This is a rush transcript from "Journal Editorial Report," April 28, 2012. This copy may not be in its final form and may be updated.
PAUL GIGOT, HOST: This week on the "Journal Editorial Report," the Supreme Court once again finds itself in the middle of an election-year battle. This time, over immigration. Will the Arizona law stand?
Plus, the president pushes lower interest rates for federal student loans. Mitt Romney and some Republicans in Congress agree. Is it a good idea?
And Sarkozy's last stand. With an economy in shambles, the French president faces an up-hill battle for re-election. Will France jump off the socialist cliff? And are there lessons for the United States?
Welcome to the "Journal Editorial Report." I'm Paul Gigot.
The Supreme Court waded into another controversial election-year issue this week, hearing oral arguments on Arizona's immigration law. The Obama Justice Department sued Arizona over that 2010 law, arguing that Governor Jan Brewer violated the Constitution's Supremacy Clause by requiring local police to enforce federal immigration statutes. So are the justice's buying the administration's argument?
Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; Political Diary editor, Jason Riley; and editorial board member, Joe Rago.
Joe, this is a case about federal versus state power. The Supreme Court this week, both liberal and conservative justices, did not seem very sympathetic to the federal government's argument.
JOE RAGO, EDITORIAL BOARD MEMBER: No, they didn't, because Arizona very carefully crafted the state law to fit into the federal law. So really, all they're doing is saying, look, if the police happen to pick up somebody, maybe they need to verify their legal status, that's part of federal immigration law. So --
GIGOT: The state is saying we're just going to enforce the law. We're supplementing what you do. What about the provision of the law, the Arizona law that says, look, if you're illegal, it is a crime. If you're illegally here, it's a crime to go look for work. That, in the oral arguments of the Supreme Court, seemed to be the part of the law most in jeopardy.
RAGO: I think so. And that's definitely the part that's most out there.
GIGOT: In terms of maybe exceeding the federal statute?
GIGOT: All right. What was the argument that Arizona used that said that was fine?
RAGO: Well, what they said was, it's already a crime to be an illegal immigrant, so we're supplementing that.
GIGOT: By saying, if you look for work, it's another statute. It's another crime.
Jason, why -- if the Justice Department may lose here, 8-0, it's possible.
We don't know for sure, but it could. Why would they have advanced this argument?
JASON RILEY, EDITOR, POLITICAL DIARY: I think they did it for political reasons, Paul. This is about the Hispanic vote, showing that they care. The Justice Department did not need to bring this case. Other groups, civil rights groups and so forth were suing. They could have let those cases run their course. The Obama administration wanted to jump in here.
It doesn't look like the vote will be close, Paul. It looks like parts of the law will be upheld. But when a liberal justice like Sonya Sotomayor is skeptical of the government's case, you know the Obama administration --
GIGOT: What about the case that it's racial profiling. This was not argued in the course, because even the government isn't making that case, but a lot of outside groups have been saying that that's what this is, and therefore, that's a violation of the law. Is that even at issue here?
RILEY: Well, I believe that the law specifically bans that practice. And Chief Justice Roberts made that clear during the oral arguments. There's no racial profiling. You're not alleging that, right? The government said, no, we're the not.
GIGOT: Dan, explain the politics. If you lose 8-0 at the Supreme Court, that doesn't strike me as good politics.
HENNINGER: I think that the Obama White House and Democrats reached the point where it doesn't matter to them all that much whether the Supreme Court rules against them 8-0 on this. They still take away the issue of Republicans and Mitt Romney being anti-Hispanic. And I don't think the voting block is going to be paying really close attention to the federalism issues at the center of this case. They're going to be able to run against the Republicans and Arizona -- the right will at least get the law -- as being anti-Hispanic. And it's purely a political play.
The interesting thing is you have to ask yourself, as Jason was suggesting, why did they bring such a loser case to the Supreme Court. Are they now enlisting the Supreme Court itself in their political strategy?
GIGOT: I should add there would be only eight -- there are only eight justices sitting on this case because Elena Kagan has recused herself because she was at the Justice Department when this was being formulated.
Let's talk about the trends in immigration, on where this law is really needed.
RILEY: right. Because there are two issues here, whether this is constitutional and whether efforts like this are effective in reducing illegal immigration, which is the goal here. That's what we all want. And the jury is still out on that -- on that. There's a law that --
RILEY: -- five other states, at least five other states, have passed Arizona-type laws. Some have walked them back a little bit. The business community doesn't like them. Law enforcement isn't crazy about them being deputized. They say it makes it more difficult for them to police their communities, do their day jobs. People are afraid of them, think they are deportation agents and so forth.
So, we have to ask ourselves whether the laws work or whether there's another way to go in terms of determining how much foreign labor we should allow in the country.
GIGOT: But the big story on immigration is not this enforcement. It's the fact that illegal immigration is collapsing. It's falling dramatically from Mexico. And it has -- according to a Pew Foundation survey this week showed that it's really, really --
RILEY: Net zero.
GIGOT: -- net zero.
RILEY: The amazing thing about this is that trend began in 2000. That trend preceded this whole uproar we've been having over the last decade about --
RILEY: immigration and before the state laws passed and before all that illegal immigration --
GIGOT: OK, but the restrictionists would say it's because of greater enforcement. Do you agree with that?
RILEY: I'm sure that greater enforcement has something to do with fewer illegal -- with, less illegal immigration, no doubt about that. But we also have a poor economy. And we know that most of these are economic migrants coming here in search of jobs. So I think that has also played a role, Paul.
GIGOT: What about the politics of this, Joe, going forward? Let's say the Supreme Court does agree mostly with the state of Arizona. Chuck Schumer, this week, the Democratic Senator from New York, says he would introduce a law that would overturn the Supreme Court decision in the case. What's he up to?
RAGO: Look, I think he's trying to be the majority leader here.
He's trying to ride this for all it's worth. But you have to understand, the people that oppose this law, they think it's a reign of terror. And they think it's a racial police state. So I think they're really going to do whatever they can to oppose this. And I think that explain the weakness of the Justice Department's argument.
GIGOT: So the Democrats, given their interest groups, feel they have no choice but to fight on this ground, even if it's a loser. Fascinating, politically.
When we come back, lowering student loan interest rates. President Obama is pushing it. Mitt Romney says he supports it. And even some Republicans in Congress are voting for it. So what's not to like? Find out next.
(BEGIN VIDEO CLIP)
PRESIDENT BARACK OBAMA: This country has always made a commitment to put a good education within the reach of all who are willing to work for it. That's what makes us special. That's what made us an economic super power.
OBAMA: That's what kept us at the forefront of business and science and technology and medicine. And that's a commitment we have to reaffirm today in 2012.
(END VIDEO CLIP)
GIGOT: That was President Obama hitting the college circuit this week and pitching an idea near and dear to many student hearts. The president is calling on a freeze on interest rates for federally subsidized student loans, set to double from 3.4 to 6.8 percent on July 1st. Mitt Romney thinks it's a good idea and so do many House Republicans. So is it?
We're back with Jason Riley. Also joining the panel, assistant editorial page editor, James Freeman; and Washington columnist, Kim Strassel.
Kim, I'm a simple man.
Explain the politics of this to me.
KIM STRASSEL, WASHINGTON COLUMNIST: OK, so what you have here is the president basically setting the agenda. He's rolling out a very carefully orchestrated election campaign. He's targeting different groups. A few weeks ago, it was women. This week, it's students. And he's out talking about the student loan issue.
Unfortunately, Mitt Romney is allowing himself to be dragged along on this.
When the president said he's was for the 3.4 percent rate, Mitt Romney said, I am, too. As a result, he put pressure on House Republicans. So they're now for it, too. And the only question is how we'll pay for it.
GIGOT: Mitt Romney is doing this, why? Because thinks it's a loser if he gets on the wrong side?
STRASSEL: Well, everyone is fighting for the younger person's vote. They obviously were a key part of Barack Obama's victory in 2008. They're not a happy crowd. If you look at the numbers, about 53 percent of the people under the age of 25, with college degrees, are jobless or under employed. There's a battle is going on to see if they can get them to turn out.
GIGOT: We'll give them subsidized loans for four years --
JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Right.
GIGOT: And you can pay them back with the jobs you're not going to get.
STRASSEL: That's right.
GIGOT: That's wonderful, wonderful.
Let's look at the substance of this, James. Is this loan idea a good idea, a good policy?
FREEMAN: As you pointed out, it's not going to help anyone who is now looking for work or who is a senior and coming out for work. It's going to offer modest help for other people. But for taxpayers--
GIGOT: Because it only applies to --
JAMES: Only new loans. Nobody is getting a rate cut on anything. And even on the new loans, going forward, it's not everybody. It's not all categories of student loans. But it's enough. And under budget rules, it's six billion next year and if this 3.4 percent rate gets capped, it'll be a lot more in the future.
GIGOT: If it's capped for one year, as the proposal would do, probably going to be very hard to ever raise, is it not?
FREEMAN: That's the danger, if this becomes a part of this Washington herd of sacred cattle where the 3.4 percent raise becomes a basic American right. And look an at Uncle Sam borrowing for the long term at 3.1, let's say interest rates spike, taxpayers could be losing on every loan even before the inevitable default.
GIGOT: So you already have default risk. That means students won't pay the loans back, on a trillion dollars worth of student debt, about $900 billion of that, now government loans. This adds credit risk. Explain to viewers what that means?
FREEMAN: You've got the credit risk because the government doesn't check your FICO score and other things the way they would on a different type of loan. It's a big market, bigger now than credit cards and auto loans. Now it's adding the interest rate risk, which is, if we say 3.4 percent student loans are now the new American right, and that's clearly what President Obama wants to do -- you look at these speeches he's giving, and he talks about it as a necessity, this student funding program. If those -- if interest rates -- if the government is borrowing at higher rates than they have to offer the kids, it's a guaranteed loser.
GIGOT: The secret winner here, Jason, are colleges, aren't they?
And tuitions have been outpacing inflation for three decades. And one of the reasons is because every time these subsidies increase, the schools see it as a green light to raise their prices. And that's exactly what they'll continue doing.
GIGOT: Kim, why are House Republicans being dragged along with this?
STRASSEL: Well, again, what you've got here is a newly minted punitive GOP nominee, Mitt Romney. For them -- he came out and said he was for capping the rates. And to have gone against him would have been a huge embarrassment to their new standard bearer of the party. They decided to fold the fight. Now it's over how you pay for it. The question is, do you strip the money, as the Republicans would like, out of the health care bill, and do you do what the Democrats are proposing again and again and again and again, which is to tax wealthier Americans to pay for it?
GIGOT: The big problem it seems to me, James, is the loan guarantees. They're a free lunch for politicians because they don't have any cost at first. They don't appear to have costs except when they go bad.
GIGOT: And then you pay -- some future Congress and --
FREEMAN: Yes. And it's also -- even -- it's not just that they say it has no costs, and want people to pretend that, they actually pretend, because of bogus accounting, that it makes tons of money.
That this is a huge winner for the taxpayers. And yet, they had a funny series of letters where the head of the Congressional Budget Office said, well, I know this is bogus accounting, but we've got to do it anyway. It's absurd.
GIGOT: All right.
Still ahead, high unemployment, slow economic growth, a familiar combination, and it may cause French President Nicolas Sarkozy his job. When we come back, French voters face the socialist cliff. Will they jump? And what are the lessons for the United States?
GIGOT: A struggling economy and high unemployment led Nicolas Sarkozy to a second-place finish in the first round of voting in France's presidential election on Sunday. Mr. Sarkozy is the first incumbent French president to lose a first-round vote in the modern era, finishing behind Socialist Party nominee, Francois Hollande. The two now face off in a May 6th runoff.
Wall Street Journal foreign affairs columnist, Bret Stephens; and editorial board member, Matt Kaminski, joins us with more.
Matt, what difference will it make if France elects a Socialist as president?
MATT KAMINSKI, EDITORIAL BOARD MEMBER: I think the markets will tumble in 30 days. Hollande has promised to tax the rich to the hilt and all kinds of socialist --
GIGOT: Seventy-five percent marginal rate.
KAMINSKI: But to be fair, Sarkozy has been saying the same things, too. He ran as a very centrist, market reformer. And he's sort of lost his way. And I'm not sure -- I think Hollande may dabble in some of this stuff early on and may end up getting a visit from his minister of finance --
KAMINSKI: -- saying you can't do this. And in a way, you know, France needs a change. And Sarkozy has been a disappointment in many ways.
GIGOT: You mean a change psychologically?
KAMINSKI: A change of leadership. And I'm not sure that Hollande is the French Tony Blair, much less Margaret Thatcher. And I'm not so sure -- I'm not as worried as some people that France will go off the cliff here.
GIGOT: What's the implications, Bret, for the larger Euro crisis that they see if Hollande gets elected?
BRET STEPHENS, FOREIGN AFFAIRS COLUMNIST: France is the fifth-largest economy in the world. It's the second-largest in Europe. It was, until about a year ago, when people started discovering the depths of French problems, considered one of the functioning motors of the European economy, bailing out the little Greeces, Portugals, even Italys and Spains. If France begins to fail, the whole Euro project begins to fail.
What's really frightening, Paul, and the attacks on both Sarkozy and Francois Hollande on the independence of the European Central Bank, the calls for them to ease up even further on their lending, and essentially to debase the Euro as a way of getting themselves out of their mounting debts.
GIGOT: Inflate. Inflate.
HENNINGER: Inflate indeed, and spend. We have gotten -- the debate has actually gotten around to a point where we can understand the real divisions. The European Central Bank president, Mario Draghi, gave a speech this week in which he said, spending alone is not sufficient to produce growth. Francois Hollande is getting credit for favoring growth. He means public spending.
HENNINGER: German Chancellor Angela Merkel said I agree with Mr. Draghi, spending alone is not going to solve our growth problems here. We need structure reforms and labor market reforms. And I think that's the division that's now showed up in the European debates.
KAMINSKI: But the French has always wanted to undermine the ECB and mettle with the ECB. The Germans are stronger than they've ever been in Europe.
GIGOT: Because they have a successful economy.
KAMINSKI: Yes. And it's their biggest economy. And the last thing, Merkel is facing her own election and
GIGOT: The chancellor of Germany.
KAMINSKI: Right. And the last thing that she wants to do is give into the French on this.
STEPHENS: But what's astonishing and interesting is here you have Germany, the one functioning economy in Europe. Why is it functioning? Because six of seven years ago, they underwent a series of very -- at the time -- painful labor reforms, liberalizing the labor market, making it easier to hire and fire employees.
GIGOT: Cutting the corporate tax rate.
STEPHENS: Cutting the corporate tax rates dramatically. And now Germany is doing well. You would think that countries like France, to say nothing of Spain and Italy, would look at the German example and saying, how is it they turned out so well. It was just a decade ago that Germany was in a great deal of trouble.
HENNINGER: Well, Spain is trying -- Spain did pass market reform in February so that you can take it to the courts and challenge it, which bogs it down. And Mario Monty, in Italy, has attempted the same thing. He got his head handed to him in the parliament. They know what they have to do, but in these southern-tier countries, it's almost impossible to get over the unions and create these reforms.
GIGOT: Maybe not just southern tier. France is the heart, as Bret said, of the Euro project.
Is Europe getting its arms around its real economic problems or is this French election really showing us, in fact, that they're not there yet?
KAMINSKI: I think it's too early to say. I think if Europe manages to do what it needs to do, and it's pretty widely acknowledged what needs to happen, need to put in place incentives for these economies to grow.
GIGOT: For private sector growth.
KAMINSKI: Absolutely. And not just free-spending. Germany is an example. Denmark did it very well. Poland is doing well. So there are European success stories out there. But Europe needs to get past this crisis. And if it does implement the things you should do, it will emerge stronger. And --
KAMINSKI: -- so strong and that's really the worry.
STEPHENS: The terms of the debate that Europe now has are wrong. On the one hand, you have the Keynesians saying raise taxes for the sake of austerity, balancing budgets. And on the other hand --
GIGOT: For the sake of growth and spending.
STEPHENS: Yes, but basically, what they're saying is we need to balance the national first (ph).
STEPHENS: And so you raise taxes. You cut certain spending. That's what the British are trying to do, with no success. They've gone into yet another recession. And on the other side -- so that's on the Keynesian side. On the other side, you have the Socialists. Wrong debate. You need a free market side.
GIGOT: All right.
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: This is a miss for President Obama's campaign team, which this week on the web site publicly named and shamed eight private citizens for the crime of donating to Mitt Romney's campaign. Ever since Nixon's enemy's list, presidents have been careful about not targeting private individuals for politics, and for good reason. They're so powerful that they can chill the environment for political participation. And they're supposed to represent all Americans. This was a big no-no.
GIGOT: All right.
STEPHENS: This is a hit for Mr. Miss, Newt Gingrich --
-- who says, yes, he's going to withdraw from the race. We don't know exactly on what time table. He's building the suspense. But I think, on the whole, we deserve to -- we ought to be thanking Newt. He made the race interesting, sometimes exciting. And sometimes he made it a real race. He sharpened Mitt Romney's performance. And above all, he made it very entertaining. Thank you, Newt Gingrich.
GIGOT: All right.
KAMINSKI: Charles Taylor, the former president of Liberia and an African warlord, became the first head of state this week to be convicted of war crimes by an international tribunal. It's a well earned distinction in his case. He's one of the worst of Africa's many bad leaders for his role in Sierra Leone during that civil war. Credit must also go to Britain, which intervened in that civil war 10 years ago, and to the U.S. for pressing Nigeria to hand him over to the court in the first place.
GIGOT: All right, thanks, Matt.
That's it for this week's edition of the "Journal Editorial Report. " Thanks to my panel and especially to all of you for watching. I'm Paul Gigot. We hope to see you right here next week.
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