Was the Iowa GOP Debate a Game Changer?

This is a rush transcript from "Journal Editorial Report," December 17, 2011. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," the GOP candidates square off in their last debate before the Iowa caucuses. Was it a game changer?

And with polls tightening, the two frontrunners spar over their private business experience. We'll take a closer look at Newt Gingrich's dealing with Freddie Mac and Mitt Romney's time at Bain Capital. Are the attacks fair? And how big a vulnerability will they be in a general election?

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

The GOP candidates squared off Thursday night in their last debate before the Iowa caucuses. With a new poll showing Mitt Romney, Newt Gingrich and Ron Paul locked in a close race for first place. Some of the lower-tier candidates tried to galvanize last-minute support and make a final impression on Iowa voters.


GOV. RICK PERRY, R-TEXAS: I'm kind of getting where I like these debates. And as a matter of fact, I hope Obama and I debate a lot. And I'll get there early.


And we'll get it on. And we will talk about our differences, which are great. Let me tell you, I hope I am the Tim Tebow of the Iowa caucuses.


FMR. GOV. JON HUNTSMAN, R-UTAH: I think people, Neil, are coming around to finding that I mean the consistent conservative in race.

They're coming around to find that I'm not going to pander. I'm not going to contort myself into a pretzel to please any audience I'm in front of. And I'm not going to sign those silly pledges. And you know what else? I'm not going to show up at a Donald Trump debate.


GIGOT: So did they succeed? Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; and editorial board members, Jason Riley and Dorothy Rabinowitz.

So, Dan, did the debate do anything in your mind to change the fundamental contours of this race?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: I don't think so, Paul. I mean, I believe that the race is now between Newt Gingrich and Mitt Romney, with Ron Paul probably playing the role of a spoiler. The others simply didn't perform strongly enough. They would have had to knock it out of the park.

That said, Rick Perry can stay in this race. Unlike the others, he does have money and money matters. He gave up a pretty credible performance and didn't blow himself up. But I think at this point it's pretty much congealing around Romney and Gingrich.

GIGOT: Dorothy?

DOROTHY RABINOWITZ, EDITORIAL BOARD MEMBER: Yes, I think that's true. But I think that they all of them did show something quite definitive about themselves. It was fascinating. You did see that Santorum is innately depressed.


And you can see it from the lack of fight. Whereas, compared especially to Michele, who just went at it like the Energizer Bunny and couldn't be stopped. And that is impressive. And you see Huntsman, who is in a realm all by himself, talking about transactional matters. And we're, what?


GIGOT: Hey, I like the flat tax that he passed in Utah.

RABINOWITZ: That's good.

GIGOT: And I think his tax reform plan is pretty darn good.

RABINOWITZ: Paul, there is some problem every time a politician says, I'm not going to pander. You go, oh.


JASON RILEY, EDITORIAL BOARD MEMBER: I though Michele Bachmann had a pretty good debate. I mean, for the second debate in a row I think she punched above her weight. And I think Newt Gingrich's weakest moment of the debate was responding to Michele Bachmann's charges over Freddie Mac. And so, I think she exposed some vulnerabilities there in the frontrunners.

But I think you're right, by and large, the frontrunners pretty much laid off one another and let the second-tier candidates go after them.

GIGOT: I want to deal with each of those questions separately. Michele Bachmann did attack, and effectively in some areas, against Newt Gingrich, I would agree. But did she make the case affirmatively for herself? That's the question I have. She needs -- I know, she needs strategically not to knock Gingrich down so she can do well in Iowa and move on past that. She has to do relatively well in Iowa.

HENNINGER: I don't think so. It's been very odd to me that Bachmann, Santorum and even Huntsman, the way that they come out debate after debate, and there's a sense that they're a little disorganized in the theme.

GIGOT: Well, her them is that everybody is disqualified as conservatives and she the only conservative. But she doesn't seem to --



GIGOT: Yes, that --


HENNINGER: The American people are upset about several things. Nine percent unemployment, an economy that's dead in the water and whether their taxes are going to be raised or not. None of those subjects really came up in the debate. And so, they're -- Santorum and Bachmann and Huntsman are trying to present other reasons why they should be supported. At some point, you have to connect with the concerns of the American people.

GIGOT: How well did Gingrich defend himself? Do you think he did --


RABINOWITZ: I felt he defended himself not as well as he could have done under that attack. But, believe me, this was washed away by the second half of that debate. And you could tell, when Michele was at her fiery hot best, the tepid response from the audience was quite obvious to me. Those are not the issues that are raising -- as soon as you hear Gingrich talking, at what I think his best moment, was the pipeline stuff.

GIGOT: The Keystone Pipeline.

RABINOWITZ: The Keystone stuff where he had everything, his capacity to boil down everything from the left wing radicals and the president's fight against it, all of this while people are unemployment.

RILEY: I think Gingrich had a very strong debate. I mean, I wish he would get over himself. He compared himself to Thomas Jefferson, Abraham Lincoln, FDR.


That was only in the first half.


GIGOT: We want -- I want to listen to a bite from Ron Paul talking about Iran.


REP. RON PAUL, R-TEXAS: For you to say that there's some scientific evidence and some people arguing that maybe in a year they might have a weapon, there's a lot more saying they don't have it. There's no U.N. evidence of that happening. You know what I really fear about what's happening here? It's another Iraq coming. It's war propaganda going on.


And we're arguing. To me the greatest danger is that we will have a president that will overreact.


GIGOT: Jason, give him credit for consistency.


He hits that line every time, but --

RILEY: You can give him credit for consistency.

GIGOT: Is that a winner politically?

RILEY: No. That's exactly what disqualifies him from becoming the nominee. But Ron Paul gave one of the most interesting responses of the night, and it was actually a nonresponse. He was asked if he will eventually support -- if he'll support the eventual nominee, the Republican nominee. He did not answer that question. And I think that scares a lot of the Republican establishment because it means he's leaving open the door to a third-party run, which could cause a lot of problems.

GIGOT: If Romney -- I mean, if Ron Paul does well in Iowa, is this disqualifying. Will he just stop there? Because he does have this fervent support.

RABINOWITZ: He does have fervent support, but so have many leaders of the world who we happen to have gone to war with, I won't mention, you know.


Consistency? They're all consistent. What are they consistent about? If you looked at Ron Paul, you heard, especially when he goes on a bit, the bubble that he's in. The more intense the emotions, the less rational.

GIGOT: OK. All right, we will watch.

When we come back, Newt Gingrich and Mitt Romney trade attacks over their time in private business. Who experiences a greater political vulnerability? Our panel weighs in next.


GIGOT: Well, Newt Gingrich and Mitt Romney have been fighting for much of the week over their time in the private sector, with Romney calling on Gingrich to return the $1.6 million he made consulting for mortgage giant, Freddie Mac. In Thursday night's debate, Michele Bachmann, among others, joined in.


REP. MICHELE BACHMANN, R-MINN.: Evidence is that Speaker Gingrich took $1.6 million. You don't need to be within the technical definition of being a lobbyist to still be influence peddling with senior Republicans in Washington D.C. to get them to do your bidding. And the bidding was to keep this grandiose scam of Freddie Mac going. That is -- that is something that our nominee can't stand for.


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

So, Mary, was Bachmann's attack fair?

MARY ANASTASIA O'GRADY, COLUMNIST: Completely fair and a direct hit.


For a guy who is running as the outsider, the Tea Party candidate, the anti-establishment guy, I mean, Newt Gingrich's activities with Freddie Mac are damning. And I think he should be more straight forward. To claim that he was a consultant who was acting as a historian for Freddie Mac? That lowers his credibility. And I think she was -- it was well within her rights to go after him on that.

GIGOT: All right, let's hear Gingrich's response?


GINGRICH: I will state unequivocally, for every person watching tonight, I have never once changed my positions because of any kind of payment. Because the truth is, I was a national figure who's doing just fine, doing a whole variety of things, including writing best-selling books, making speeches. And the fact is, I only chose to work with people whose values I shared, and having people have a chance to buy a house is a value I believe still is important in America.



GIGOT: So, James, affordable housing. He's basically saying, I was in favor of affordable housing. Freddie Mac helped affordable housing. I shared their values. That is why I was on their payroll.



He seemed to be channeling Barney Frank, sort of going on about --

GIGOT: Ouch.

FREEMAN: -- how government-sponsored enterprises were very valuable. And promoting home ownership was a good idea.

GIGOT: Right.

FREEMAN: It was as if the financial crisis never happened. And as far as the first explanation, that he was acting as a historian, I'm sure there are a lot of historians around the country who were thrilled to learn there's now a 30 grand a month retainer waiting for them in Washington D.C. The point is he was right at the moment where it could matter. He was teaching Freddie Mac how to avoid reform, just as we were heading to the mortgage crisis.

GIGOT: He says he actually urged them to reform. That was part of his message --


FREEMAN: He said that and then it came out, their old publications, 2007 --

GIGOT: Freddie Mac's own publications.

FREEMAN: Freddie Mac's publication, where he's basically lauding the general model of this kind of government-funded --


GIGOT: On that point, I want to get the quote from that period, just to buttress James' point here: "I would be cautious about fundamentally changing their role or the model itself," end quote. He was referring to Freddie Mac and Fannie Mae.

HENNINGER: Paul, we could sit here for a couple of hours trying it nail down exactly what his position was on Freddie and Fannie, because he just keeps changing. This, for Newt, is the equivalent of Mitt Romney's Massachusetts mandate. These two guys, out of hubris, will not stand down from what are one of their key vulnerabilities. You can imagine, once the campaign gets going -- and the Romney campaign will probably do this -- running ad -- commercials with ominous black-and-white images of Newt saying one thing after another to try to explain his position. And it all ads up to, you were a Washington insider, defending one of the most indefensible institutions in the city.

GIGOT: And here is my -- part of his defense is, look, I was a private consultant. This was not while I was in Congress. And I was entitled to make a buck. And I was to go around and work for companies who were willing to pay me based on my past position and my stature and ability to give them strategic advice. What's wrong with a private guy making a dollar?

O'GRADY: Yes, but the Tea Party is looking for somebody who rejects that. He can't say at the same time that he was part of it and that he thinks it's a bad way for Washington to operate.

On top of that, this is not an isolated incident. He has his lobbying he did for the ethanol industry.

GIGOT: He would say, no, he never lobbied for them. Never formally lobbied. I know there's a technical definition of lobbying. But he did -- he did -- he did receive from money from the ethanol lobby.

O'GRADY: Right, I stand corrected. He was a consultant for the ethanol lobby.


And he also recommended mandates for health care. He's got a track record of looking for big-government intervention when he thinks it's right. It's not what the Tea Party is looking for in a president.

GIGOT: James, what does this tell us about his philosophy of government?

FREEMAN: Well, it tells us it's very flexible.


And we remember the revolution in 1994, a lot of conservatives justly appreciate him for that. But you realize, as time goes on, and especially when there's a financial incentive, his ideology is flexible.

But I've got to tell you, every politician who goes off and sets up a big lobbying shop, probably tells himself he's an entrepreneur. And he's not.


This is not the private sector. This is trading on government influence.

GIGOT: OK, James.

When we come back, we'll take a closer look at Mitt Romney's private business record. Will his time at Bain Capital be an asset or a liability in the general election campaign?



GINGRICH: I would just say that if Governor Romney would like to give back all the money he's earned from bankrupting companies and laying off employees over his years at Bain, that I would be glad to then listen to him.


GIGOT: That was Newt Gingrich earlier this week attacking Mitt Romney over his time at Bain Capital, the private equity firm he led for 15 years. Gingrich has since walked those comments back, telling Iowa Public Television Thursday that he regrets taking a shot at Romney's private business record. But just how big a political liability will Romney's time at Bain be in the general election?

James, first, Gingrich's attack fair?

FREEMAN: Unfair. Unfair. And going with the Hollywood stereotype of business people that they sort of exist and take pleasure from closing down companies and firing them and raiding their pension funds, it's especially unfair in this case. What Mitt Romney did -- and he kind of pioneered this model in the private equity business -- is he had a team of management companies. They would find troubled companies, buy them, fix them and then resell them.

GIGOT: But there's no question, sometimes people go got laid off.

FREEMAN: Sometimes they got laid off. What they also did was fund new upstart companies, not turnarounds. And he talks about Staples, and he should, because this began as one location outside of Boston, and his funding basically built it into a national chain. But others, technology companies and Gardner Group and --


GIGOT: All right. Let's hear how Romney defended himself during the debate.


ROMNEY: I think the president is going to level the same attack. He's going to go after me and say, in businesses that you've invested in, they didn't all succeed, some failed and some laid people off. And he's been absolutely right. But if you look at all the businesses we invested in, over a hundred different businesses, they added tens of thousands of jobs. In the real world that the president has not lived in, I actually think he doesn't understand that not every business succeeds.


GIGOT: All right, Mary, how effective was that as a response?

O'GRADY: It was extremely effective for two reasons. One, you notice that Mitt Romney did not say anything about Newt Gingrich there. He only talked about the president, which I think was brilliant.

But, also, I think, that basically, what Bain Capital was doing, gets at the heart of capitalism, the heart of the way the American economy works, and should work. And you know, companies that are not profitable shouldn't be kept alive. They should go under and, thus, creative destruction, and new companies rise up from that. If you don't let the economy do that, you're not going to have a healthy prosperous society.

GIGOT: Dan, one of the things we didn't get to, the part of Mitt Romney's response, was he compared what he did at Bain Capital to what the president did at General Motors, and saying the fix of General Motors had to lay off people as well. But is --


HENNINGER: And close dealerships.

GIGOT: Right, and close dealerships. But does that mean that Mitt Romney essentially conceded that the General Motors bailout worked?

HENNINGER: He might well be. I think he's trying to make a comparison of how things work in the real world.

And I have to agree with Mary, I was very encouraged by Romney's answer. I had a lot of concern that he simply wasn't going to step up to the attacks on Bain, and he's beginning to develop a response, and that's good.

Having said that, I think it's a huge vulnerability for him, for better or worse. It's too bad. But Bain involved huge amounts of money. It's financial engineering. And it's going to be very possible for the Obama campaign to make it look, on television, like something evil. And he has to be prepared for that.

GIGOT: On that point, I think we're going to know before -- if Romney is the nominee, before the campaign is over every one of them who lost their jobs, up close and personal, by name. They're going to be visiting your home.


FREEMAN: Absolutely. Absolutely. Mitt Romney is going to have to defend it. But I think he's got a good story to tell, because it's not financial engineering. This is not trading of exotic securities. The first fund at Bain was $37 million, generally small investments and often small companies, some technology companies, steel companies, across various sectors. So I think it's a good story if he's able to tell it.

GIGOT: But if his practical election argument is, I'm the guy in private business who knows how to create jobs. What the Obama campaign will try to do is say, no you don't, you destroyed as many jobs as you created, because they want to undermine that argument. Doesn't Romney have to take the argument above just how many jobs he created to an almost philosophical level and a moral level and say, here's -- to get to your point about here is why the private-sector model is better than government growth?

O'GRADY: Of course, he does. And I think it was only the beginning of that. It was a step one towards doing that. And he has to do that more aggressively and, like you say, do it philosophically. But I think he wins that argument. I don't think that -- first of all, I don't think that there's any evidence that he destroyed more jobs than he created. But, secondly, I mean, this is going to be an election about how the U.S. economy should be structured. So that's -- fundamentally, he's right in the right spot.

GIGOT: We don't have much time, Dan, but Newt Gingrich may have done him a favor by forcing him to respond to this early.

HENNINGER: He did do him a favor. Because Obama is going to do it in spades when he campaigns against Romney. And he's got to develop an argument about, just as Mary said, the American economy going into the future not the past.

GIGOT: All right.

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


GIGOT: Time for "Hits and Misses" of the week -- Jason?

RILEY: This is a mess for Attorney General Eric Holder, who gave a speech this week critical of Voter I.D. laws on the ground, because they supposedly suppress minority turnout. In fact, in places like Indiana and Georgia, where the laws have passed, afterwards, minority turn out actually increased. In any case, you would think the attorney general would be most concerned about ballot integrity, which is what these laws are really about.

GIGOT: All right.


RABINOWITZ: Here's a miss to Secretary of State Hillary Clinton for hosting the Organization of Islamic Agencies in Washington this week, which was designed to threaten, essentially, and to criminalize, perhaps, any defensive speech against Muslims. For hosting this farce and for failing to stand up for freedom and against religion elements (ph), Clinton deserves -- and her agents -- the utmost scorn.

GIGOT: All right.


HENNINGER: Paul, a big hit for the guys who want to build the world's biggest airplane. That would be legendary airplane designer, Burt Rutan, and Microsoft founder, Paul Allen, who says he's going to put up $200 million to build a huge plane that will launch satellites into space. 385-foot wing span, six engines, privately funded -- this is the Wright brothers, living, and we need a lot more of that right now.

GIGOT: Might be better than NASA. Who knows?

That it for this 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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