disturbing things about this besides the result of this judgment is the fact that you could have intimidated, very good chance, the justice and you could have found a way to explain and exculpate this with the most bizarre sorts of excuses.

GIGOT: Thank you Dorothy.

When we come back, what now as both sides spin the Supreme Court's decision. ObamaCare's future is in the hands of American voters. Will Democrats pay at the polls for this new middle class tax and can Republicans get it overturned?



PRESIDENT BARACK OBAMA: Whatever the politics, today's decision was a victory for people all over this country, whose lives will be more secure because of this law and the Supreme Court's decision to uphold it.



MITT ROMNEY, R-PRESIDENTIAL CANDIDATE: What the Court did not do on its last day in session, I will do on my first day if elected president of the United States.


GIGOT: Reaction Thursday from President Barack Obama and his Republican rival, Mitt Romney, to the Supreme Court's health care decision.

Okay. Dan, how big of a political victory was this for President Obama?

HENNINGER: If he had lost it would have been a big loss, there would have been no other way to spin it. But he won, and it's a little bit like football and politics, the Super Bowl. He won the Super Bowl with this Court decision.

On the other hand, I think that this decision has really blown a hole in his electoral strategy. He is running as the protector of the middle class, he has been saying for three years I will not raise taxes on the middle class. This tax raises taxes on the middle class. There is no other way to interpret it. The Court is saying it's a tax. The Democratic Party is running around refusing to describe it as a tax but you know that Mitt Romney is going to go out there and say that the president is imposing this tax on the middle class had he has got a basis for saying so.

GIGOT: Dorothy?

RABINOWITZ: Yes, well I was thinking about the number of times we heard yesterday the phrase, we have awakened a sleeping giant. The sleeping giant being the Republicans, by this thing.

GIGOT: Sleeping maybe, I am not so sure about giant. But go ahead.

RABINOWITZ: True. The first user of this great analogy was actually the architect of the Pearl Harbor attack, Admiral Yamamoto who said I fear we have only succeeded in awakening a sleeping giant and filling him with a terrible resolve. The terrible resolve is now indeed in the hands of the Republicans. But it struck me too that the connection with treachery, Pearl Harbor, all of that, the sense of treachery that the Roberts Court has infused in people, filled people with, the sense of a back-stabbing against expectations, that too is very much in the air--

GIGOT: Could demoralize Republicans --

RABINOWITZ: It is an embittering factor, it's one of the things -- let's remember Pearl Harbor, let's remember Roberts..

GIGOT: I think that, had it gone other way -- like Dan -- this would have really ruined the Obama presidency because his single achievement would have been overturned and he would have looked ineffectual in addition to ideological and therefore would have really suffered, particularly as the left was so -- would have been demoralized by the fact that this great achievement that they have longed for was undercut. So I think there is a good argument to be made -- we will see what happens in the election -- that John Roberts personally saved Barack Obama's presidency.

TARANTO: It is a pretty good argument. On the other hand, this law has always been terribly unpopular and we keep hearing during the lead up to it, Obama was going to give a speech and it was going to turn things around and when it was passed people were going to turn around when they realized how great it was, and it has never happened. I don't think this is going to happen either. I still think that ObamaCare is a big burden on the President in his reelection effort.

GIGOT: There is no question, Joe, the tax argument can be used by the president, but Mitt Romney didn't mention the middle class tax that this mandate tax is in his remarks. And why not?

RAGO: And here is the problem. It's because he instituted the same policy in Massachusetts in 2006. He is a compromised messenger. The other problem here for the people that want to get rid of the Affordable Care Act, is that, say Mitt Romney wins, he said I want to get rid of this. If he needs any kind of democratic support, including in the Senate, he is not going to get it, they are going to fight tooth and nail to fight to protect the biggest legislative liberal achievement since the 1960s. So without some kind of outside force coming in, it makes their job much, much harder.

GIGOT: Well the outside force here has to be the voters. This is the only recourse here if people do not want this law to stand. Because the president made clear, it is going to grind on this implementation and he is not going to give up anything in it if he doesn't have to.

HENNINGER: I think the decision hands a campaign gift to Mitt Romney, it has got Republicans angry, it has unleashed extraordinary amounts of negative energy, which in campaign politics is really good. You want your base riled up and this has done that.

Secondly, he raised about three million dollars the day of the decision, the Republican Party raised two hundred thousand dollars by posting an anti-Obama thing on his website. I think Romney's contributions could skyrocket with the result of this, if he knows how to exploit the issue.

GIGOT: And this does eviscerate the argument that he has not raised taxes on the middle class. I mean really, this mandate tax, it was upheld because it's defined as a tax.

TARANTO: Well Romney can use Obama's 2009 interview with George Stephanopoulos in which Obama gets very testy when Stephanopoulos says, "Isn't this a tax?" and he says, "No, George." Stephanopoulos actually looked it up in the dictionary and Obama lectured Stephanopoulos. The fact that he had to look it up in the dictionary just shows how much of an argument that is.

GIGOT: Well, will Romney use that, Dorothy, because of the reasons that Joe pointed out about Massachusetts, will he use that tax argument?

RABINOWITZ: I think he can, and he will. I think he will. He has done a very good job about having amnesia about his very own experience in Massachusetts, and let's remember one thing, what's here a huge number of aged people who are worrying about Social Security are going to be confronting this immense cut, they are going to the poles, they vote.

GIGOT: All right. When we come back, a closer look at what Dorothy referred to as the economic fallout from this week's ruling. What it means for the health care industry's small business and your own insurance coverage. Next.



OBAMA: If you are one of the more than two hundred and fifty million Americans who already have health insurance, you will keep your health insurance. This law will only make it more secure and more affordable.


GIGOT: Well, you have heard it before, and that was Pesident Obama, Thursday, saying it again. If you like your health insurance you can keep it, only now he promises it will be more secure and more affordable.

So Joe, is everybody going to be able to keep the health insurance they have?

RAGO: No, I don't think so. There is huge incentives in this bill as it stands for employers to drop coverage, put them into Medicaid, into the government exchanges. So that is a problem. The other problem is, this mandate, as a tax is pretty weak. It is only a few hundred dollars. The much better deal is for younger, healthier people to continue going on and just sign up for health insurance when they get to the hospital.

GIGOT: Because they are guaranteed with this bill to be able to.

RAGO: They are guaranteed. Paying the mandate tax is the best deal in town if you don't need health care.

GIGOT: And that is what has happened in Massachusetts.

RAGO: That is what is happened in Massachusetts, it's what's happened in certain federal programs. So I think we are going to see a lot of destabilization and then the calls are going to arise to increase the mandate cost over time.

GIGOT: And they are already doing that, the insurers are already asking.

RAGO: Already.


HENNINGER: Well I think somebody should say something at this point for medicine, doctors and patients. We have been sitting here through this whole thing talking about processors, insurance, drug companies, big hospital complexes. What does all of this mean for the practice of medicine in the United States, you know, the geniuses who create new surgical procedures, new medical technologies which are being taxed under this bill, 3.3 percent--

GIGOT: What does it mean for those practitioners?

HENNINGER: I think it means that they are going to be suppressed. I think doctors are suppressed by this bill and I think patients should understand that their doctors are going to be herded into a system in which the practice of medicine is ruled upon by this fifteen person board that they have created in Washington. And I think the Republicans should start talking about that, because that is what medicine is really - health care is about doctors and patients.

GIGOT: And because the costs are likely to explode with the subsidies, the bureaucracy and the regulators are going to impose certain cost control mechanisms, that are increasingly going to micromanage the practice of medicine.

TARANTO: One other point is the effect on the country's finances. The one area in which the Supreme Court did curtail the law, it said the states don't have to go along with the Medicaid expansion. Well, the states -- by passing off a lot of the cost to the states, that is one of the ways this law was supposed to reduce the deficit, so this could cause an explosion in Federal costs.

GIGOT: But states will be able to opt out, but the feds then have to absorb the cost, Joe?

RAGO: Yeah, they can't threaten them, they can't say we are ordering you to expand Medicaid. So the problem with this is, if the states opt out and the federal government comes in and says fine, we will pay for everything, go to town, we are going to get a national Medicaid program, I think states are gradually going to lose their role, we have been seeing this for years. That is not good for federal taxpayers.

GIGOT: Costs, Dorothy, are also going up about eight percent a year, they keep going up and they are likely to go up even further because of the expansion of coverage.

RABINOWITZ: That is exactly right, you only again have to look at the costs in Massachusetts where the costs are much higher now and the doctors are fleeing -- very hard to find a private physician in Massachusetts now. And just the specter that should be haunting everybody now about this bill is the insurance companies are interposing themselves between the doctor and the patient, now that has never happened before in history. That is the great terror, that they are there, we will help you with your health, we will give you advise, we will do prevention with you, but what happens to the physician? That is a very real ghost.

GIGOT: Now, the Obama administration would say, Joe, you are wrong, businesses won't drop coverage, but a lot of outside experts are saying in fact, they will drop them by the millions.

RAGO: Exactly, and the problem is, if you are a business, you can raise wages a little bit, and pay a fee and say employees, you are better off.

GIGOT: You go into the exchanges and the government will have to pay for it.

All right, we have to take one more break. When we come back, it is the hit/misses of the week.


GIGOT: Time now for hits and misses of the week, Dorothy first to you.

RABINOWITZ: Yes, this is a hit for the memorial to the men of Bomber Command who carried out the air war against Germany, who have never received any honors for their work because of the hypocritical considerations and worries and political offenses against civilians being hit. There has never been notice taken of it, and at long last, the event has happened, this very week. Overdue justice.

GIGOT: Thank you, Dorothy. James?

TARRANTO: There hasn't been a fatal air crash by a major airline since November 2001. That sounds like great news, doesn't it. But not to the Air Safety Regulation Lobby which is complaining that without fatalities, it is harder to make the case for new regulation. If you think I am exaggerating, listen to this quote from William Vossel of the Flight Safety Foundation. "If anyone wants to advance safety through regulation, it can't be done without further loss of life." Obviously this is a miss, I am flying this weekend, the last thing I want is a hit.


HENNINGER: Well, looking for a silver lining this week, Paul, I found that House Ways and Means Chairman Dave Camp said that Republicans will not be raising taxes to close the deficit. It is good to hear Dave Camp saying this because it puts the ObamaCare decision at the center of the debate about the proper use of taxes. If we do tax reform next year, I hope that abolishing that ObamaCare mandate tax is included.

GIGOT: Thanks Dan, and remember, if you have your own hit or miss please send it to us at jer@foxnews.com, ad be sure to visit us on the web at foxnews.com/journal.

That's it for this week's edition of the "Journal Editorial Report." 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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