This is a rush transcript from "Journal Editorial Report," April 14, 2012. This copy may not be in its final form and may be updated.

STUART VARNEY, FOX HOST: This week on the "Journal Editorial Report," taxing the rich. President Obama says it's only fair. His "Buffett rule" may be good politics, but is it bad policy?

And weekly job numbers. Payday bleak employment picture. Is it a bump in the road or is the economic recovery headed off a cliff?

And with his chief Republican rival out, Mitt Romney looks to the general election. What he needs to do to take on the president and win.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: What Ronald Reagan was calling for then is the same thing we're calling for now, a return to basic fairness and responsibility, everybody doing their part.


VARNEY: Welcome to the "Journal Editorial Report." I'm Stuart Varney, in this week for Paul Gigot.

Well, you just heard President Obama invoking Ronald Reagan, and claiming that his latest plan to tax the rich is all about fairness. The president officially endorsed the so-called "Buffett rule" in the swing state of Florida Tuesday, calling for a minimum 30 percent tax on those making more than a million dollars a year. His campaign clearly thinks it is a political winner, but is it good policy?

Let's ask Wall Street Journal columnist and deputy editor, Dan Henninger; columnist, Mary Anastasia O'Grady; assistant editorial page editor, James Freeman; and Washington columnist, Kim Strassel.

Dan, to you first. I call this class warfare.


VARNEY: I know something about that. Is this a winning political strategy?

HENNINGER: Let's put it this way, Stuart, invoking Ronald Reagan in this context really takes the cake. We'll get to that later. But bear in mind that the first time around with the Obama rule, it wasn't about basic fairness. It was about reducing the deficit. As the president said, it's simple math. Well, somebody did the arithmetic, and it turns out, it adds up to about $5 billion a year, a teardrop in denting the deficit. Then we shifted to basic fairness.

I think the problem with that is he's running in a way that induces resentment on the part of some voters. I don't think most people carry resentment and fairness in their head all the time, but he's going to have to sustain that by giving these class warfare speeches. While it may work, I don't think it's a winning strategy. I don't think he can build a majority on that basis. Some people will respond, but I don't think enough.

VARNEY: Kim, I want to stay with the political angle for a second. In America, does class warfare win?

KIM STRASSEL, WASHINGTON COLUMNIST: Well, look, the president's doing this for two reasons. One is because he just doesn't have anything else to run on. The economy's not great. His record is not strong. He's also doing it because he views this as a weak spot for Mitt Romney, who is a bit sensitive about his own wealth. The problem is if you ask Americans in the abstract, do they think millionaires and billionaires should pay more, they say yes. More interesting, though, are the polls that say, what do you think is the most important issue? They do not believe this is the most important issue. They want a president who's going to tell them how he's going to fix the economy, what he's going to do fix the deficit. So the question is, do you motivate people to go to the polls on this issue? Can you win as a president running on higher taxes? That's a bigger gamble.

VARNEY: Which brings us to the question of whether or not this is good economic policy.

But look, the premise of the president's position is that this is fair, this is fairness. Is it, Mary?

MARY ANASTASIA O'GRADY, COLUMNIST: Well, if the question is paying your fair share, it certainly is not. I mean, the top 1 percent of earners in this country already pay about 40 percent of the taxes. The top 5 percent pay almost 60 percent of the taxes. And the bottom 50 percent pay less than 3 percent of the taxes. So if it's about paying your fair share, that's already happening. What the president is doing here is getting at something else, which is very common in Latin America, equality. He wants everybody to be equal. He thinks that that's a resounding message to the American voter. I don't think it is.

VARNEY: James?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Well, just to clarify, this is not what Ronald Reagan was calling for.

VARNEY: Thank you.

FREEMAN: Amazing. This week, the White House using the 1986 tax reform as somehow connecting it to the "Buffett rule" -- the '86 tax reform under Reagan was cutting rates, lower deductions, simplifying taxes. What President Obama is proposing here, no elimination of deductions, no simplification, no rate cuts, increasing taxes on capital gains. So it's really the exact opposite. I think you have to wonder, good policy, is it a growth strategy to say we are going to tax equity investment more?

VARNEY: In your judgment, is it good economic policy?


FREEMAN: It can't be. We're sitting here with all these nervous investors, scared companies, individuals sitting on cash, investing in long-term treasury bonds instead of taking risks. This is an arrow right at that risk-taking to say we'll make it more expensive to invest in equities.

HENNINGER: Yes, and to James' point, what's so fascinating about the president's presentation, especially invoking Reagan, is he himself does not even talk about the growth aspects of this tax policy. Did anyone hear him talking about how his tax policy was going to promote economic growth? Reagan did it all the time. Barack Obama isn't even talking about that, which is obviously the primary issue in the center of the campaign. It's really kind of amazing that he doesn't somehow try to make a case for how this is going to improve the economy.

VARNEY: Kim, I think it's going to be voted on next week in the Senate. How much Democrat support will it get?

STRASSEL: Well, they have brought this issue up several times in the Senate before. It's never actually passed. I think you touch on another risk for Democrats. Senate majority leader, Harry Reid, is starting to get a real reputation of overseeing a graveyard. There are growing complaints that the House Republicans have passed dozens of pieces of legislation. There are even bills that President Barack Obama says he supports, that Senate Democrats support, but Harry Reid has had no time to debate any of those or bring them to the floor, because they're holding show votes like this, legislation that's not going to pass, but is all designed for the political campaign this fall.

VARNEY: All designed for the political campaign this fall. I have to keep going back to that question. Does class warfare win politically in America? I understand that in the past it has not. This year, Kim, do you think it's a winning issue, politically?

STRASSEL: I don't. They're going to try, again, because they don't have much else. The only way they might win this is if Mitt Romney does not actually respond on this. This is the president drawing a line in the sand, saying this is what we are going to fight over. If Mitt Romney decides to agree with him and continues saying things like, well, the rich can take care of themselves, he sees that issue. He has to go out and make the argument that lower tax rates for all are what create jobs and economic growth. If he can't do that, then the Republicans have a problem.

O'GRADY: You know, I think Kim is absolutely right on that. This is an opportunity for Romney. I mean, here is a president, going after the single most important group of people who can create jobs, who can give us capital formation, who can give us growth, and Romney has to make that very clear, because if the president just sails through on this resentment issue, I think it's going to be very tough.

VARNEY: Last word.

FREEMAN: You can't hit the "Buffett rule." It's a political sham. It doesn't raise money. Warren Buffett is not going to be affected by it, because he has bragged by shielding his wealth from capital gains taxes. It's not even going to hit Buffett that hard.

VARNEY: I want the last word --


-- class warfare does not work in America.


Still ahead, troubling new job numbers this week. Are they a sign of a new economic downturn or is the recovery still on track?


VARNEY: New applications for unemployment benefits jumped sharply last week, to their highest level since January, yet another sign that the jobs picture is worsening. So what about the rest of the economy? Is the recovery on track or heading off the rails?

James, what do you say?

FREEMAN: I think we're continuing to bump along. I don't think you can say we're sliding into recession. Just to continue with the Reagan theme and making comparisons, one thing that's disturbing during the Reagan years, real disposable personal income was growing 10 times the rate of the Obama era. We actually in the early part of this year are seeing real disposable income, what people have after taxes, adjusted for inflation, shrinking.


VARNEY: This is very important to the average voter. The cash in their pocket --

FREEMAN: That's right.

VARNEY: -- after taxes, the money in their pocket, that's come down this year?

FREEMAN: It's actually shrinking in January and February. It's basically a little -- slightly positive last year. But to the average person it's just not the crummy employment numbers we've seen, it's the cash in the pocket, which isn't there.

VARNEY: Mary, we've got the greater growth slowing down, we understand, in the first quarter of this year, job recreation rate cut in half, the unemployment rate still above 8 percent. Now, do you think we're headed to recession?

O'GRADY: I don't think we're going to have a recession. I agree with James, that we're just going to sort of bump along the bottom. But, you know, this week there was an interesting survey out from a very important group of job creators in this country, small business owners, who are members of the National Federation of Independent Businesses, and they did a survey. The March results were very discouraging. Nine out of 10 sectors that they surveyed on, business owners were more pessimistic about the economy. They did not expect to be adding staff. They did not -- they found that -- difficult to hire jobs, those job openings were -- were not really growing. They were worried about inflation. They were worried about poor sales. They were worried about taxes, overregulation. It was a very negative picture. And these are the people on the frontline, and they are the most important job creators in the country.

VARNEY: That's a pretty long laundry list you had there.


HENNINGER: To Mary's point, recession occur because of investor pessimism. Investors get pessimistic, they withdraw from the economy. Recoveries occur because of investor confidence. The economy starts growing again. We cannot say that investors have confidence right now for the reasons you just heard. They're slightly depressed.

In terms of the recovery, I think there are two parts of that going on. Recovery is occurring in terms of corporate profits. American corporations are very dynamic, very strong. They're very good at adjusting. We are not having a recovery in the employment market. We are not creating new jobs. I think that's the part of the recovery that most voters are looking at. The corporate profit in this case, they're not falling into their pockets, they're falling into the bottom line for shareholders. That's good, but we're not getting the jobs we should be getting in a real recovery.

VARNEY: In each of the last two years, we've seen the green chutes of recovery trampled on. Are we seeing the same thing this year, third year in a row?

FREEMAN: Third year in a row, early part of the year, there's good news, then it tails off. I don't know. I think it's possible you see a modest improvement as we go into the fall. That's I don't think we -- politically, I'm not sure Mitt Romney can count on a terrible economy when people vote.


VARNEY: A two percent growth rate. Supposing we get to that in the summer and fall? That's not where America ought to be.


VARNEY: That's not the feeling you should have in America three years after the end of a recession, is it?

FREEMAN: No, it isn't. It's historically bad when you look at other deep recessions. Usually there's a big snap-back, a big rebound. That's why it's discouraging seeing that story on the income.


O'GRADY: There's concern about inflation out there. The Fed says there's no inflation, but the -- the Fed --


VARNEY: Gas prices, food prices?

O'GRADY: The regional banks say that when they survey the people who live in their districts, those people are worried about inflation.

And the other thing about the Fed that's interesting is, you know, Ben Bernanke has every motivation to be talk up the economy. Yet, when they talk to him, he's a very nervous guy. I mean, he says this is not anything that he's very confident about.

VARNEY: Dan, I've got a smile on my face, because I've lived in America for nearly 40 years. The feeling that I always got from America was of a robust, lively, vigorous, go-ahead, knock-them-flat economy.


I do. That's the feeling I got.


VARNEY: I don't get that feeling now, Dan.

HENNINGER: Because it's not there. It's because Barack Obama is not giving it the wherewithal to do that. If he wanted to do one single thing to revive the economy, he would put a reduction in the corporate tax rate on the table. He could get that passed. Is that happening? No, it isn't. Instead we're getting the "Buffett rule."

FREEMAN: I think that economy you want, that we've always enjoyed, it's there, it's being restrained. It's kind of like a car idling right now, ready to roar, but these are very healthy companies. So if you take away some of the Washington pressure and uncertainty, I think the good times can come back.

VARNEY: Well, you know, we all agree that the economic outlook is indeed far from rosy. And that may be the president's biggest challenge heading into November. But can Mitt Romney step up and make the case, not only against Obama's economic policies, but for his own? Our panel weighs in on that next.


VARNEY: With Rick Santorum bowing out of the Republican race, Mitt Romney can finally turn his attention to the fall fight against President Obama. If this week is any indication, it's shaping up to be quite a brawl. So what will the November election turn on? Will it be the so- called war on women? Will it be the economy? Or what?

Kim, you know, the economy has taken a lot of attention this week, but I've got to say that the fight over women, that holds center stage now, doesn't it?

STRASSEL: Yes, does it. Although -- this is -- the way I look at this, Stuart, is this is the first of many flashpoints and hullabaloos you're going to see from now until November, a fight over an issue like this. It's worthwhile stepping back and seeing what we have now that Rick Santorum has left the primary, which means Mitt Romney is the presumptive for the GOP. You've got a president who, in many ways, is a very weak president. He's got deficit problems. The economy is not great. People don't love his record. You have Mitt Romney who has his own challenges. We're now going to get a sense of what those are.

One of these and why the White House was pushing this issue of women is the fact that he is relatively weak compared to the president in terms of women voters. The way he solves this is the way he solved some of his other problems with other areas of the electorate, and that's to start spending time for a very compelling reason for his own presidency, not just reasons for why Barack Obama should not be re-elected.

VARNEY: Dan, do you think that the prominence of the women's vote will fade?

HENNINGER: Yes, as a matter of fact I do think it will fade, as the Romney strategy for the presidential run rather than the primary run begins to emerge at least. He's going to have to make a case for the economy and the economic benefits of a strong economy to women. But he also has to run against, kind of what Kim was suggesting, a president that's not going to run on his record, but instead is going to run on pretty much what I'd call a negative campaign. He's going to say, Mitt Romney, why are you against fairness for the middle class?


Why are you against women? What is your problem with poor people? Why are you just for the rich? All of these kind of unanswerable questions that have resonance, and people go, yes, why is he?


He's going to have to come back and talk about that 2 percent growth rate, 8 percent unemployment, and what happened on Barack Obama's economic watch, because the president is doing everything he can to keep that off the table.

VARNEY: Well, there's a poll out, and it shows that -- the question was asked, did the Obama team's policies help or hurt the economy. 37 percent said it hurt the economy, has hurt. Only 31 percent said those policies have helped the economy.

James, that sounds like that is a gift to Romney to run on the economy.

FREEMAN: Right. I think --


VARNEY: But he's got to do it --


FREEMAN: That's right. He's got to play offense. He's in trouble if he spends the whole campaign reacting to President Obama raising the issue of whether women ought to get in the Augusta National Golf Club --


-- or whether the Lilly Ledbetter Law in fair pay was a good idea. Romney has to set the agenda and talk about both freedom and economic growth. On the freedom question, which he has a lot of room to run there with women, Independent women don't love Obamacare. They don't necessarily like the federal government dictating more of their health care choices. So there's a lot of material here, but Romney has to play offense and raise the issues.

VARNEY: Kim, you're in D.C. I've got to put this question to you. It doesn't seem to me that looking back over this past week it was Mitt Romney that carried forward the attack. I thought it was Ann Romney, who was very classy in defense of the attack on her. She seems to be leading that campaign.

STRASSEL: Well, she is. And part of this, Stuart, is this all happened, Democratic political operative Hilary Rosen stepped into the middle of mommy wars. Big mistake why anyone would ever do that. You cannot win in that. Ann Romney has been a very effective advocate for Mitt Romney, both in softening his image. The attack on her just teed her up to go out there and make headway on this. To the extent that we're stuck in some of these roundabout questions, like the mommy wars, that aren't necessarily about the economy, this wasn't the best move by Democrats. But she's going to be a very forceful presence for him in this campaign. You saw that this week with her response to all of that.

VARNEY: Dan, James? Have you yet seen Mitt Romney come out of his corner and start attacking, taking the initiative? Have we seen it yet?

HENNINGER: Yes. I think we saw it in the two victory speeches over the most recent primary. They were very strong. The last one I found very little to disagree with. So I think his message is coming together. But I think what he's really going have to do -- because it's a message about the economy, and that can get a little bit complicated. And Obama is running against the Romneys as a rich couple, and him as a rich businessman. Mitt Romney has to find a way to talk as though he's sitting around a kitchen table with a middle class couple, explaining it to them, in very simple terms, how this is going to affect them.

VARNEY: Just like Ronald Reagan did.


VARNEY: All right.

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


VARNEY: All right. It's time for "Hits and Misses" of the week.

Kim, you're first.

STRASSEL: This is a hit to the slow but ever-churning wheels of justice, which, this week, began a federal trial against John Edwards. Mr. Edwards is, of course, the Democratic Senator. He ran for president in 2008. He lost. He had since been indicted for misusing campaign funds to conceal an extramarital affair. The irony, of course, is that Mr. Edwards knows his way well around the courtroom. He became a Senator on his reputation as a hot-shot trial lawyer, one who incidentally ought to note law. Now, of course, a jury will decide his guilt or innocence, and we hope for a fair trial. But it's comforting to know that the justice is not beyond -- does not close its eyes to everyone, even trial lawyers.

VARNEY: Dan, it is your turn.

HENNINGER: Well, a big swing and a miss to Ozzie Guillen, who is the manager of the Miami Marlins -- Miami being the greatest collection of Cuban refugees and Cuban Americans in America -- who earlier in the week, said, I respect Fidel Castro. You know why, a lot of people have wanted to kill Fidel Castro. For 60 years, that son-of-a-gun is still here. Well, this didn't play so well. When Hollywood figures say this sort of thing, everybody goes, yes, so what do they know, no big deal. In Miami, they do know.

VARNEY: What was he thinking?


FREEMAN: This is a big hit to Rick Santorum for running a great campaign without a lot of money but making the case for freedom, and doing it with eloquence and a lot of passion, and making Mitt Romney a better candidate, and forcing him to embrace growth economics. So a hit for Rick Santorum.

VARNEY: You did it in perfect time. Excellent, James.

Just excellent, Dan and Kim.


That's for it this week's show. Thanks to my panel and to all of you for watching. I'm Stuart Varney. You can catch me weekdays on "Varney & Co." on the Fox Business network, 9:20 eastern each week day. Paul's back next week. We all hope to see you then.

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