This is a rush transcript from "Journal Editorial Report," December 28, 2013. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," from the ObamaCare implosion to America's global retreat, we take a look back at the big stories from 2013. And from stock market highs to sports- cheating lows, our panel picks for the "Hits and Misses" of the year.

Welcome to this special edition of the "Journal Editorial Report," our look back at the biggest stories of 2013. I'm Paul Gigot.

Joining our final panel of the year is Wall Street Journal columnist and deputy editor, Dan Henninger; editorial board member, Dorothy Rabinowitz; columnist, Mary Anastasia O'Grady; and assistant editorial page editor, James Freeman.

So let's get right to it.

Dan, certainly, a lot to talk about. What's your choice?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: I think obviously the biggest story of the year was ObamaCare, officially the Affordable Care Act. It isn't that it was a big story in itself but it also has a story in what it has told us about the future of liberal governance. Barack Obama came into the presidency. And from the first inaugural speech, he told us he was going to deliver benefits from the government, the government should be able to do that. In fact, two weeks ago, he even said we are all, the American people, the government, the government is us. They introduced ObamaCare. The first thing that didn't work was the website. It just simple didn't function. This was when people expect websites to work. But I think in some ways, more important thing is the cancellation of the policies, the limited choice of doctors. This was not a failure of the act. It was intended to work this way. In other words, policies would be terminated, people would go into the ones defined by the act because they were broader, and this would be a good thing. Instead of being a good thing, people are turning against the idea of a plan like this. Normally, big government operates below the surface. This one has been all up for everyone to see. It's been a bad experience for the promoters that government could help.

GIGOT: And it's gone directly to the question -- the president's reliability.

Mary, because what's happened is, is his promises, you can keep you policy is you like it and you can keep your doctor in you like him, directly undermined by the bill itself, but also the way it's rolled out. Also the way it was designed. This was intentional.

MARY ANASTASIA O'GRADY, COLUMNIST: Absolutely. You have all these people who voted for the president and now finding out they feel like he actually lied to them. That's very distressing for his former supporters.

What really amuses me is how the Millennials seem to be waking up to this president that they played a large role in putting into office, and now all of a sudden they're realizing that government doesn't create wealth. It has to come from someone, and they didn't realize it, but they're supposed to be one of the suppliers.

GIGOT: Liberalism is suddenly expensive again.


For years, it was not so expensive.

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: And now people are discovering it costs money, a lot -- maybe in other ways.

FREEMAN: I think not just the Millennials, but all Americans, when you look at polls, are returning to the natural distrust, the healthy distrust of government that I think is really our tradition and has served us well. In a lot of ways, it could only get worse. You look at these initial reports that people are not signing up, especially healthy people, especially young people, so what it means is, along with all the problems of the last few months and the canceled policies, you're going to see a big premium spike next year.

GIGOT: Let's move on to another subject.

Mary, your choice?

O'GRADY: My big story for the year is the oil and gas revolution in North America. In the last four year, Paul, we've had $150 billion in new foreign direct investment come into the U.S. in the shale fields. And basically what's happening is we're having a gusher, an oil gusher. We have 800,000 barrels per day increase between now -- per year, between now and 2016, where we'll reach 9.5 million barrels per day. That's two million per day higher than the Energy Department forecast this time last year. So --

GIGOT: That's happening in places like Pennsylvania, North Dakota and Texas.

O'GRADY: Yeah. This is really a technology revolution. Because what's happening is the drillers can actually see through the rock because of the seismic -- it's really a seismic technology that allows them to know where the oil is. That's what the real change is. And of course, put that together with fracking and you have lots of new supplies. So the U.S. is a big energy producer now. Canada has been an oil gusher for at least a decade. Now Mexico's buying in by allowing private investment into what has solely been a state-owned sector.

GIGOT: Big competitive implications for the North American economy for manufacturing, in particular, potentially company -- users of energy, manufacturers and chemical industry and so on.

FREEMAN: Yeah, it's really -- it's a huge change. It couldn't come at a better time. Because, we catalog all of the mistakes coming out of Washington, all of the policies, ObamaCare and other things that are a big drag on hiring, a big drag on productivity. And countering that is roughly $4 natural gas makes manufacturing in the United States a lot more appealing and efficient and competitive.

GIGOT: Let's move on here for the third -- your story, James?

FREEMAN: I think the biggest story of 2013 was the IRS scandal, the deliberate targeting of Tea Party groups leading up to the 2012 election. I think it's really -- as bad as ObamaCare has been, as positive as this energy revolution is, I think the IRS scandal is really the biggest story of the year, because it goes right to the heart of our democratic process. You're talk about an agency of the federal government attacking the opponents of the president and really, in a close election, possibly having an impact on the outcome.

GIGOT: Why has the scandal vanished then? It seems to have gone away in terms of the mainstream media and so on.

FREEMAN: Well, it's partly the stonewall. But they may not be able to stonewall forever, because what's happened relatively recently is that the Obama appointee, William Wilkins, who is the IRS chief counsel, was interviewed by House investigators and basically didn't know, didn't recall, avoided answering dozens of questions. As they continue to look for documents, and let's hope the congressional and private litigants continue their effort here, I think we may learn more.


HENNINGER: Yeah. It says something about the mood of the country right now, Paul. I mean, polls show that belief and faith in government is at an all-time low, almost dangerously low. This is an example of the sorts of reasons people have -- I think, no matter what their politics -- to wonder what are is going on in Washington. It creates a very deep level of discontent.

GIGOT: And it undermines the ability of government or Congress to accomplish goals that might actually be constructive. For example, like immigration reform, things like that. It undermines trust in things we need for our security, like the National Security Agency surveillance policy.

DOROTHY RABINOWITZ, EDITORIAL BOARD MEMBER: And the lies, Paul, are exceptional. I mean, you can talk about presidents who refuse to -- who lied to us about the war and about hidden munitions and all of that. But when you got to ObamaCare and that outright lie, this is the most permanent incandescent lie that will live in the hearts of Americans. People simply cannot get past it.

GIGOT: All right, Dorothy, thank you.

Much more to come as we reveal our pick, for the biggest stories of 2013 right after the break.


GIGOT: Welcome back to this special year-end edition of the "Journal Editorial Report" as we continue with our picks for the biggest stories of 2013.

Dorothy, what's yours?

RABINOWITZ: I think now of America's retreat phrase on everybody's lips now and I think also of 1941 when Henry Luce, Time, Fortune, Life editor, said America must involve herself, this is the American century. He was talking about a crumbling civilization.

GIGOT: Involve themselves in the war.

RABINOWITZ: In the war. What would he think now? Look back on Obama and Syria and Obama and Iran. Think about, first, Iran. We have given up, thanks to Obama's push, the only ingredient that would have kept Iran in check, the sanctions. We've badly loosened them. Look back to September when we had --

GIGOT: Syria.

RABINOWITZ: -- the Syrian -- 1,400 Syrians are murdered by poisoned gas and everything is going forward essentially take a strike and Kerry is almost saying this is going to happen tomorrow or the next day, President Obama comes in and says, well, we're going to turn this over to Congress. By the way, they're on vacation, they have time.


And Kerry chimes in and says, yes, we have time. You have to think, well, what could have happened if Obama had been president in 1941 and sending those destroyers when Britain was on its way out, about to be defeated? Well, you know, turn it over to Congress. Leadership, the idea of leadership which is you take a stand, go ahead of the people, never mind what they're feeling about isolationism, when there is a point in the crisis. We are now seeing the reason for American retreat.

GIGOT: Another development in the world this past year was China's new aggressiveness in the East China Sea against Japan, South China Sea against some of the Southeast Asian nations as the new president, Xi Jinping, consolidates power and seems to be giving the People's Liberation Army what it wants to do to press its advantage in the Western Pacific and drive the U.S. out. On this point, I give the Obama administration better marks. They are actually beginning to push back.

HENNINGER: But back to the Middle East, I mean, some of the post war alliances, such as with Saudi Arabia that existed for 40 or 50 years, are breaking down. Egypt is now doing deals with Russia. Any time you have an alliance system like that disintegrating, the world becomes more disordered. I think that is what is happening in the Middle East and that, as Dorothy suggested, the result of the Obama government not paying close enough attention to those relationships.

GIGOT: All right, I get it a say here, too, of the biggest story and I'm going to pick the Edward Snowden leaks, stolen documents on the national security surveillance programs. Did enormous damage to our national security, created big diplomatic incidents with Germany and others because we were discovered to be listening in on Angela Merkel's phone calls, but also I think greater damage domestically, politically, because it's broken, it threatens to break the post-9/11 consensus across the parties to fight terrorism. I think this is very dangerous.

O'GRADY: But, Paul, you know, you can hardly expect any different outcome when you have a president who has created an environment where nobody trusts what he is doing in Washington. And so if the American people are pushing back against, you know, NSA listening, it's because they really don't have any confidence in how they're using the data they collect.

FREEMAN: I agree, given the ObamaCare consumer fraud, IRS, hard to trust the government, hard to trust this president.

GIGOT: But --


FREEMAN: But it is important to remember that there are still people in the world trying to kill us, and we can't defend every soft target in the United States. We have to be on the offense on intelligence. This is our great advantage over our adversaries, is we do have technological abilities.

GIGOT: But despite the leaks, there has not been a single abuse of civil liberties discovered in the surveillance program.

O'GRADY: Well, there had not been a single use of the IRS the way it was used by Obama until there was. So I don't think that's a good defense. I think basically --


GIGOT: Well, how about punishing the IRS offenses so we can have some confidence --


GIGOT: -- that if people abuse the NSA, then they will be punished.

O'GRADY: Precisely. But I think what you have to -- the way you explain the failure of this consensus is the fact that this president has abused his power.

FREEMAN: It is a great irony of this era, Paul, that President Obama wanted to restore trust in government, has really brought it to a new low since, I don't know, Nixon perhaps.



GIGOT: Go ahead, Dorothy.

RABINOWITZ: I just don't understand how we can find any exculpation of Mr. Snowden at any point, including President Obama. That one just won't work.

GIGOT: All right. We're going to give you a shot here at Snowden again.



GIGOT: Still ahead, as we look back at 2013, our panel's pick for "Hits and Misses" of the year.


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

Let's start on a high note with the hits -- Dan?

HENNINGER: Well, Paul, I'm going to give a hit to the good old American economy. I mean, what has been the watch word around the economy for the past three years? Uncertainty. And uncertainty has occurred because of ObamaCare, the fact we've only had about 2 percent growth for three years, Dodd/Frank was introduced. For all that, the economy has begun to push back towards 3 percent growth. The tech sector is thriving. Companies are well managed. I think the potential upside is tremendous. If, as Ronald Reagan used to say, the government will simply get out of the way.

GIGOT: You think gridlock in Washington, such as it is, with not much happening, it may actually be a benefit?

HENNINGER: No question. There's a school of thought, they should be gridlocked forever, the economy would boom.



GIGOT: Go ahead, James.

FREEMAN: I was going to say the good news I've learned from reading Mary's columns is it's actually very hard to kill an economy. You have some room for error. There's been a lot of mistakes. And in this season of hope, looks like the economy is managing to keep growing.

GIGOT: All right, Dorothy, your hit.

RABINOWITZ: Yes. This goes, oddly enough, to Mayor Bloomberg who is about to exit. And --

GIGOT: New York City mayor.

RABINOWITZ: New York City mayor --

GIGOT: 12 years.

RABINOWITZ: -- as we know. In the end, we see -- we feel we are going to miss this mayor very much, particularly with the advent of his successor, Mr. Bill De Blasio, and the assault of progressivism that we now see coming at us in droves. But let us look about the mayor. Look at things he has done. He has, incredibly enough, gotten rid of smoking. He has stood up against Occupy Wall Street. Of course, he has assaulted us with other health-endangering things like bicyclists on the prowl.


But all in all, we owe him great thanks.

GIGOT: All right.

Mary, how about you? What do you have?

O'GRADY: My hit goes to breakthroughs in medical research, particularly in the area of brain science. The first is that we made some major progress and advances in working towards the treatment of Parkinson's disease. In December, a professor of neurology at Emory University won a prize from Silicon Valley, a breakthrough prize, for his work on understanding the circuits that go bonkers with Parkinson's disease. This goes straight to the treatment of the disease.

GIGOT: Very exciting developments on the science front.


FREEMAN: My hit is to the earth and the sun --


-- who have conspired once again to blow up the predictions of those promoting the global warming thesis. These two -- the earth and the sun have just refused to show a warming trend over the last 15 years on earth's surface temperatures. And so I think the amount of suffering that's been avoided by avoiding all the regulations that they wanted to impose is quite significant.

GIGOT: All right, you guys shut me out here so I'm going to have to be silent on this one.


We'll take one more break when we come back, our "Hits and Misses" -- our misses of the year. I won't miss that one.



GIGOT: Time now for our misses of the year.

Dan, first to you.

HENNINGER: I'm giving mine to Lance Armstrong, who admitted that he has been blood doping and using other techniques to win all those Tours de France. It really re-raises the issue of cheating in sports. In August, Major League Baseball suspended not only Alex Rodriguez but 12 other players for essentially the same reason. The sad thing about this, Paul, is I think it calls into question the credibility of professional athletic performance. It's a great thing to watch but you have to be worried when you're saying I don't know if it's real.

GIGOT: Do you have any sports heroes? Big Papi of the Red Sox, or my favorite, Aaron Rodgers of the Green Bay Packers?

HENNINGER: I love Big Papi.


As far as Aaron Rodgers goes, I don't know. He's not going to win another Super Bowl this year, so


GIGOT: Cowboys fan.

OK, Dorothy?

RABINOWITZ: My big miss is to all of the supporters and protectors of Snowden, all of which are multiplying ferociously all over the place. They include, of course, Barbara Walters, who made him one of the most fascinating people of the year, not the most. And this is her last broadcast, and not a moment too soon. And also it was Tom Friedman --


-- who announced that he was a whistleblower. Well, thanks, that explains everything, Tom.

GIGOT: Dorothy just got herself a lot of invitations to media parties going into 2014.



O'GRADY: My miss for 2013 is the rise of left-wing populism in this country. I think most clearly exhibited by the election of the new mayor in New York City, Mayor de Blasio. Not only because of what it means for New York but for what it means more broadly about how the electorate seems to fall for these kinds of populist promises and what that means to our freedom. I think the only good news is that now we have a lot to write about with the mayor.

GIGOT: You think this is the direction the Democrats are going to do as faith in government and confident in government falls and they're going to need a new theme for the 2014 election? Is this going to be the big theme for 2014?

O'GRADY: Well, as you know, eventually, these promises run out of gas. But until that happens, we have -- we suffer a lot. We're seeing that now with ObamaCare.



FREEMAN: This is a miss to outgoing Federal Reserve Chairman Ben Bernanke for continuing this year to buy another trillion dollars in mortgage-backed securities, essentially creating money, forcing it out into the economy. The financial crisis was five years ago. It's been years since the recession ended. And now we have this real distortion of prices. And I think eventually there will be reckoning.

GIGOT: Do you put any more confidence in Janet Yellen, the new Fed chairman --


FREEMAN: No, no more confidence.

GIGOT: Really? You think there's going to be something easy as far as the eye can see here?

FREEMAN: Well, this baby step of just cutting back by $10 billion a month, when the markets really were ready for more. They were ready more last summer when Ben Bernanke did his head fake. And I think it's time for government to step back and let markets run.

GIGOT: Short summary. Freeman is long for going into 2014.


FREEMAN: Always.


GIGOT: All right.

My miss goes to the Republicans who engineered the government shutdown in the name of a goal they couldn't achieve, defunding ObamaCare. They hurt their party image and they reduced whatever leverage they had in the budget negotiations. And tow they decided their party when they need to be unified going to 2014. We called them kamikazes before the showdown. That may have been unfair to the ca kamikazes, who at least were fighting the enemy.


The shutdown leaders took down their own ships.



HENNINGER: So neither party looks to be in fabulous shape in 2014, so which one is going to show some upside next year, is my question.

GIGOT: Well, if the Republicans can avoid another calamity on the debt ceiling, I think you've got to give them the momentum. Because you've got ObamaCare here, and if they focus on ObamaCare, rather than criticizing it, offering constructive reform, not doing something that is unachievable. We all support the defunding of ObamaCare. Everybody at this table certainly does. And we have in the newspaper since -- well, going back 25 years, we've opposed this.

HENNINGER: Hillary-care.

GIGOT: Hillary-care. But it's a question of what is achievable and what will the American people listen to. And I think a critique that offers real solutions for the individual insurance needs of Americans is going to succeed.

FREEMAN: I think a number of Republican pick ups in the Senate is also achievable next year.

GIGOT: All right.

If you have your own hit or miss from the year, be sure to tweet us at JERonFNC.

That's it for this week's show. Thanks to my panel, especially to all of you for watching. I'm Paul Gigot. Happy New Year. And we hope to see you right here next year.

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