This is a rush transcript from "Journal Editorial Report," June 23, 2012. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," anticipation builds ahead of the Supreme Court's health care decision. Could the White House benefit if the mandate falls? And are Republicans ready with a coherent response?

Plus, panic on the left? Does the Obama campaign need a shakeup? Some prominent Democrats think so.

And the latest in the education wars. A showdown in the president's hometown pits the teachers union against his former right-hand man.

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

Well, all eyes on the Supreme Court, where justices will rule this week on the constitutionality of President Obama's Affordable Care Act. So when are we likely to get a decision, and how the White House and the GOP likely to respond?

Let's ask Wall Street Journal columnist and deputy editor, Dan Henninger; editorial board member, Joe Rago; and Washington columnist, Kim Strassel.

Dan, if the law is upheld, obviously, the status quo prevails and we'll fight it out in the election. The interesting thing happens, politically and legally and everything if some of the law is overturned. Let's assume that part of the law, the mandate, and maybe some of the other regulations that go with it, the purchase mandate, that you must buy insurance, are overturned. How is the White House likely to respond to that?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: If that happens, Paul, the first things they need to do is attack the Supreme Court as they did the Citizens United position.


GIGOT: Really? Make that the central issue of the campaign?

HENNINGER: It will be a political response for starters. And then they'll say it threatens to turn health care back to the insurance companies and the pharmaceutical companies, because that's always part of the Democratic riff. Thirdly, the president will say he intends to work, if elected, to preserve the best parts. He'll need to work with Congress, need a Congress that works with him. And he'll mention the middle class as being the victims of this decision because he's running on being the protector of the middle class.

GIGOT: And you have good sources in the White House, Dan, that sounds like exactly what they would say.


All right, Joe?

JOE RAGO, EDITORIAL BOARD MEMBER: No, I mean, the bill in substance, whatever they throw out, we never really meant that. These are the most unpopular part of the bill so they'll keep it and they'll say --


GIGOT: The unpopular part of the bill, the mandate.

RAGO: The mandate. They'll say, look, let's get this flowing.

GIGOT: You say that's the heart and soul of the bill, the core and substance of the bill from the Democratic point of view.

GIGOT: So if you can get the middle class --


RAGO: -- the government control. Get the middle class on to being -- on board with entitlements and their hopes for that (ph).

GIGOT: Kim, what do you think about this Supreme Court tactic, making the Supreme Court an issue? Because I will tell you my view is that's a loser. If you go out and attack the Supreme Court for this, you're going to look partisan and I don't think that's a winner. I would say, here is what I would do if I were the White House. I would say, we're disappointed, we thought it was constitutional, we made a good argument, OK, the Supreme Court has spoken, but now we've got the rest of the bill, as Joe and Dan said, we think it's a good will and, by the way, Mitt Romney shall what's your man? That's the way I --


STRASSEL: I agree. Yes. I agree. I think it's a loser, but I don't know if this president can help himself. He's actually come out before and rathed (ph) the Supreme Court. He sent out a warning in a speech a couple of months ago suggesting he would go after them. What they may do, Paul, on the Supreme Court, rather than attack them directly for this or in addition to attacking them directly, they may talk about the stakes for the Supreme Court. They may make the argument that Obama needs a second term so, if there's a retirement, they can appoint a new person and, therefore, make sure you don't have decisions like this again. But in a way, going to your other point, what they're going to do, remember, the president came out and talked about how this is about two visions going forward. they're going to work into this and make the argument, whatever it is that the Supreme Court strikes down, all or part of it, they're going to claim this is part of the Romney plan, the Romney vision going forward, that he's going to take you back to a day when people aren't covered by health care and that's the choice. And he's going to stay in office to make sure that doesn't happen.

GIGOT: Kim, do you think this could turn out to be a net-plus for the president, politically, if part of his signature achievement is overturned.

STRASSEL: That will depend as always on the Republicans.


You know, the Republicans had a lot of intellectual confusion over the year on health care. One of the reasons the country has the health care bill is because the Republicans didn't know how to address health care reform and they didn't even when they were in the majority. They're now facing a question of how to respond and there's confusion about, in particular, as we were talking, some of these more popular provisions of the bill. Do they embrace those, which goes against their principles, and do they put out a full replacement, which embraces free market principles, or do they consider that too dangerous in an election year and do something.

GIGOT: Joe, you've been reporting this, no doubt, to your dismay, you drew the short straw and where the Republicans on this?

RAGO: There's a real furious internal debate about how to go forward. And the danger for the party is really, they become the dog that caught the car. This debate never gets resolved and you see a mish-mash of responses that don't cohere in any way. And the larger problem, they haven't talked about the replace part. They say repeal and replace, repeal and replace, but replace is just a word, and they haven't come up with something that will appeal to the public. They haven't tried to educate the public enough about what reform alternatives would look like.

HENNINGER: I think he's right. It's going to revert to the pre- Obama-care status quo, which is the health care system is a mess and nobody knows what to do about it, and they're not going to attend to it next year at all.

GIGOT: Think about what you're saying here. You're saying that the Republicans could get this gift of a historic constitutional victory, a victory for liberty from the Supreme Court, and they don't know what to do with it?

RAGO: Right. And there was an AP poll this week that said if the Supreme Court overturns all or part of the law, 77 percent of the public wants a better health care system, wants Congress to go back to the drawing board and look for some constructive alternatives. And it's really too bad that we'll not seeing that.

GIGOT: Who is the single best Republican on health care in the Congress?

RAGO: I would say it's, like most issues, Paul Ryan.

GIGOT: And they're not listening to him as much as they should.

OK. All right. Well, thank you all. We'll see.

When we come back, liberals lament the state of the Obama reelection campaign, as angst over his economic message grows. Is a shakeup coming?


GIGOT: Is it time for a shakeup in Chicago? Many on the left seem to think so. This week, Bloomberg's Al Hunt, summed up how fellow liberals are feeling about the president's election efforts. In a column titled "The Obama Campaign Needs an Intervention," he writes, quote, "For Democrats, June has been the cruelest month. There has been discouraging economic news, the reelection candidate has made mistakes and seems he's out of his comfort zone. The supposedly superior Obama campaign looks amateurish, and complaints about the operation's insularity have reached a fever pitch."

We're back with Dan Henninger and Kim Strassel. And Wall Street Journal columnist and former Bush speech writer, Bill McGurn, also joins the panel.

So, Kim, what do you make of this liberal angst about the Obama campaign? Is it warranted?

STRASSEL: Well, it comes out of watching the Obama campaign in the past couple of months, which have been all over the place. First, they said the economy was getting better. Then it wasn't as bad as it might have been. And they went after Romney and Bain Capital and they went on him on his handling of Massachusetts and the war on women and student loans. They've been throwing everything they can at him to try to get something to stick without much traction. Last week, the president came out with an attempt at a reboot. This is when he laid out his two visions forward, mine, or the terrible one that belongs to Romney. And this interestingly has begun to calm some nerves out there among the Democratic base and among the political community. Because, in part, they realize that this may be the best opportunity he has. If he can't talk about his record and the economy, but he can try to make this a referendum on Mitt Romney.

Bill, is this pivot, likely to work? What's the --


BILL MCGURN, COLUMNIST & FORMER BUSH SPEECH WRITER: I don't that it's likely to work. It's probably wise. Look, you mentioned liberal angst, liberals have always been anxious when they have to explain the failure of liberal policies. For two years, the president has a Democratic majority and put in a stimulus that didn't stimulate and he put in a health care bill that may be declared unconstitutional and unemployment is higher than he would. My experience has always been, when people say there's a campaign problem or a PR problem, it's always a substance problem.

I think I told you, when I was in the White House, we once had an acrimonious meeting about war speeches, waiting for the surge, and everyone was complaining about the speeches, that we should be saying this and ratings would go up. My line was, you give me a better war, I'll give you better speeches --


-- which happened --


GIGOT: It's hard to make a losing war sound good.


GIGOT: And it's hard to make a poor economy sound like it's somebody's fault other than your own.

MCGURN: Right. Everyone can't concentrate on the message, how you can get the message. But, is this the only place he can go. A reboot, what does it mean? It means a new spin on facts that he can't really talk about.

GIGOT: Yes, Dan, I think that, I kind of agree with bill on this. If I were the Romney and disagree with the liberal critics of Obama's campaign, what else do they -- can they do?

HENNINGER: What do they want?


GIGOT: They've got to change the subject.


GIGOT: You can't say 8.2 percent unemployment. That's fabulous. Housing prices down again. That's fabulous, too.


You've got to say, Romney would make it worse, it's all Bush's fault, or let's talk about contraception of immigration or something else. And they're playing, as well as they can, a rotten hand.

HENNINGER: It's the hand they've been holding for about 40 years. Look, they want Obama to somehow come up with a new magic idea on the economy. The Democratic -- the Democratic idea since at least Lyndon Baines Johnson can be summed up in three words, tax and spend, OK? That's what they do. And Barack Obama, in that Cleveland speech, said -- he calls it investments. He's going to invest in education, infrastructure, energy, research and development.

GIGOT: But you wrote this week that you think that could be a winning message because of the way he pitches it and the focus on the middle class.

HENNINGER: Yes. I think there is tremendous anxiety out there in the country among the electorate and the middle class electorate. People are upset and they don't know why the economy is performing as badly as it is and they want it to get better. And it will be up to either of those two candidates to tell those anxious people why his ideas are going to make it better. And I think if the president keeps drilling and drilling on himself as the protector of the middle class, without a refutation by Romney, it could work.

GIGOT: All right, Kim, how do you think Romney should respond, and is he likely to, the way that Dan says he needs to?

STRASSEL: Well, this is the Romney challenge, because fundamental to the president's reboot in this argument, is this narrative, this sort of rewriting of history, this argument that the financial crash was fundamentally the fault of conservative policies and philosophies, and that everything that is wrong in the country is because of that, and stems from that. And Romney's challenge is going to have to be to explain why that's wrong, to talk about what really caused the financial crash, to talk about why we haven't recovered since then. He hasn't done that much. He's been very good ostensibly saying what the president hasn't done right, but he hasn't talked a lot about the bigger ideas and gone back to try to correct that history. That's what he's going to have to do. Otherwise, if there's a choice that people may, Dan, go with what seems safer if they think that the alternative is worse.

GIGOT: Romney speaks in practical terms. Obama isn't working. Obama speaks in moral terms. This is right, this is wrong. That's a more powerful argument?

RAGO: I would say play devil's advocate a little bit. I'm not sure Romney has to get into details. President Obama came in on hope and change, with almost no details.


People were tired of Bush, tired of war, financial crisis, they were tired of it. A lot of people might be tired of Barack Obama. What Romney has to do, I think, is speak to aspirations of people. People are struggling. A lot of people out of work. There a lot of people are in work, but afraid they are going to lose their jobs or they're not moving forward. He has to grab -- he's starting to do that. But he has to really grasp their aspirations.

GIGOT: Does he have to show how we get out of it.

MCGURN: Yes, he does, but I think that's the part. Tether it to an economy that lets people achieve their dreams.

GIGOT: Thanks, Bill.

Forget Wisconsin there's a labor battle brewing in the president's home state. In Chicago, Mayor Rahm Emanuel isn't the only Democrat taking on the teachers unions. We'll have details next.


GIGOT: Move over Scott Walker and Chris Christie. Now Democrats are taking on the teachers' unions. A showdown on President Obama's home turf is pitting his former chief of staff, now mayor, Rahm Emanuel, against Chicago teachers over issues of pay and longer school days. And last weekend, the U.S. Conference of Mayors, led by Democrat Antonio Villaraigosa of Los Angeles, unanimously endorsed so-called trigger laws, that allow parents to seize control of so-called failing public schools.

We're back with Dan Henninger and Bill McGurn. And senior editorial page writer, Collin Levy, also joins us from Chicago.

So, Bill, I never expected to see this, the National Council of Mayors siding with parents over teachers. Solar eclipse? What accounts for it?

MCGURN: Right. What a change. Remember, a few weeks ago, in Washington, Dick Durbin got the poison pill and started to kill the vouchers program and it looked like nationally choice and accountability was dying and on the losing end. And what's happened, instead, around the country, it's flourishing and people are having to embrace it. That said, the parent trigger, it's a good thing the mayors did it. We need a little more teeth in that. We need to prevent the school board from being able to access public funds to blocking these charter schools. A lot of this is the how question.

GIGOT: Which they are doing in the two places in California --

MCGURN: Right.

GIGOT: Compton and (INAUDIBLE), where parents have pulled the trigger.


HENNINGER: I think what's happening, here, Paul, is the inner city school status quo is indefensible. It's even obscene. We've known that for a long time.

GIGOT: Morally so.

HENNINGER: Absolutely. But because of the process of charter schools, more and more black parents have been engaged in at that system, and they're discovering that the status quo was indefensible. and I think they're becoming a political force that the Democrats are beginning to have to recognize. And in this case, like Chicago, better late than never.

GIGOT: All right.

Speaking of Chicago, Collin, what accounts for this miracle? And what's the state of play there, Rahm Emanuel versus the unions?

COLLIN LEVY, SENIOR EDITORIAL BOARD WRITER: Yes, Rahm Emanuel is leading a very important charge here. And I think you have to acknowledge that liberals are incredibly desperate that this not be seen as an aftershock of the Wisconsin battle, right next door here in Chicago, and here we go again. I think there are strong parallels here for Rahm Emanuel and Scott Walker, namely, that there are very strong financial incentives. Rahm is looking at a situation where he basically can't govern unless he takes care of some these issues. And the school teachers, what they've proposed, the teachers union has proposed, will cost about 800 million dollars and there's no way to pay for it.


GIGOT: Collin, are they proposing a 30 percent increase? Did I read that properly?

LEVY: Yes, they're proposing a 30 percent increase over two years, and they're objecting to the mayor's request that they lengthen the Chicago school day, which is, by the way, the shortest in the nation. It's currently about five and a half hours. They're saying they need more pay just to do the work that most teachers already do.

GIGOT: And they're threatening to strike as soon as this summer if they don't get what they want.

LEVY: Right. They've kind of jumped the gun on the strike in a way. They've already authorized the strike. And it's really a sign of how much fear there is here. I think they want to send a very strong message, hey, we can't have Democrats falling out of line here, we've already fought the Republicans. And I think that unions know, if they lose that battle with Democrats, then they're really sunk.

GIGOT: Yes, Bill, I think you deserve as big an increase --


-- but I'm not sure that thinking people will say that they do -- that their teachers.


MCGURN: Right.

GIGOT: Nobody else in Chicago is getting a 30 percent raise.

MCGURN: To follow Collin, this is a Wisconsin -- what Wisconsin has shown is that the teachers unions, unions in general, public-sector unions are not as strong as people think. Their bark is a lot worse than their bite. It's coming in, in Idaho, too. There's a referendum to change reforms and we are going to find out. I think Rahm is reading tea leaves. He sees, from Wisconsin, he might be able to take them on and win. He's finding he can't afford the teachers. Let's be clear, it's mostly a financial reform. This isn't a reform of one of the worst school districts in the nation.

GIGOT: Although I've talked to Emanuel about this, about education. I think he's deadly serious on the substance of it. He's endorsed parent trigger during the campaign even though he hasn't been able to implement it, and thinks that the schools, if they continue to fail 50 percent of the kids -- and in Chicago it may be a higher percentage -- then we're sunk as a nation.

MCGURN: Right.

HENNINGER: Yes, but it's not over until it's over, Paul. These teachers are like an old industrial union, like the miners union, they are tough, and this thing is not going to be won easily, whether it's in Chicago or Los Angeles, Cleveland, because they have fought successful to overturn vouchers programs in some of those cities.

GIGOT: And aside that have is in New York.


GIGOT: Governor Cuomo to be able to hide evaluations of students from everybody except the parents who -- your child's teacher that year.

MCGURN: And they put so many hoops. You have to go into the school or something. It's ridiculous.

GIGOT: And you can't even use -- let's say your kid is in second grade. You can see the evaluation of the second grade teacher, but not the third grade teacher --

MCGURN: Right, that you're going to get.

GIGOT: -- that you're going to get next year. How can you make a decision about where to send your kid next year?

MCGURN: Let's hope some entrepreneurs set up their web sites and start sharing some information out there.

GIGOT: All right.

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.

Collin, first to you.

LEVY: Paul, this is a hit to a group of plaintiffs, including the state National Bank of Big Springs, Texas, which, this week, filed suit, challenging the Dodd-Frank law, which created vast new regulations over the financial system. And a group of plaintiffs basically say that, that Obama's stealth appointment of Consumer Financial Protection Bureau chief, Richard Cordray, and the two agencies that were created by the law were given so much power that it violates the Constitution's separation of powers. This is a law that's created incredible burdens for business and a lot of regulatory uncertainty, and we're glad to see it get its day in court.


RAGO: Paul, a miss this week for the reality free zone --


-- known as California. Governor Jerry Brown succeeded in getting a $9 billion one-year tax increase on the November ballot. Here is the thing. That's the compromise. The other --


The other option for voters is a $20 billion tax increase that will start on people earning as little as $7,000 a year. Only in California is Jerry Brown a moderate.

GIGOT: At least that's truth in advertising, because eventually they go after the middle class.

All right, Bill.

MCGURN: A half hit for the Plymouth Cafeteria Association of Michigan. This is a union, part of the Michigan Education Association. Recently, their members received a letter from their president saying they need to pay their dues if they expect to have a job, and they can do it three ways, providing a credit card, bank account or paying in full at the beginning of the year. The letter is in reaction to a new state law that prohibits them from collecting. I call a hit, because better unions collect this stuff from taxpayers. It's a half hit for the federal judge who suspended the law for the moment.

GIGOT: All right, Bill, thank you.

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. We hope to see you right here next week.

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