Supreme Court's affirmative action decision

This is a rush transcript from "Journal Editorial Report," April 26, 2014. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," the left and right react as the Supreme Court upholds Michigan's ban on racial preferences. But is the decision really the death knell for affirmative action?

Plus, with student loan debt soaring, the administration tries to fix a problem of its own making. But could taxpayers be left footing the bill?

And President Obama and Vice President Biden head overseas in an attempt to reassure anxious allies. Can they count on America as Russia and China ratchet up the threats?

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

The Supreme Court on Tuesday upheld a 2006 Michigan voter referendum banning racial preferences in admissions to its public university, preserving the status quo in that state and seven others that have ended affirmative action since 1996. The 6-2 decision produced five different opinions, including a 58-page dissent by Justice Sonia Sotomayor, who compared Michigan's referendum to Jim Crow laws in the south, calling it, quote, "The last chapter of discrimination," and writing that "a majority of the Michigan electorate changed the basic rules of the political process in that state in a manner that uniquely disadvantaged racial minorities."

For more, I'm joined by "Wall Street Journal" columnist and deputy editor, Dan Henninger; "Political Diary" editor, Jason Riley; and senior editorial writer, Collin Levy.

So, Collin, you wrote about this for us. The opinion was really splintered, a lot of opinions, different points of view. What should our viewers -- what should be the main takeaway from the opinion?

COLLIN LEVY, SENIOR EDITORIAL WRITER: Right, Paul, the main takeaway here is that the justices got to the right answer. But they got there by the most incremental means possible. They found that states can ban racial preferences without violating the Constitution but, as you said, it took them five opinions and 102 pages to do it. So it's pretty clear this opinion is not going to be a clear guiding light going forward.

GIGOT: But it's very clear this opinion did not say that racial preferences are unconstitutional. In fact they just said --

LEVY: Yes, Justice Kennedy -- yeah, Justice Kennedy was very, very clear to say that -- and wanted to make sure this was a very narrow opinion --


GIGOT: So it boils down to basically the people can decide whether or not they want to ban them, or allow the universities to and government to implement them. But it's up to the public, people and through referenda or the legislatures to decide?

LEVY: That's exactly right.


Now, Jason, there was a dissent -- not a dissent, excuse me -- concurrence by Justice Scalia joined by Clarence Thomas that while they agreed in the result, didn't agree in the logic.

JASON RILEY, POLITICAL DIARY EDITOR: Right. They wanted the court to go further, as they have for the past 20 years-plus, Paul. As you said, the court won't just come out and say that racial preferences are unconstitutional. And that's really what we need the court to do. And they keep punting on that issue. They keep saying, you can racially discriminate, you know, sort of if you're not too obvious about it, if it's for diversity sake or, you know, if there is some government compelling interest or -- but what we need the court to say is either you can take race into account or you can't. And they won't -- they won't just come out and --

GIGOT: And your argument is they should do that because that's the plain language of the 14th Amendment of the Constitution, and post-Civil War amendment which said you cannot discriminate by race. That's your argument?

RILEY: They should do it, right, because I believe racial preferences are discriminatory and unconstitutional. But also because I think that racial preferences actually harm the intended beneficiaries. And the evidence that they do that is mounting by the day, frankly.

GIGOT: So what about this argument that Charles Krauthammer and some others have made that, you know, what the court actually did the right thing. It's incremental, but they did the right thing because they said we're not going to decide for the public. This is too contentious an issue. This is something for voters to decide. And you saw that in Justice Breyer's, liberal Justice Breyer's concurrence. He said we shouldn't settle this for all-time. The voters should have the say.

What's wrong with that?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Well, Justice Sotomayor thinks there is a lot wrong with that. She thinks the voters are capable of disadvantaging minorities, using that process. She said that's what happened in Michigan. They passed the constitutional amendment, it means that racial minorities no longer have access explicitly to the elected board of regents to appeal to them as parents of legacies or athletic scholarships are able to do.

GIGOT: What's your reaction to her point?

HENNINGER: I think that -- look, she says there is persistent racial inequality in society. To Jason's point, Justice Sotomayor is talking about black Americans, because of the legacy of slavery in the United States. The problem is the United States is now full of other ethnic minorities, such as Asians or Hispanics, who themselves can make similar legal claims to Justice Sotomayor's. And so you're looking towards an endless legal tangle here. And to have it suggest --


GIGOT: So you're saying race is uniquely combustible and complicated, unlike, say, legacies for alumni, which, face it, sometimes are --


GIGOT: -- do get a preference in academic institutions for admissions. So is that your argument, that race is somehow unique?

HENNINGER: It's Justice Sotomayor's argument that it is unique, and it uniquely disadvantages black Americans. And she cites areas of American life where she called persistent inequality persists. But the question is, what is the result that she is looking for? And mainly, it is a statistically based equality that people like her and Eric Holder and Thomas Perez of the Labor Department -- this is not just Justice Sotomayor.

This is President Obama's view of race in America.

RILEY: Just a couple of points. First, she omits Asians when talking about the minorities that are harmed by this ruling. Because we all know that racial preferences harm Asians --

GIGOT: In admissions.


RILEY: -- in admissions in college admissions, because they over perform.

Secondly, however, even if you buy her argument that racial discrimination is still some barrier to black progress in America -- I don't buy that argument -- but even if you do, it does not follow that racial preferences are the best way to address that argument. We have evidence mounting that shows -- and you mentioned eight states now have these bans in place. When they stopped using racial preferences in California and other states, black college graduation rates went up. Not only across the system, but they went up in the most difficult fields of math and science. So we would have more college graduates, but for these policies. So it's not just a matter of them being wrong and harmful, it's a matter of them being harmful, as well.

GIGOT: All right, Jason, thank you very much.

When we come back, faced with surging enrollment and skyrocketing costs, President Obama is now calling for reforms to his own student loan program.

But even with those fixes, could taxpayers be left paying the tab?



BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Under existing law that we passed, you never have to pay more than 10 percent of your income in paying back your federal student loans, which means if you want to be a teacher, you want to go into a profession that does not pay a lot of money but gives you a lot of satisfaction, you are still capable of doing that and supporting yourself.


GIGOT: That was President Obama last May touting his pay-as-you-earn student loan plan, which allows qualified students to borrow unlimited amounts and then caps their monthly payments at 10 percent of their discretionary income. Unpaid balances are forgiven after 20 years for those working in the private economy and 10 years for those working in government or for nonprofits. Sounds like a pretty good deal, and sure enough, the administration is now trying to put a lid on the program as more students sign up and costs spiral out of control.

We're back with Dan Henninger. "Wall Street Journal" columnist, Mary Anastasia O'Grady; and assistant editorial page editor, James Freeman, also join the panel.

So, James, just so our viewers understand, you have to pay back -- you can pay back -- in 10 years, you get to write off all your loans if you work for the government or nonprofits.


GIGOT: But 20 years if you work for the private sector. What's the justification for that distinction?

FREEMAN: Yeah, it's tough for taxpayers to understand. We have been warning about this for several years and now the bills are starting to come due. It's interesting, liberal think tanks are now urging reform, basically, saying, President, you're going to ruin big government for everybody. You've got to fix this thing.


GIGOT: But it was their idea. The liberal think tanks came up with it.

FREEMAN: Right. As far as this justification, the thought is that, I suppose among a lot of people in Washington, including the president, that working in the nonproductive sectors of the economy, government nonprofit is somehow better than those who actually create wealth. But the bottom line is, you have the situation where people can go through college, grad school, law school, come out of law school, work as a community organizer, and never pay a nickel.

GIGOT: Imagine this, Mary, the -- if you give people an incentive not to repay their loans, more people don't repay their loans.


MARY ANASTASIA O'GRADY, COLUMNIST: Paul, if they had this program when I was going to college --


-- I could have pursued that career as a poet. But instead, I had to work for a living.


You know, I have to think about how they came up with this. I mean, were they sitting around the room saying, gee, prices are really high? I've got an idea. Let's subsidize consumption. This obviously is going to push prices higher. And I think that's --


GIGOT: You mean tuition in this case, for schools, yeah.

O'GRADY: Yeah. And --

GIGOT: The schools take the lines and they just capitalize them into the tuition because they know the students will be able to borrow whatever they need.

O'GRADY: Right. And they have no incentive to try to hold down costs.

You have a lot of American high school students who don't go to college.

And what ends up happening is they're subsidizing these losses and also I think --

GIGOT: The kids who don't go to school, don't go to college, don't get the four-year degree, don't go to Yale, Brother Freeman. Get -- they're the ones who end up subsidizing through their tax dollars.

O'GRADY: And finally, I think this stifles innovation. Because some people are actually trying to be creative about how to bring down costs, online learning combined with the traditional Socratic learning to try to push prices down. But where is the incentive to do any of that innovation if the government is just going to provide a bottomless pit.

HENNINGER: As we said, this came out of the liberal think tanks. This program is an educational ObamaCare. All right? This -- President Obama has talked about this from day one in every major domestic speech he has given about access to education. This is the way they do it. This is a progressive idea. It doesn't work. It is falling apart. And as a result, like ObamaCare, you end up with everyone having to pay the costs for these progressive ideas.

GIGOT: What's the cost, James? Do you have a sense of the magnitudes here?

FREEMAN: It is massive. You're talking about a market with $1 trillion in loans outstanding. The government is originating $100 billion a year in new loans. Now, just these income-based repayment programs we were talking about, where people can avoid the big payments without going into delinquency, they're skyrocketing. In just the last six months, people in that category have grown 40 percent, over $1.3 million borrowers. Then, you have default problems that are on top of that. The Federal Reserve new report saying this is the highest delinquency rate among any consumer debt product. So, remember, these are loans without regard to the borrower's ability to repay. So there's several ways the taxpayer can lose.

GIGOT: But the administration is saying, well, because of all this, we want to cap the amount you can borrow. What are they talking about?

FREEMAN: Basically, what they're trying to avoid is this spectacle of someone going to a fancy law school and walking out the door and the taxpayers eating the whole tab --

GIGOT: With $150,000 or $200,000 in debt and saying, sorry, taxpayers, it's all on you.

FREEMAN: It's unlimited how much they can borrow for grad school. So to avoid that indefensible situation, they're saying, oh, we're going to reform it. But the reform is actually more expensive than the problem.

GIGOT: How so?

FREEMAN: Because what they're doing is they're broadening the program.

They're saying, OK, we're going to cap the amount we'll forgive for the grad students to $57,500, which is the amount undergrads can borrow. But what they are also doing is expanding access to this deal so that -- it used to be just for recent borrowers. They want to blow it out to everybody --


GIGOT: And will this require Congress to pass this fix, this reform? This would require action by Congress?

FREEMAN: Well, normally, if you read the Constitution, you would think that. But given the way he expanded in 2011, it's a question.

GIGOT: All right.


This is -- what a glorious mess it is.

When we come back, President Obama and Vice President Biden head overseas to calm nervous allies. But as Russia and China ratchet up their territorial claims, can the United States still play the role of world power?


GIGOT: Both the president and vice president were overseas this week trying to reassure nervous allies of America's continuing commitment. In Tokyo, the first stop on his Asian tour, President Obama warned China that the U.S. would stand with Japan against territorial grabs in the East China Sea. And in Kiev, Vice President Joe Biden warned Russia that Ukraine is and must remain one country, and insisted that the United States will never recognize the annexation of Crimea. So should our allies take heart?

We're back with Dan Henninger and Mary Anastasia O'Grady, and editorial board member, Mary Kissel also joins the panel. She's the host of "Opinion Journal" on WSJ Live.

So, Mary, the president probably the most news worthy thing he did was to stand with Prime Minister Abe of Japan and say that the U.S. defense treaty with Japan includes these disputed islands in the East China Sea, the Senkakus. China claims them, has been saber rattling to say give them back. Real source of tension in the East China Sea. Now the president has said we'll go to war with -- to defend Japan if they're attacked. So was that the right thing to do?

MARY KISSEL, EDITORIAL BOARD MEMBER & HOST, OPINION JOURNAL: Absolutely it was the right thing to do. And it's a welcome sign from the president, because our Asian allies are very concerned about our commitment to defend them, given what's happened in Crimea. They watch the news. China is a big problem in the region. They're doubling military spending. They are rattling sabers, not just with Japan. They seized islands off the Philippines. And they declared the South China Sea a core interest, Paul.

This is a major trading route. So the president -- this kind of strong rhetoric is very, very welcome.

GIGOT: What about the trade treaty with Japan, Mary? Because that was also something the president wanted to take away, but that's -- that looks like it's stalled. This is the Trans Pacific talks with 12 Pacific nations, not including China, but very much including Japan.

O'GRADY: Right. If the Trans Pacific Partnership is accomplished, it will make up about 40 percent of total world trade. It's very important to Japan, which has had an economy in a slump for two decades now. And I think, you know, I lay this one squarely at the feet of President Obama, because everyone has known in the trade community for, you know, several years now that none of these countries are going to the table and talking about really serious agricultural products like rice --


GIGOT: Reducing their tariffs on imports.

O'GRADY: Right. Until the president has fast-track negotiating authority from Congress. And the president has not lifted a finger to try to get that. And his biggest opponents there are in his own party. So, you know, for him to show up in Japan and then say, well, I guess we didn't get the trade deal we wanted, is I think a little bit disingenuous.

GIGOT: So, Dan, Joe Biden drew the short straw, went to Kiev.


The tougher nut there. Real big problem with the Russian troops on the border of Ukraine. How do you -- what do you make of his reassurance or attempt to reassure Ukraine?

HENNINGER: The question is, what basis do the Ukrainians have, or the Asians, for that matter, have that the United States will follow through.

Joe Biden said we will stand with you.

GIGOT: But do you think it was a good idea for him to go there?

HENNINGER: I guess so. I mean, they were -- I don't know about that, Paul. I think the administration keeps feeling that they have to say the right thing, to show as though they might be doing the right thing.

GIGOT: Well, but he goes there. I mean, he goes there in person. Isn't that showing that the right thing? And saying, look, we stand with you?

HENNINGER: Because of these activities on the Ukrainian border late this week, the president in Japan said we have more arrows in our quiver. It sounds as though the United States is always on defense. Putin is pushing forward, we react. If they do something, then we react again. I don't think that's what the Ukrainians were looking for in terms of a forceful reaction from the U.S.

GIGOT: Mary, you lived in Asia for several years. You referred earlier to the fact that China is paying attention, and Asia is paying attention to what's happening in Ukraine. Explain that.

KISSEL: Well, let's take the Philippines, Paul. The Philippines kick U.S.

troops out in 1991, out of Clark Air Force Base and Subic Naval Base. Now they're pleading for us to put troops back in. That is a sign, a signal, an important example of what is being felt throughout the region. Because they don't feel that they can depend on our security assurances. And this isn't just about the Philippines. Remember, we have a string of allies that circle China that are very vulnerable. They haven't spent on their militaries. They depend on us. This pivot to Asia is really nothing more than talk, because we're cutting back so much on our military spending.

Yes, we're putting a higher percentage of ships in there and troops, but of a much lower base. So they see what's going on in Ukraine.

GIGOT: Briefly, this isn't the world that President Obama imagined he would take over in 2009.

HENNINGER: No, not at all. It's being turned upside down. You know, the

Iranian initiative has been put on the back burner and now he has to deal with Ukraine and increasingly problems in Asia.

GIGOT: 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, it looks like the IRS is feeling pretty great about its performance for taxpayers, since it turns out that between 2010 and 2012,

2800 IRS employees, who had recently been disciplined, also got performance bonuses, totaling about $2.8 million. So, you know, the media has been pretty busy yawning about Lois Lerner's role -- she is the director of -- tax exempt organization's role in the targeting of conservative groups. So I guess we should probably give the IRS a hit for being consistent here.

She's not going to be held responsible for her conduct --

GIGOT: All right.

LEVY: -- why should any of her colleagues?

GIGOT: Bonuses all around.



RILEY: Paul, this is a miss for President Obama and Eric Holder over their eagerness to shorten the sentences of convicted drug dealers and get them back to the ghetto as soon as possible to raise hell once again. I wish the administration had half as much sympathy for the victims of these crimes as they do for the perpetrators.



KISSEL: I want to give a hit for the 9/11 National Museum down in lower Manhattan for refusing calls to edit out references to Islamists and jihad in a documentary on al Qaeda. An imam and others said this would be offensive to Muslims. You can't understand or fight radical Islamic terrorism without talking about it honestly and openly. And whitewashing history doesn't serve anyone.

GIGOT: They even objected to the use of the word "Islamist," which is obviously an attempt to try to distinguish radical Islam from just normal Muslims, and they even object to that.

KISSEL: It's a destructive form of political correctness, Paul.

GIGOT: OK, all right.

Thank you all.

And remember, if you have your own "Hit or Miss," please send it to us at And be sure to follow 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. Hope to see you right here next week.

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