This is a rush transcript from "The Journal Editorial Report," October 18, 2008. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: Coming up on "The Journal Editorial Report," with just over two weeks to go, Joe the plumber steals the show and puts the tax and spend issue front and center in the presidential campaign. Can it help John McCain close the gap?

Plus, another roller coaster ride on Wall Street. Recession fears take hold despite the government's historic plan to shore up U.S. banks.

And cracking the ACORN. A closer look at the controversial group, the allegations of fraud and its past ties to Barack Obama.

"The Journal Editorial Report" begins right now.

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

Well, forget Bill Ayers, Joe the plumber is the hottest name in the presidential race. And with just two weeks to go, he has put the candidates' tax plans front and center. But the question remains, can the McCain campaign make the most of this opportunity?

Joining the panel this week, Wall Street Journal columnist and deputy editor Dan Henninger, columnist Mary Anastasia O'Grady, opinionjournal.com journalist John Fund, and Washington columnist Kim Strassel.

Kim, a couple of weeks to go in the campaign, all the polls show John McCain is trailing anywhere from 2 to 14 points, depending on the poll. What's McCain's strategy for the home stretch?

KIM STRASSEL, WASHINGTON COLUMNIST: The value of Joe the plumber is that it really encapsulates what looks as though it's going to be McCain's closing argument. And that McCain argument runs something like this. That with any luck, the financial crisis, the immediate problem, maybe we're getting through hopefully. So now people are starting to wonder, how do we deal with the aftermath? How do we ride out this downturn?

What John McCain is saying, my opponent over here, he believes government is always the answer. He wants bigger government. He's going to tax people to get bigger government. And I'm saying to you, I want Joe the plumbers out there to have their money, keep their money, make their decision, create more jobs. So that's going to be the debate that he's going to try to make. And I think that's going to be his best shot in closing out this election.

GIGOT: Dan, does that get him passed — I guess, over the hump? Can that make the argument, especially when he hasn't rebutted the Obama claim that 95 percent of Americans are going to get a tax cut?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yes, in all honesty, it's a little bit late in the campaign to try to mouth an argument like that. Maybe it will work, if he could couple it with the fact that Obama has so little experience and that you're loading up so much responsibility on him. It's possible that, come November 4th, people may say, I cannot go there with Barack Obama.

But one of the problems is the financial crisis, pretty knocked the presidential campaign off the pages for two weeks. So they lost two-week's time to make these arguments. But Obama himself, however, persistently in the debates describes the level of spending that he intends to commit to. And it's enormous. It's mind boggling.

GIGOT: Did Joe the plumber — use of Joe the plumber did open up a fundamental truth about this race and about some of the Obama agenda that maybe most Americans haven't seen, which is there's going to be of an enormous tax increase leveled on this economy if Barack Obama wins.

MARY ANASTASIA O'GRADY, COLUMNIST: I think this is the great thing about what happened in the debate is that McCain finally got Obama to admit that his idea of good government is that, yes, he's going to punish up and coming entrepreneurs, but it's OK as long as he makes the people on the lower rungs better off. And we call that socialism. And not only is that something most Americans don't like, but it's also, we know economically speaking, it means a smaller pie and less to divide up every year that you go on with that kind of policy.

GIGOT: John, I guess the argument is that liberal conservative dichotomy on taxes and other issues that Mary talked about might have worked — has worked in the past. We know it. But it doesn't seem to have the same salience this year. Is that because of the economy we're in or is it just it's their tired arguments?

JOHN FUND, OPINIONJOURNAL.COM JOURNALIST: Also, the Republicans have been in charge eight years, and that's a lot longer than the Democrats have been in charge in Congress. They get the onus. I also think John McCain has not a consistently anti-government message. For example, on the biggest part of the tax increase, which may be the cap and trade legislation that regulates all the economic activity in this country in order to control global warming.

GIGOT: Cap trade on all carbon emissions, being oil and coal and anything except nuclear power and alternatives, so just about the entire energy economy.

FUND: The unelected Environmental Protection Agency may be imposing this on the economy without even a vot4e of Congress. Both John McCain and Barack Obama are pretty much on board.

HENNINGER: Let's face the economic reality here. They're both going to be taking over a deep recession, right? We need a policy to deal with a recession.

GIGOT: We hope it's not a really deep recession.

HENNINGER: Well, it's probably going to be pretty severe, and in neither candidate do you hear economic growth? Obama is proposing something virtually equivalent to the New Deal in the Depression. His solution to the recession is to simply throw vast amounts of public spending at it. But there's nothing for Joe the plumber or the Joe plumbers of the world who want to grow their businesses.

O'GRADY: But Obama's idea is that he creates a higher culture of dependency for all of those who vote for him. So he's moving the number of people who are dependent on the government up and that's good for him. That's called populism.

GIGOT: Go ahead, Kim.

STRASSEL: I was just going to say, John was onto a crucial political point. McCain, if he's going to make this his theme, he's got to keep it his theme in the rest of the election. What has hurt him in this economic crisis politically is he seems to bounce around on these economic message questions. And if he's going to make it — and cut away at his inexperience argument, the argument that he's who you want in a crisis, so he has to stick with this.

GIGOT: All right, John, one thing that's not being widely reported is the degree to which Obama is really out spending McCain in the battleground states, four, five, six to one. You go to some of these states, you don't see a McCain ad, but you see an Obama attack ad going after McCain.

FUND: Well, in previous years, we've seen a lot of complaints about the rise of money in politics, too much money in the system. And Barack Obama is spending more money than any candidate since Richard Nixon. It's an astounding amount of money. And there's been a tremendous lack of curiosity on how Obama has raised this money because McCain has revealed all of his donors under the $200 dollar limit, which is not required by law. Obama has refused to. There may be a pending story after this election on how much of that Obama money came from questionable sources, like overseas citizens.

GIGOT: And the irony is the great campaign finance reformer, John McCain, the guy who wanted to limit campaign spending...

FUND: Is now getting crush.

GIGOT: ... is now getting crushed in the spending game, in part, because of the rules he helped to enforce.

FUND: You know the old expression, hoisted by your own petard.

GIGOT: All right, John, thanks.

When we come back, the perils and pluses of the historic bank rescue. And a look at what was behind this week's wild ride on Wall Street.



GIGOT: Another wild week on Wall Street as the announcement of the government's historic bank rescue plan combined with growing fears of a global recession sent stocks on a roller coaster ride.

Mary, I have to say, every day or every other day, I get up and there's a once-in-every-20-year financial story. It's just an astonishing period. And then stocks up 1 percent one day and down 9 percent the next. And what are those prices telling us we should know about the economy?

O'GRADY: I think a lot of the swings in the market are actually reflecting the selling by mutual funds, which are very large players in the market. And those are redemptions coming from ordinary people who say get me out, and from hedge funds, which have borrowed a lot of money to take on their positions. So they have to sell when the market goes against them. And so every...

GIGOT: That accounts for the volatility each day?

O'GRADY: Every time there's a rally, they sell into it. But I think the mutual fund message we're getting is that people are afraid we're in a recession. They're panicked. There's a sense of panic. If you look at the individual stocks, there's a lot of value. But people are worried.

GIGOT: Not much doubt we're in a recession.

You were saying before, you think it's going to be a severe one. David Molpus, an economist that we all know and like, says that the economy has hit a brick wall this quarter, like a car slamming into it, and we're going to have a pretty steep downturn.

HENNINGER: Yes, but I think that would be true in a normal situation, and what we have here is the double whammy of this financial market crisis, which is like the 100-year flood. To me, the thing I'm beginning to worry about, Paul, is that there is this bias now against risk and innovation. The idea is that Wall Street failed across the board. Listen, Wall Street and everyone else failed with subprime mortgages. and I'm really afraid if they try to restructure now, they're going to so suppress the idea of risk taking that the new bankers will be looking for borrowers with AAA and gold-plated ratings and people coming up from below, Joe the plumber, shall we say, or really Silicone Valley types, will not be able to get capital.

GIGOT: At least not in the United States. Maybe they'll be able to get capital around the rest of the world, which may be part of the saving grace here that prevents Washington from going too far, as it seeks to absolve itself from any responsibility for causing the mess and blame the private economy, deregulation, whatever.

O'GRADY: But I don't think we know what's going to happen yet until we start seeing the credit markets returning to normal. And the capital injections that the government made into the nine biggest banks this week, began this process. But it's going to begin to take sometime to get the credit markets back to normal. The fact of the matter is banks make money lending money, and they have to go back to that. So I don't think the scenario is that glum. I think what happened is we have a very sharp draw down in the 4th quarter probably extends into the beginning of next year. But I do think we'll see a recovery in this.

GIGOT: Kim, let me ask you about this historic treasury capital injection into nine of our biggest banks, $129 billion of capital, non- voting shares, but public capital, nonetheless. Is this something that you think could have been avoided?

STRASSEL: No, I think it was actually necessary. And it's probably the smarter way to go right now because what this is going is it's going to give the banks the capital cushion, the leeway they need to go out and hopefully sell some of these dodgy assets at market prices without worrying about insolvency. So this was something that was good.

But I think that some of this volatility is because people are unsure about how this treasury program is going to work and what is still coming from Washington. Is this a program with an end term? What is Washington going to do next from a regulatory stand point? What is the tax situation going to look like? This is scary stuff.

GIGOT: John, there are pitfalls from this public capital injection, aren't there.

FUND: Absolutely. What's even worse is we don't know what the next Congress and president are going to do. You can make this recession worse. There's not a single school of economic though that says you raise taxes in a recession, but that's what the Congress and Barack Obama plan to do.

GIGOT: And Barack Obama hasn't even disavowed that, not withstanding the financial crisis.

FUND: Exactly. And you add to that a health care plan, which would nationalize, in part, the health care industry, you add the Environmental Protection program that we talked about, this could be an enormous cost to the economy and could delay recovery for a year or more.

GIGOT: Politically directed credit. You know, we keep lecturing the Chinese, you can't do that. You can't have a free economy and politically decide where credit goes in your banking system. We tell them liberalize your financial system.

And here, there's a real danger now that the banks will be told, lend to these people, lend to these people, lend to these people.

O'GRADY: There is a real danger. I think that not all of the banks that needed a capital injection needed one or wanted one. That was not the right way to go. I think that...

GIGOT: It should have been voluntary?

O'GRADY: It should have been voluntary. And secondly, the idea that a lot of things are now guaranteed, deposits and so forth, I think that opens up the possibility for a lot of — the banks getting addicted to government support.


HENNINGER: And how about a tax cut? The Fed is talking about reducing the Fed funds rate below one. Fine, but where else are we going to get the growth? And John McCain I think should be talking about cutting taxes in January.

GIGOT: All right.

Still ahead, cracking the ACORN, we'll take a closer look at the accusations of fraud being leveled at the controversial group as well as Barack Obama's past ties to it.



SEN. JOHN MCCAIN, (R), PRESIDENTIAL CANDIDATE: We need to know the full extent of Senator Obama's relationship with ACORN, who is now on the verge of maybe perpetrating one of the greatest voter frauds in voter history in this country.


GIGOT: John McCain using Wednesday's final presidential debate to question his rival's ties to ACORN, a far left advocacy group that has endorsed Barack Obama and boosted registering 1.3 million new voters. The question is just how many of those are real?

Of the 5,000 new registrations ACORN filed in Lake County, Indiana, an estimated 2,500 are fraudulent, say county election officials. In Philadelphia, officials have identified at least 8,000 suspicious ballots turned in by the group. And 1,500 have been handled over to the attorney's office. And officials in Houston say some 40 percent of the group's submitted registrations have been deemed fraudulent. In all, over a dozen states are looking into the validity of ACORN's submitted registrations.

John Fund is the author of the book, "Stealing Elections: How Voter Fraud Threatens our Democracy."

John, what is ACORN and how should we care?

FUND: ACORN is a poverty rights organization that has too frequently used intimidation and street tactics to try to get their political agenda, which is very liberal and very interventionist, imposed. They were at the heart of the subprime mortgage crisis, and that is they pushed banks and Freddie Mac and Fannie Mae to lower their banking standards that helped get us into this mess. They also have a political arm. And that political arm is in the middle of another voter registration fraud scandal. This follows on previous scandals in 2002, 2004 and 2006. They always say they're going to clean up their act. They never seem to.

GIGOT: And reports are now that the FBI — the AP, the Associated Press, reports that the FBI is now investigating ACORN for voter fraud. Is this the first time that has happened?

FUND: Local prosecutors have often indicted ACORN employees and often imprisoned them because there's a pattern and practice here. And in Nevada, they hired 59 members from a work release program from a local prison. I believe in rehabilitation, but they put the people who had been convicted of identity theft in charge of the registration program. That's hiring specialists.

GIGOT: The response is, look, yes, they might submit false registrations. You have Jive Turkey and you have Mickey Mouse, voters registering under those names, but the problem is you have to show up to vote actually to steal an election or to really influence an election and commit fraud. And if you don't get enough people to show up, then who cares?

FUND: We have already had examples in Ohio of people registered by ACORN have already cast early ballots. So there are examples of fake registrations showing up as actual votes. Secondly, former employees of ACORN tell me, Paul, that the organization may have a plan to overload the election system, to make is so there's such chaos at the polls that they can bring a lot of voters there and get a lot of suspect votes counted at the polls, simply saying you have to count every vote, the system breaks down. Chaos is often ACORN's friend.

GIGOT: All right, now Barack Obama has had ties to them. Their campaign gave $800,000 to ACORN for get out the vote efforts. What has ACORN done for Obama over the years?

FUND: Well, ACORN and Obama are marinated for each other. Obama was their lawyer in key civil rights cases. Obama a top trainer, although he denies it, for the group. Obama has also funneled over $200,000 when he was on the Woods Fund to ACORN. Bill Ayers was also a fellow board member.

GIGOT: So what does this tell us about — does it tell us anything at all, this relationship, about Obama's style of government and his brand of politics or is it just, look, they're going to register a lot of voters and help him win?

FUND: I think that Barack Obama has always been in support of ACORN. He has never criticized their methods, even though it's a very troubled organization. In fact, ACORN's own board members are suing the organization, saying that the faction that was involved in scandals are still controlling the organization.

With all of this trouble, Obama should disassociate himself with ACORN. Instead, he's praising their efforts and he is hiding his own ties with it. It all makes you wonder if there's an agenda here that's not being fully revealed.

GIGOT: What agenda would that be?

FUND: A radical agenda of expanding government and having greater power for groups like ACORN, which want to dramatically change American society.

GIGOT: OK, and the federal government does give ACORN a lot of money, Dan, I think $31 million since 1998.

FUND: You put your finger on a fundamental problem underneath it. Their argument would be, look, what's the problem with registering new voters. It's a public good. And as John pointed out, it's of a piece of the subprime mortgage crisis. The idea there was we want to put new people into home ownership maybe whose credit rating isn't so good. In both incidences, to get to that goal, what we've done is lowered the rules, lowered regulations. And in ACORN's case, really pushed the edge of the envelope and so you ended up with crisis in mortgages and now you're going to get a crisis in voter fraud. I mean, to have elections disputed like this after the elections would be catastrophic.

GIGOT: All right, Dan, thanks.

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


GIGOT: Winners and losers, picks and pans, "Hits and Misses," it's our way of calling attention to the best and the worst of the week.

Item one, another class that Dan Henninger would have loved to have taken in college. You'd still love to be in college, Dan, face it.

HENNINGER: Who wouldn't?

The University of Wisconsin in Madison has just announced a course called the Art of Brewing. I mean, a frosty state producing a course on frosties, oddly enough, like that. But wait a minute. It's actually a pretty good idea. It's going to promote two things this country needs most at this moment, entrepreneurs and new businesses. It turns out that beer is a $7 billion a year industry in Wisconsin.

GIGOT: Is that all?

HENNINGER: Is that all? And basically, Wisconsin is doing the same thing that California did for its wine industry, which is to set up courses and expand the industry. And there's also one silver lining. To get into this course, you have to have taken microbiology and organic chemistry. Cheers.

GIGOT: All right.

Next, debunking the latest media myth — Mary?

O'GRADY: Yes, this is the miss for the Scranton Times Tribute. Last week, one of the big campaign stories was that the McCain side was getting too extreme and maybe even inciting violence. And the Scranton Times Tribune reported that at a Sarah Palin rally, somebody had mentioned the name Obama and someone else yelled kill him. And of course this became a big event at the debate and in the media.

But it turns that the Scranton News Leader went to talk to people at the rally to find out what was said and they could not find one person who heard it. And in fact, they talked to the Secret Service detail and 20 law enforcement agents, and they never found anybody who heard that said. So the Scranton Times Tribune is standing by their story. But they're the only one who heard it.

GIGOT: OK, Mary, thanks.

And finally, a hit to rival journalist — John?

FUND: Mark Halperin is a former political director of ABC News and now editor-at-large at Time magazine. He was at a media conference on Monday and he was asked do you think there has been any media bias in the campaign? And he said, yes, the media has been biased largely against John McCain and for Barack Obama. And it's interesting because he said the choices were in how many stories were allocated for investigative work on one candidate versus the other. And he said basically Barack Obama got a pass on a lot of what happened in Chicago. And also the selection of stories, what stories you choose not to report. And I think there has been an amazing amount of a lack of curiosity on much of Obama. And at the same time there's been an obsessive look at Sarah Palin.

GIGOT: Good for Halperin for admitting it.

All right, John, thanks.

And remember, if you have your own hit or miss, please send it to us at jer@foxnews.com. 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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