This is a rush transcript from "Journal Editorial Report," March 23, 2013. 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's Middle East mission. He is calling for renewed peace efforts in the area, but as the Iranian threats continue and the Syrian conflict escalates with claims of chemical weapons, will it make a difference?

Plus, the president courts controversy here at home with his pick to head the Labor Department. Did Thomas Perez interfere with a Supreme Court case that could have discredited his theories on race discrimination?

And New York's mayor strikes again. Will his latest effort to hide cigarettes meet the same fate as his big soda ban?


PRESIDENT BARACK OBAMA: Yes, it is possible.


OBAMA: It is possible.

I'm not saying it's guaranteed. I can't even say that it is more likely than not, but it is possible.


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

That's President Obama in Jerusalem Thursday, raising the prospects of peace in the Middle East and urging Israelis and Palestinians to return to long-stalled negotiations. The trip, Mr. Obama's first as president, saw a thawing of his often frosty relationship with Israeli Prime Minister Benjamin Netanyahu. But did it mark a turning point in what has become the tide of war in the region?

Let's ask "Wall Street Journal" deputy editorial page editor, Dan Henninger; and "Global View" columnist, Bret Stephens.

So, Bret, the big news out of this, or at least at the surface, a new good feeling between Prime Minister Netanyahu and President Obama. Real or does it makes a difference?

BRET STEPHENS, "GLOBAL VIEW" COLUMNIST: Maybe real, and might make a difference. It's definitely as good in terms of the optics.

Look, President Obama spent the first four years trying to put as much distance between himself and the Israelis or at least the Israeli government as he could. It didn't serve American foreign policy interests or anyone's interests. Now he's there to talk about my friend B.B. Maybe it's not sincere, but at least it's creating a perception of greater closeness. That's a good thing. Israelis respond better when they're being held than when they're being scolded. No question, the speech went over well. The real question is whether the president has a realistic vision for --

GIGOT: Well, he raised the prospects of this peace agreement with the Palestinians. He's -- clearly, John Kerry, the new secretary of state, has made this a priority or wants. What are the realistic prospects?

STEPHENS: You saw a bit in Ramallah when the president spoke --

GIGOT: That's in Palestine.

STEPHENS: It's the capital of the West Bank, if you will -- when he was having a press conference with Palestinian President Mahmoud Abbas and the American president said, look, let's not have negotiations with pre- conditions or insist that the Israelis end settlement activities.

GIGOT: Right.

STEPHENS: And he was effectively scolded by the Palestinian president. So, the real nub of the problem here isn't so much the settlements or this or that Israeli activity. It's a refusal by the Palestinians to make any kind of compromises with the Israelis.


DAN HENNINGER, DEPUTY EDITORIAL PAGE EDITOR: Well, let's talk a little bit about Barack Obama. He is asking fundamentally the Israelis to take a risk on behalf of peace.

GIGOT: And that's why he wanted to reassure them about the American security commitment?

HENNINGER: Well, that's right. But think about what Obama's attitude has been towards the Middle East in the first term of his presidency. The Libyan intervention, he brought up the rear after the Europeans went in first. We have Syria now completely falling apart and the president has kept the Syrian rebels at arm's length for nearly two years. And then he shows up in Israel and tells the Israelis that they should take a risk for peace in the Middle East when he's been holding -- the president holding the region at arm's length. It's not --


GIGOT: So you're saying this is essentially credibility problem.

HENNINGER: Yes. Absolutely.

GIGOT: -- going to have with the Israelis. And at this stage, they've seen four years. They're not going to buy it.

But on the other hand, he tried to appeal, Bret, to the Israelis self- interest, and said, look, your future, demographically, is such that with the Arab populations growing faster, you have to come to an agreement if you want to survive in the region.

STEPHENS: Right. In theory, that's right. And in 20, 25 years, Israel will face a demographic problem.

But the question is the here and now, Paul. And in the here and now, Egypt is under the control of the Muslim Brotherhood. You don't know what's going to happen in Syria or in Lebanon. The future of Jordan, where the president also visited, it's very clouded, very unclear. In Israel, you have to take your problems in the order in which they arrive. The real problems, Iran, chaos in the rest of the world. The issue of the of the demographic future is real but its longer term.

GIGOT: So realistically, peace in the next few years between Israel and the Palestinians or not?

STEPHENS: There's no chance.


STEPHENS: But the problem can be managed.

GIGOT: It can be managed so there's not an outbreak of conflict.

The other area the president -- really, I thought his rhetoric on Iran was at least as forceful as I've ever heard him. Basically, it seems to me, saying, look, we're not going to let them get a bomb. It isn't containable, Iran is not, if it gets one. That really puts him on the hook, it seems to me, in the next term to do something if Iran doesn't cooperate diplomatically.

HENNINGER: Well, one would like to think so, Paul. But again, it seems to me it raises a question of the president's credibility. Let's put it this way, the U.S. standing has probably risen under President Obama, but his clout has fallen for the reasons I stated earlier, because of his reluctance to get involved over there. If you're the Iranians and he says something like this, do you really take it seriously at this point, or is it simply Barack Obama saying things because he believes them himself?

GIGOT: I would bet Bret takes issue with the point about the standing question of the --


STEPHENS: We're less popular in the Arab world than we were -- in much of the Arab world than we were in the last year of George W. Bush's presidency.

GIGOT: Is Jordon -- you mentioned Jordan. Could King Abdullah be the next Arab ruler to fall in that region? And what would be the consequences, not just for Israel, but for our own interests?

STEPHENS: It would be a disaster. We'd lose one of the last few moderates in the Arab world and Israel would lose a secure border along its longest border. You would have a vacuum and a contest for power.

GIGOT: How much trouble is the king in? I know there have been reports of food protests, the price of energy, and so on. How much --


STEPHENS: Right. He has a financial crisis. He being vocally opposed by the Muslim Brotherhood and he no longer has the backing of the tribes that were the traditional base for the Hashemite rule.

HENNINGER: He's flooded with refugees from Syria as is Lebanon. The whole area is being destabilized because of the Syria situation.

GIGOT: Good illustration of how our own stepping back and abdication has created problems for everyone there.

All right, coming up next, questions surrounding President Obama's controversial pick to lead the Labor Department. Did Thomas Perez work behind the scenes to prevent the Supreme Court from ruling on an important race discrimination case?


GIGOT: President Obama this week tapped Thomas Perez as his next labor secretary in a move that could make a contentious battle. Perez, who heads the Civil Rights Division at the Justice Department, will have questions to answer about the DOJ's decision to drop that now-infamous voter intimidation case against the New Black Panther Party, as well as the personal interference in a case headed to the Supreme Court that could have struck down his legal theories on racial discrimination.

For more, we're joined by editorial board member, Mary Kissel, and Political Diary editor, Jason Riley.

Mary, you broke the story a year ago about the involvement in the St. Paul case. We've since discovered a lot more details thanks to your digging. Why did Perez get himself involved in the case?

MARY KISSEL, EDITORIAL BOARD MEMBER: Well, the city of St. Paul, Minnesota, was challenging at the Supreme Court a theory of racial discrimination that Tom Perez and the Justice Department were using to accuse banks of discrimination. And so, he feared that if the court struck down this particular rule that he would have to stop doing that. It would cut off a big source of funding, actually, for the Justice Department.

GIGOT: So he leaned on St. Paul to drop the case. And they'd been litigating for 10 years.

KISSEL: Yes. In fact, they did a quid pro quo in exchange for St. Paul dropping the Supreme Court case. The federal government said we would not join two false claims access cases that were being brought again the city of St. Paul.

GIGOT: By private citizens. And the Department of Housing and Urban Development had wanted the Justice Department to intervene on behalf of the claimants. And Perez got them to back off that, in return for St. Paul dropping the case.

Now, what is -- the theory of racial discrimination is called disparate impact. Jason, why don't you tell us what that is?

RILEY: Adherents of disparate impact believe that statistics can be used to discrimination. They sort of worship at the altar of racial parity and outcomes. Blacks are 13 percent of the population. They should be 13 percent of dentists and 13 percent of the freshman class of UCLA or 13 percent of the firemen. And if they're not, legal action should be taken and --


RILEY: -- discrimination can be shown on that basis alone.

GIGOT: You don't have to prove it in an individual case.

RILEY: Right. If the -- the policy in place, however race neutral it is, if it's producing disparate outcomes, then there's a problem with the policy.

GIGOT: And this was at risk because it was using housing law, Perez was using housing law to prosecute banks with this theory.

KISSEL: That's right.

GIGOT: And he thought this might be illegal, why, because the disparate impact is allowed in some parts, but not in housing.

KISSEL: In employment discrimination. But the 1968 Fair Housing Act and the Equal Credit Opportunity Act don't have the same language as Title VII employment law. And he was afraid that St. Paul would win this case.

By the way, St. Paul itself said it thought it would win and it was dropping the case because it didn't want to endanger important anti- discrimination work that the Justice Department was doing. So think about that. You have a senior member of the Justice Department leaning on other parts of government to withdraw a case, deny the Supreme Court the ability to rule on this disparate impact practice under the Fair Housing Act. And in the meantime, having the government not join two cases that could have brought tens of millions of dollars to taxpayers.

GIGOT: Can you recall any case like this, Jason, where officials basically got somebody to drop a case the Supreme Court had already accepted?


RILEY: No. No, I can't. But Perez has credibility problems. He was head of the Civil Rights Division of Justice when they decided to drop a case against the New Black Panther Party. And this was a case involving members of the Black Panther Party on Election Day, standing outside of the polling station, armed with batons and yelling racial epithets at the passersby. It was on video and was put up on the Internet. Justice launched an investigation and were on the cusp of a victory until they decided to stop the prosecution. And there were hearings about this and Perez was asked at one of these hearings whether or not it was a decision made by political appointees at Justice. He said no. It turned out subsequent e-mails showed, in fact, political appointees at Justice were consulted on this. And I hope the senators, at his confirmation hearings, ask him about this.

GIGOT: We should point out that we have asked the Justice Department to make accessible Mr. Perez or other officials or a spokesman to explain this to us or as well as the city of St. Paul, and they've all declined to do so. Dan?

HENNINGER: Well, I hope the senators bring this up. He is nominated to secretary of labor, which has enforcement authority over the entire American workplace -- pensions, minimum wage, contractor compliance, Davis- Bacon. And if Mr. Perez goes into that job and uses these statistically based theories to penetrate the American workplace in ways that are hard to defend against, I must say, then we will have some real difficulties.

GIGOT: Mary, how likely do you think it's going to be become what we've talked about, both the Black Panther case, but more importantly, the Perez case, extraordinary intervention in the judiciary, will become an issue and could complicate his confirmation?

KISSEL: We've already had a couple of senators raise questions about him, including Chuck Grassley, looking at Magner, which is the St. Paul Supreme Court case, for a long time. David Vitter of Louisiana as well. But this is a pattern and practice that Perez has been using for more than decades, throughout his career. He seems to view the law as something that's malleable, even incidental if it conflicts with his ideological goals.

GIGOT: We'll be following this one.

When we come back, fresh off his big soda smack-down, Mayor Michael Bloomberg is at it again. Is his new crusade to hide the cigarettes a safer bet or will it meet its own court defeat?


GIGOT: Well, a judge may have ruled against his big soda ban, but New York City Mayor Michael Bloomberg is at it again. The target this time, cigarettes. If the mayor has his way, stores in the city will no longer be able to publicly display tobacco products and instead keep them under the counter or behind curtains. The proposed legislation is the latest public health crackdown by Bloomberg who successfully banned smoking in New York City restaurants and bars in 2003 and has since taken on not just those sugary drinks, but salt, trans fat and even baby formula.

So, Mary, the mayor would say, look, sometimes the people need to be led, even though some people call him a nanny mayor for it. What do you think?

KISSEL: Yes, well, where is the evidence that this is going to lead to better health outcomes and why do we need government hiding products from us? What's next? Is he going to hide the beer?

GIGOT: Maybe.

KISSEL: Is he going to hide the Big Macs in McDonald's? Look, it's much better to empower consumers than to try to nudge them in the right direction, which he seems to be trying.

GIGOT: He would say he has improved public health with his campaign against cigarettes and trans fats, that New York health outcomes are better, and sometimes the public needs to be led in the right direction and sometimes yanked.

STEPHENS: Yes. I think the mayor needs to be reminded of the concept of a free society. He's acting like a Joe Stalin.

GIGOT: Joe Stalin? Don't you think that's a tad --



STEPHENS: Well, if Bloomberg --


STEPHENS: Public health is a good. There are other competing goods in this world. One of them is the freedom to be a little overweight or the freedom to smoke cigarettes or the freedom to gamble. And by the way, the state and city profit fairly handsomely off the bad habits of Americans through huge taxes on cigarettes and the rest of it.

GIGOT: You don't object to the government taxes, so-called sin taxies, that say we want to defer the use of that?

STEPHENS: I object to all -- I object to all taxes.


But this is a real problem. It's a vision of government which is supposed to lead citizens to virtue. That's a very different -- that's not the constitutional vision. We need to have a free society in which people make choices and then accept the consequences of those choices.

I would add, by the way, I can't think of a few measures designed to make cigarettes popular again among young people than to put them behind counters and make them seem elicit and therefore cooler than they ought to be.

HENNINGER: This isn't just Mike Bloomberg's obsessions. It's huge in public policy. How do you alter individual behavior that might impose public costs on society? We had seat belt laws, for insurance.

GIGOT: Sure.

HENNINGER: Singapore has a mandatory savings program. We do not.

Another big example, that board that Barack Obama set up in the middle of ObamaCare, the 15 people who, in Medicare, will decide which medical practices work and which ones don't. And the whole medical community will be asked to comply with this.

The bigger question -- and that board is a good example -- where do you draw the line? Once you allow experts to decide whose behavior is right and wrong, where could you stop?

GIGOT: Where would you draw the line?

HENNINGER: I don't know where I would draw the line because I do think heavy smoking obviously imposes costs on the health care system. Would I ban smoking? I would not. I think the burden should be put back on individuals themselves who incur those costs rather than making the rest of us pay them.

GIGOT: Should the distinction be that if you want to use the tax code or government incentives in some way, for example, savings incentives, you can provide those, that's one thing. But when you start to issue dictates that say you cannot do this, you must do that, that becomes a different story and much more coercive.

KISSEL: Taxes are something that citizens can either increase or roll back or eliminate. There's something that's controlled by the public. I think what disturbs me so much about the Bloomberg edicts is that it's one man dictating to us how a bodega owner should display his products.

And by the way, with the cigarette ban, has anybody told Mayor Bloomberg cigarettes are addictive and it's already illegal to sell to minors? Who is this law supposed to be protecting?

STEPHENS: Look, this is one thing about Mayor Bloomberg. I live in lower Manhattan and they've been working on two blocks of Chamber Street to try to gut the street and redo the piping or whatever. That's taken longer than the Freedom Tower to rise from the basement to the 105th floor. I would like a mayor who focuses on things that mayors are supposed to do instead of telling me or anyone else what we can eat, smoke, drink.

GIGOT: All right, Bret.

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


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

Mary, first to you.

KISSEL: I'm giving a big hit to former Indiana Governor Mitch Daniels who is now running Purdue University for -- imagine this, Paul -- the students. He's holding tuition costs in for the next two years and cutting spending, freezing raises for senior administrators, deans, other professional staff. Now, imagine if the Obama administration felt the same responsibility to manage the federal government in the same way.

GIGOT: A sequester for the university. All right.


RILEY: This is a miss for New York Governor Andrew Cuomo who wants to extend the temporary tax increase on high-income earners in the state after promising to let it expire. For the second time, he will be extending the --


RILEY: -- temporary tax increase.


You would think voters would learn after a while they're being played here? Apparently, not, Paul. Out in California, Governor Jerry Brown sold Californians on a temporary tax increase for high-income earners in his state. I guess the blue-state liberals never learn, Paul.

GIGOT: All right.


STEPHENS: Just briefly, this is a hit for Pope Francis. He's off to a fantastic start. I think this is obviously true for Catholics, but even as a non-Catholic, you see a pope who is getting out and mingling with people, showing love and humility to the people assembling by the hundreds of thousands in Rome to see him. Next week, he's going to go and wash the feet of inmates in a prison for young offenders. This is the right way, it seems to me, to conduct the papacy. And we wish him continued success.

GIGOT: All right, thank you all.

And remember, if you have your own "Hit or Miss," please send it to us at jer@FOXnews.com. And follow us on Twitter, @JeronFNC.

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

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