US government dancing with default

This is a rush transcript from "Journal Editorial Report," October 5, 2013. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," gridlock grips Washington as the U.S. government dances with default. Can the two parties find a way out?

Plus, lessons from the ObamaCare rollout. What to make of this week's glitches and what to watch for in the days ahead.

And a just released U.N. report calls climate change unequivocal but it can't explain the hiatus in global warming of the last 15 years.

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

Gridlock continued to grip Capitol Hill this week as the two sides failed to reach a budget accord, forcing a partial shutdown of the federal government and raising fears of a default as the debt ceiling deadline looms. It's a partisan standoff President Obama insists he has nothing to do with.


PRESIDENT BARACK OBAMA: During the course of my presidency, I have bent over backwards to work with the Republican Party and have purposely kept my rhetoric down. I think I'm pretty well known for being a calm guy. Sometimes people think I'm too calm.


GIGOT: Joining panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; Washington columnist, Kim Strassel; and assistant editorial page editor, James Freeman.

Dan, you're a calm guy.



GIGOT: You can comment on the calm guy, the president of the United States. He says he won't negotiate with the Republicans until they do two things, one, pass a clean increase in the debt limit and a clean continuing resolution, with nothing attached except to fund the government. What's his calculation?

HENNINGER: Let me just say I have personally spent four years bending over backwards to be fair to Barack Obama --


-- so let me try to do that right now. They are basically three things that I think he wants. One, that -- this is something people must not forget, because he has said it. He wants to take back control of the House of Representatives in 2014. To do that, he has to give voters a reason to vote against Republicans. That's going on right now.

GIGOT: So you think that's the underlying motivation here?

HENNINGER: I absolutely think it's one of the underlying --

GIGOT: So he wants a shutdown?

HENNINGER: I think he would accept a shutdown.

GIGOT: We have one now. But is he enjoying this?


HENNINGER: I think he's absolutely enjoying it. I watched his speech in Maryland yesterday and he was enjoying himself. He wasn't calm. He was trashing the Republicans and trashing John Boehner. Nothing he said would have given John Boehner an incentive to negotiate with the president about anything.

GIGOT: So what about default, which is a dicier proposition? Do you think he's toying with that, too? Could he welcome that in order to blame it on Republicans, too?

HENNINGER: An interesting news stories that came out this week is that the Treasury Department, which would have to manage a default, is not giving the market any indication of what its plans are to manage that situation. That's really unusual, Paul, for treasury not to tell, not so much the Republicans but the market that's going to have to deal with this crisis, and they won't tell them what they're going to do. I mean, it suggests that they're planning for a situation that is a tremendous crisis that they can blame on the Republicans. It's hard to avoid that conclusion.

GIGOT: That's very high risk.

Here's the other thing, James, he may be thinking, which is, you know what, the Republicans are going to crack first. They're going to break here. They're going to -- before the default or whenever it is, John Boehner will simply say, look, we'll turn it over to the House, let Democrats in, whoever, whatever Republicans want to vote for, the debt limit increase, and so he can play this game of chicken.

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Yeah, he can. And I think he feels like he's winning so there's not a great urgency to move towards the Republicans but he does hate the sequester. He hates these limits on spending --


FREEMAN: -- automatic spending cuts.

GIGOT: That are built into the law now.

FREEMAN: Yes, and he's thrilled to have ObamaCare rolling in. But this now pretty much takes off the table any new spending programs over the rest of his term. And as we know, what he loves to do is create new spending programs. I think that's the leverage for Republicans, ultimately, to make him make an offer to them on resolving these issues.

GIGOT: OK, Kim, let's talk about the Republicans. Where are they? Publicly? And they have a common front? There's no question about that. And they're holding firm. But behind the scenes, there are some disagreements. Why don't you explain what's going on?

KIM STRASSEL, WASHINGTON COLUMNIST: Well, look, the leadership never wanted to be in this situation of shutdown. It was sort of foisted on them by those who pushed forward with this defund strategy. But now, having arrived here, they realize the importance of having some sort of honorable exit. Because if they just fold on this, and this is the fear, that then Barack Obama knows that he's got them on either other negotiation, too, and they're sort of sitting ducks in the water. They can't ever exert leverage again. I think what is going on, along with what James said, is there's talk about whether or not you can't roll this up into the debt ceiling argument as well, where the president has been willing to negotiate in the past. You get some sort of sequester as a leverage. You get some sort of budget reforms on the Republican side. And then, maybe something smaller on health care that satisfies those who have been pushing to fund.

GIGOT: Right. OK, but, Kim, that's the strategy that Paul Ryan and some of the other House leaders would like to get to as an exit strategy if they can. But it takes two things. One, the president has to negotiate. Because if he doesn't negotiate, you can't get to these kinds of negotiations. And, two, you have the Ted Cruz faction, which is basically saying we won't negotiate at all either over anything except ObamaCare. What is the exit strategy that the Cruzites are saying -- here's our end game, here's where we want to arrive at? Do they have one?

STRASSEL: They have no end game, Paul. They've never had an end game. And, you know, I think what they're hoping is that Democrats are simply going to crack at some point under the pressure. But I have not seen any sign of that. In fact, they have been taking vote after very difficult vote with near unanimity because --

GIGOT: The Democrats have?

STRASSEL: The Democrats have. Because they understand, this goes back to Barack Obama's calculation, that this is the president's signature achievement. And to go so far as to do defund or even delay to a certain point is to fundamentally undercut that law and get rid of that achievement.

GIGOT: So here's the thing. Will they really be willing, this group of Republicans, to refuse to raise the debt limit? Is that what they're saying now?

STRASSEL: At least some of them are now saying that you have to continue to not blink on that issue as well. Now, that is going to be a much harder thing for many in the Republican caucus to do because they are very concerned about the president's ability to claim default. And even if you didn't go to default, what would happen with the markets and the economy as a result of that?

GIGOT: Gentleman, what's going to happen?

FREEMAN: I think you probably get some or a format of this. But I would just like to emphasize the fact that Republicans may not have a perfect strategy or tactics right now doesn't mean they're not right on the underlying argument.


FREEMAN: We have too many entitlements. And here's another one. I don't think the fact that Barack Obama passed this law means that it can ever be changed.

GIGOT: No, of course not, but the question is, about the raw political math, if you on have one house of Congress, you can't expect to get everything you want.

HENNINGER: And the other piece of raw political math is, if it begins to look as though some Republican Senators are not going to -- candidates are not going to succeed in taking those six Democratic seats that they've targeted, and if some of the congressmen from moderate seats in the north begin to look in peril, I think they'll be tremendous pressure on these people to start to look for an exit strategy.

GIGOT: The 2014 election prospect.


GIGOT: When we come back, lessons from the ObamaCare rollout. We'll tell you what to make of this week's glitches and what to watch for in the weeks ahead.



OBAMA: Consider that just a couple weeks ago, Apple rolled out a new mobile operating system. And within days, they found a glitch so they fixed it. I don't remember anybody suggesting Apple should stop selling iPhones or iPads.


GIGOT: President Obama Tuesday comparing the glitches in this week's ObamaCare rollout to launch of Apple's new operating system.

Wall Street Journal editorial board member, Joe Rago, has been following the Affordable Care Act from the start. And he joins me now with a look at what happened this week.

ObamaCare, or as we fondly call it, the Joe Rago Lifetime Employment Act.


Steve Jobs, you think he would have rolled out ObamaCare with this?

JOE RAGO, EDITORIAL BOARD MEMBER: No, he would have fired the person in charge of it. It takes a lot of hubris, I think, to compare the launch of the Affordable Care Act with a world-class product. I guess the other point I would make is that in cell phones, you have the choice with the Samsung Galaxy or whatever --

GIGOT: Right.

RAGO: -- and all the rest of the phones. Here, you're mandated to buy this specific product. And as we learned this week, it's full of glitches.

GIGOT: So how serious are these technological issues with this rollout? Scot Gottlieb, who is our friend and contributor, wrote an interesting piece this week saying that they're actually pretty serious, particularly the data control and entry, and the risk of fraud is really serious.

RAGO: Right. What we saw this week was a kind of comic "catch me if you can"-type caper where journalists were trying to track down the one guy who was able to enroll through these exchanges. But the point that Scott makes is these are much deeper technological problems. They go to the real information technology architecture of the plan, the states that are going to be bouncing information off the IRS and Social Security and Health and Human Services Department and all the rest. He's saying this is really a weak system. It's going to expose consumers to identity theft. There's going to be all kinds of much larger problems in terms of reconciling who gets subsidies, who qualifies for coverage and so forth.

GIGOT: You know --


GIGOT: Go ahead, Dan.

HENNINGER: Well, the political problem is, to the extent consumers, the uninsured, are having these bad experiences and may have them over a period of time -- the real enrollment is around January 1st -- to what extent will this ObamaCare act lose elevation with people, simply lose heart and decide it's too difficult, I've got other things to do? They need big numbers of enrollees for the insurance pool to work. And so this is a serious problem for them. It's like, sure, if your Smartphone doesn't work, you're going to go over and start looking for something else. And I think that's the risk they're running, that people go elsewhere.

GIGOT: You know, Kim, the president implicitly conceded that this wasn't ready because -- in two ways. He delayed the business mandate for a year. He delayed the government's testing of income limits for people who would enroll. So if you're making $1 million, technically, you can apply for subsidies and get them. The government may catch up with you later. But having made those concessions, why didn't the president then just delay the whole thing for another year? So we could avoid some of these problems and the dangers that Dan talked about?

STRASSEL: Because he couldn't or at least he felt he couldn't politically. If you -- what he conceded in the end and what he exempted in the end was what he felt was the outer limits of what he could get away with. Had he --

GIGOT: Why couldn't he do that politically, Kim? Why couldn't he just delay it?

STRASSEL: Because if you acknowledge that it's not ready now, you move into next year's election and the reality is that the public opinion on ObamaCare has no way improved. It just continues to get worse. Democrats are increasingly worried about this law and what kind of liability it is for them in an election.

And, by the way, Paul, a lot of the Democrats who actually voted for this law in the first place, they're gone. They're not even here. You have a new generation of Democrats who don't necessarily have the same fealty to this law as the older generation. And so the fear I think for the president was that his own party, if this got delayed --

GIGOT: Right.

STRASSEL: -- may lose its nerve and bolt on this and it might never become a reality.

GIGOT: One other thing, Joe. I think that the president wants to get the subsidies started. Because he wants to get the body politic, if you will, on the I.V. drip of subsidies. Because history shows that once he starts to hand out subsidies, you get something free that somebody else is paying for, you don't want to give it up.

RAGO: Right. I think that's definitely part of his goal. I might question how successful that's going to be. As we've discussed, these are going to be very limited networks of doctors and hospitals, a kind of Medicaid-plus. And the other thing is, for a lot of consumers, they don't qualify for a lot of subsidies. And --


GIGOT: So they'll be paying a lot of money.

RAGO: Right. When the regulations and mandates drive up the cost of health insurance and they're not offset by subsidies, this might not be a good deal for a large section of the public.

GIGOT: So is he key thing -- briefly, Joe, is the key thing here to watch in the weeks ahead just how many people enroll in these and who they are, whether their the elderly and sick or whether their the healthy and young?

RAGO: That's right. If you look at employer-sponsored health insurance, about 15 percent of people who are offered it don't accept it. If that happens in the exchange marketplaces, you might have the same kind of problem.

GIGOT: Thank you all very much.

When we come back, a U.N. panel on climate change releases its latest report, calling global warming unequivocal. So what about the warming that hasn't been happening since 1998?


GIGOT: A United Nations climate change panel released the findings of its fifth report this week calling global warming unequivocal but failing to explain one inconvenient truth, that the earth's temperatures have been flat for the last 15 years.

Wall Street Journal columnist and deputy editor, Bret Stephens, joins us with more.

So, Bret, how did the U.N. square this contradiction between what their models have been predicting and what has actually been happening for last 15 years?

BRET STEPHENS, COLUMNIST & DEPUTY EDITOR: Well, the first thing they did was they basically buried the lede or buried the news. They said there was -- their 24-page summary report had alarmist conclusion at the beginning, and then you kind of go down to page 10 and you find this paragraph that says, well, there's this issue of the past 15 years, a pause in global warming. We don't know whether it will ever resume or not.

GIGOT: So the globe had been warming by about a degree Celsius over the previous part of the century?

STEPHENS: Right. And then it seems to have essentially stopped. There's variability --

GIGOT: Right.

STEPHENS: -- year to year. What they say with medium confidence is that some of the warming may be something happening in the oceans, but they're not entirely sure. They acknowledge --

GIGOT: Heat sink.

STEPHENS: Right, exactly. They acknowledge that there may be problems with their modeling, which is very important, because everything that we supposedly or people think they know about client change --

GIGOT: Based on the model.

STEPHENS: -- is based on computer simulations. When you have computer simulations with huge data sets trying to calculate over 100-year time spans over whether a temperature will rise by a half degree, 1 degree, 1.5 degrees, you can have these sort of variations.

So what they're essentially saying is there hasn't been the warming that we've expected, and we're not entirely sure why, but we think is -- the truth is out there, buried somewhere in the ocean.

GIGOT: Couple theories.


GIGOT: But also there's like sun spots, variability and also water vapor in the atmosphere and so on. The essence is they don't know. Isn't that -- but how can they be so sure that climate change is going to happen? I mean, seven years ago, in that report, the 2007 report, they said it will be very likely that, by the end of the century, the globe will warm by more than one -- likely by 1.5 degrees.

STEPHENS: Yeah, they were thinking about 2 degrees Celsius.

GIGOT: 2 degrees. Now, it's less than 1.5.

STEPHENS: Now, it's 1.5. And, by the way, if someone said to you, by the way, the temperatures today is going to be, let's say, 78 degrees instead of 76, you probably wouldn't change your clothes or worry that the end is near. So this has to be kept in perspective when you see these graphs of temperatures going up.

GIGOT: Right.

STEPHENS: We're talking about a degree or maybe two. But that's the essential thing. In other sciences, uncertainty is part of the discourse of all the sciences.

GIGOT: Sure.

STEPHENS: They acknowledge they don't know. We're making fundamental discoveries about Mars right now, thanks to the rover up here. The Voyager's making new discoveries. Yet, with climate scientists, there's this -- there's this quality of saying global warming is unequivocal and we must take drastic steps to reshape the world's economy or we're going to face a catastrophe. So climate scientists speak in a very different way from scientists in other disciplines.

GIGOT: Yeah, that lesson, to me, Kim, from this, the big one, is uncertainty. That you don't -- we've got to wait and see now, in particular with the last 15 years, whether or not the climate models themselves are going to end up -- the temperatures going to match what the models are predicting so let's not jump to precipitous conclusion. But what do you think are the implications of this for policies in Washington where the president has made climate change a big part of his second term agenda?

STRASSEL: Well, this is exactly why they felt the need to bury the lede. Because you've now got a president who has said he is going to enforce a climate policy agenda via regulatory means. And it would have been -- and bodies like the U.N., they want the United States to be a leader on this issue because they feel that that's the only way they can pressure yet other countries, like China and India, to also somehow get on board. So they're not going to do anything to derail this U.S. movement and this U.S. president to sort of step up and start enforcing some sort of climate program.

GIGOT: So -- go ahead, Bret.

STEPHENS: I was going to say, it's important I think for people to understand what a vehicle of convenience a -- the climate issue has been for classic redistributionists, who have always wanted a strong government, a regulatory state, high taxes, who have been averse to --


STEPHENS: -- to fossil fuels. This was true 50 years ago before anybody was thinking about climate change.

GIGOT: If the world was ending, you have to turn it all over to somebody to decide how to save it as opposed to what the real insurance should be, if the earth is warming, faster growth and more --


STEPHENS: Precisely.

GIGOT: -- to cope with the consequences.

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.

Kim, first to you.

STRASSEL: A huge hit for those World War II veterans who, for days now, have been defying the Obama administration's attempt to make this shutdown more painful by storming the barricades of the World War II Memorial in Washington, D.C. Paul, this is an open-air memorial which is normally open 24 hours a day, seven days a week. The idea that this administration would go out of its way to block it off to prove a point says something about the degree to which the president is playing politics rather than leading on this shutdown. So we owe a little bit of gratitude to this generation for reminding us it's the power to grant people to Washington and not the other way around.

GIGOT: Hear, hear, Kim.


STEPHENS: This is a hit to the Italian people and a miss for Silvio Berlusconi who, at the age of 77, is finally, it seems, walking off the stage of Italian politics. He was the prime minister of Italy three times. Came to office with great fanfare and expectations that he would finally be the man who would introduce a measure of competition and capitalism in a morbid Italian economy. He never did that. He became famous instead for things like bonga-bonga parties. It's a good thing he's gone and I hope the farce of Italian politics finally ends.

GIGOT: That's an optimistic prediction.


All right, Joe?

RAGO: Paul, Tom Clancy died this week. And a big hit to the defining novelist of the late Cold War. He started off with genre techno espionage thrillers like "The Hunt for Red October" but, over time, came to explore more complex themes like honor, patriotism and the moral clarity of the U.S. cause. Rest in peace.

GIGOT: Thanks, Joe.

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

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