North Korea ramps up the rhetoric; ObamaCare's bottom line
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This is a rush transcript from "Journal Editorial Report," April 6, 2013. This copy may not be in its final form and may be updated.
PAUL GIGOT, HOST: This week on the "Journal Editorial Report," North Korea ramps up the rhetoric, issuing more threats against the United States and moving military assets that could push the region to the brink of war.
Plus, is ObamaCare in trouble? New delays and bipartisan opposition threaten the president's health care plan.
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And Stockton, California, became the largest city in the nation to go bankrupt. Could your town be next?
(BEGIN VIDEO CLIP)
CHUCK HAGEL, DEFENSE SECRETARY: As they have ratcheted up their bellicose, dangerous rhetoric and some of the actions they've taken the last few weeks present a real and clear danger and threat to the interests, certainly, of our allies.
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GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.
That was Secretary of Defense Chuck Hagel, this week on the war-like rhetoric and actions of North Korea. Those comments were made before the North Korean army announced it was authorized to attack the United States.
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UNIDENTIFIED NORTH KOREAN NEWS ANCHOR (through translation): We will cope with the U.S. nuclear threat with a merciless nuclear attack and we will face the infiltration with a justified war. This is our military and our people's unchangeable stance. The U.S. and those followers should clearly know that everything is different in the era of respected Kim Jong Un.
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GIGOT: Those really are fighting words, but how serious a threat is it? Let's ask "Wall Street Journal" columnist and deputy editor, Dan Henninger; editorial board member, Matt Kaminski; and Washington columnist, Kim Strassel.
Matt, are we on the brink of war, could we be, or it's a bluff?
MATT KAMINSKI, EDITORIAL BOARD MEMBER: It's happened before and they've done the kind of threats. The thing about North Korea, we don't know. We don't know much about who is running North Korea. There is a new, 28, 29, 30-year-old leader in Kim Jong Un.
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GIGOT: We don't even know how old he is.
KAMINSKI: Exactly. And is he controlled by the generals? Is he doing this to establish his own legitimacy? We have the questions. And there's a danger will North Korea if you push them too far, they might do something stupid.
GIGOT: Push them too far, how?
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KAMINSKI: Well --
GIGOT: They're reacting to the sanctions that the U.N. put on after the last launch and nuclear test.
KAMINSKI: Right.
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GIGOT: How is the world supposed respond to that when it's a violation of global norms and previous U.N. actions?
KAMINSKI: Absolutely, but you don't know because they are unpredictable and you be very careful how you manage this. I think we've responded well by saying we've moved warships into the region and we've flown nuclear bombers over North Korea. We've put missile defense batteries in Guam. And taking it very seriously. At the same time, they are probably trying to exert something from us, perhaps more money.
GIGOT: Dan, is this a play for more money, the kind of threats in return for cash game that they've played for two decades?
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DAN HENNINGER, COLUMNIST & DEPUTY SECRETARY: Maybe. Who knows? But under the circumstances, I think you have to be very, very prepared to take
action. Look, so --
(CROSSTALK)
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GIGOT: So you agree with Matt we did the right thing with that show of military deterrence?
HENNINGER: Oh, absolutely. At the start, at the least. Let's recall that Kim Jong's predecessors, his father and grandfather thought to be quote, unquote, "more unstable than he is."
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They blew up a South Korean airliner filled with passengers. In 1983, they set off a bomb in Rangoon in Burma, killing two South Korean ministers. It was an attempt to assassinate the South Korean president.
GIGOT: As recently as 2010, they sank a Koran ship.
HENNINGER: Killing sailors.
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GIGOT: That's right. Your point is?
HENNINGER: My point is they're capable of attempting, shall I say, a Pearl Harbor-type attack, and in our terms, makes no sense whatsoever. It might seem suicidal. But this young 28 year old -- I've talked to South Koreans. They're unnerved about Kim Jong Un and the fact that they don't know about him and he's been in that system his whole life.
GIGOT: Kim, politically here at home, it's interesting, the president has taken a low profile and hasn't spoken out and left the comments to Chuck Hagel and the secretary of state, John Kerry. What's the thinking in the White House about that strategy?
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KIM STRASSEL, WASHINGTON COLUMNIST: Look, I think what they're trying to do here, the Obama administration should get some points because what the North Koreans are trying to do, as we've been talking about, is the same old play book. You manufacture a crisis and secure high-level talk and you get concessions from the west. So far, the Obama administration, to its credit, has not been gulled into that situation.
GIGOT: Right.
STRASSEL: And it has also -- and to his credit, he went out of his way to show an extra show of force as part of the annual military exercises it was doing with South Korea.
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GIGOT: Why wouldn't the president speak up on this? And do you think that would fear it would be giving torch respect to North Korea?
STRASSEL: I think that's part of it. What you don't want to do is needlessly provoke the North Koreans into something. What does have to be done at a certain point here is, the question that no one can answer, what happens when North Korea doesn't get its way? Because it has pretty much always in the past, and doesn't provoke some sort of greater thing. The White House doesn't want to do that and provoke them into it. But you have to send a message that if they are going to take this to the next level, in some way start a war, start an altercation, the only end to that would be the extinction of the Kim regime.
GIGOT: As far as policy goes, what to do about it, we've tried this engagement and it doesn't work. But China is the key.
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HENNINGER: Yes.
GIGOT: China has the most influence, North Korea's biggest patron, and yet it's always willing to protect North Korea. Do we see any signs of that changing?
HENNINGER: Not at the moment. It raises the subject, Paul, of nuclear proliferation. The Chinese have always assumed that we can prevent South Korea and Japan from going from going nuclear.
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GIGOT: Because we had that umbrella.
HENNINGER: We have that umbrella. But if you listen to the South Koreans these days, they're pushing back. They're angry with the United States in failing in negotiations with North Korea and they want the United States to bring tactical nuclear weapons back into South Korea. And they are talking about the option of going nuclear. So I think this message should be conveyed to the Chinese that that is weakening. And --
(CROSSTALK)
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GIGOT: If they want -- if the Chinese want a nuclear Japan and a nuclear South Korea, keep on the current course, that's what you're saying?
HENNINGER: They don't want that.
GIGOT: And they don't want that.
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But are we talking about -- think about this in the context of Iran.
Are we talking about, we're on the verge of a real nuclear breakout around the world potentially?
KAMINSKI: I think it's a test of U.S. leadership, really. There comes a time after election where the president said, we have to do nation building at home, the age of war is over. And people in South Korea and in Japan don't fully believe that the U.S. will be there for them. Same goes for Taiwan, and same goes for the Persian Gulf with Iran. We have let North Korea go nuclear.
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GIGOT: Right.
KAMINSKI: We're about to let Iran go nuclear, unless we do something about it. And it's not -- people don't have faith in the U.S. to show the will and leadership to stop these countries from going nuclear.
GIGOT: And once -- the lesson of North Korea, once a country does get nuclear, a rogue regime, they're hard to contain because they feel they can act with impunity, and we can do nothing about it. It's an important lesson for Iran.
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When we come back, it's time for a checkup on Obama-care. As the rollout begins for the next phase of the law, we'll get the real cost on Americans, and the added burden, like filling out a 20-page application with 60 pages of instructions.
(COMMERCIAL BREAK)
GIGOT: This week, more road blocks for ObamaCare and some of the pushback is coming from the president's own party. 79 Senators, including
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33 Democrats, agreed to repeal a new tax on medical devices contained in the health care law. It was largely a symbolic vote that, none the less, shows a growing unease with the cost of the president's health care overhaul. What is the bottom line for Americans as the October deadline approaches?
We're back with Dan Henninger and Kim Strassel. And joining the panel, editorial board member, Joe Rago.
And, Joe, I read even liberal columnists are beginning to worry about the pace of this rollout. You've been warning about it for more than a year. What's the big problem?
JOE RAGO, EDITORIAL BOARD MEMBER: All right, well, HHS with the health and human services and the White House never realized how big of a task they've taken on in trying to --
(CROSSTALK)
GIGOT: In redoing a sixth of the economy, they didn't figure that out?
RAGO: Imagine. Imagine that.
(LAUGHTER)
We're six months away from the rollout. It starts in October this have year and you're starting to see growing misgivings and panic, will the exchanges be ready, what happens to premiums and so forth.
GIGOT: Will they?
RAGO: It's going to be a really close call. HHS is running the exchanges, these alleged marketplaces where people will get subsidized insurance in 33 states. And this week, it came to light that, for small businesses, they will have a choice of one health plan in the exchanges where HHS is --
(CROSSTALK)
GIGOT: That was one of the selling points. You would be able to have a big choice, menu of plans, and now you've got vanilla, vanilla or vanilla.
RAGO: Right, any car you want as long as it's black.
(LAUGHTER)
GIGOT: The other promise we heard about was you would get lower health care costs, right? And now we've seen announcements, and they've going up for substantial number of people.
RAGO: Right. Competition is supposed to drive down cost and now we find out there won't be competition.
But on top of that, all kinds of new rules and regulations coming into place that will be driving up premiums, probably 20 to 30 percent on the average, on individuals, the small business market.
GIGOT: 20, 30 percent on average, but even more potentially for some people who are younger, I'm reading?
RAGO: Younger and healthier people in their 20's, 30's, 40's could see 100 percent premium increases, even triple what they're paying now.
You know, much richer benefits than 98 percent of the plans in the market today.
GIGOT: We're not scare-mongering. These are things that the people are talking about.
HENNINGER: When this happened in California, Paul, the people were -- premiums are going up on 1.3 people who are self-insured, about 30 percent.
They had comments from people who support the program saying, look, this is a subsidy program and somebody has to pay for it, and it has to come from somewhere. And they admitted premiums were going to be rise for some middle class people.
GIGOT: Kim, what about the political fallout? We saw the votes I talked about, that vote I talked about on medical device tax. I mean, you had Al Franken and Elizabeth Warren and some very liberal Democrats voting to repeal this thing. Is this a sign that the coalition, the Democratic support is leading the fray?
STRASSEL: Yes, I mean, these were the guys who -- some of the people were demanding a single-payer system at the time, and now they're worried to what it's doing to market competition. And that device tax was one example. We've had the HHS, recently, totally reverse itself on the decision to cut more than necessary from Medicare Advantage, part of the Medicare program where seniors used private insurers.
GIGOT: Right.
STRASSEL: It's a popular program. They would gut it of more money than the law called for until there was a bipartisan revolt of Democrats and Republicans who wrote letters, and so now they are restoring some of that funding. Why? Because seniors like it. So you have a lot of Democrats themselves who are having second thoughts on this.
GIGOT: Joe, what does this tell us about the popularity of the law overall? Has it changed? We have a poll that results recently. It doesn't look like it's any more popular now than it was when it passed, which is almost unheard of for any new entitlement?
RAGO: That's right, and the first few years are really going to be what's going to determine the fate of this law over the long-term. If you see people sort of with just huge surges in the premiums, the subsidies don't offset them, there's other much larger disruptions in the market, I think you'll see the unpopularity of the law increase. And you might have something like what you had in the late 1980's with catastrophic coverage in Medicare where they passed it and it was rolled back a year later.
GIGOT: We'll be watching.
When we come back, Stockton, California, is the largest city so far to go bankrupt. In an unprecedented move, bond insurers could be the ones picking up the tab.
(COMMERCIAL BREAK)
GIGOT: This week, a federal judge ruled that Stockton, California, is eligible for bankruptcy protection. Last year, the city became the largest in the United States to fail financially. California law says the city's biggest creditor, the state's public employee retirement system, is to be paid in full. Other creditors are fighting back, saying federal law mandates that all who are owed take a financial hit.
Dan Henninger is still with us. And he's joined by assistant editorial page editor, James Freeman; and assistant editor, Allysia Finley.
And. Allysia, you've been following this. Terrible for Stockton, obviously, but why should the rest of America be concerned?
ALLYSIA FINLEY, ASSISTANT EDITOR: It sets a precedent, first of all.
If pensions aren't cut in this case, you'll probably see other cities declare bankruptcy in order just to eliminate their rising bond liabilities while they preserve the cushy benefits for public employees.
GIGOT: So why, if federal law says everybody take a hit, what are the politics behind this of hitting the bondholders, but sparing the pensioners?
FINLEY: First of all, CalPers is a big force. They threatened Vallejo in 2008.
GIGOT: That's the California pension.
FINLEY: That's right. They threatened the Bay Area city of Vallejo and saying they would hold the city up in court for tons of money and lawsuits in order to stop them from cutting pensions. And sure enough, it's working in Stockton.
GIGOT: Because the politics -- the unions are very strong in these cities and they don't want their benefits cut, and it's easier to get the dentist in Tokyo or Peoria, who invested in the bonds, and hit them, skim them instead of skimming the people on the local payroll.
FINLEY: That's right. The unions -- of course, the unions helped elect these city council people. And in fact, a lot of these people who are in a city government are part of the unions and they're the ones who are negotiating the so-called cuts.
GIGOT: James?
JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Well, I think if you're -- you mentioned the dentist in Peoria. I think that muni bonds investors are hoping they get lawyers to fight appeal. It's a horrible precedent if you say in bankruptcy where normally creditors, including all the people with contracts, take a hit.
GIGOT: Well, municipal bonds for years, decades have fought to be some of the safest investments. If suddenly if they're thought to be at risk, then other cities to get credit will be vulnerable.
HENNINGER: They're safe because ultimately taxpayers are behind them.
GIGOT: Right.
HENNINGER: In this case are whether taxpayers can afford to pay all of this sort of thing. So I have to have some -- the bond companies were selling these bonds well after they knew that Stockton was making these sweetheart deals that Allysia has been describing. There has just been a tremendous amount of moral hazard created here. So while that doesn't solve the problem, it, nonetheless, in hindsight, makes it clear that there is no innocent party here, neither the municipal bond sellers or --
(CROSSTALK)
GIGOT: Hold it. You're telling us that you think that the bondholders deserve to take the hit because they're adults, they went in with their head up, and they should have understood the local politics in California, that the unions are so powerful and they should take it all?
HENNINGER: No, I think you have to think towards the future that you cannot continue to engage in this kind of behavior. The assumption that these muni bonds are entirely safe no longer exist. They don't, because there are going to be more Stocktons in Pennsylvania and other states, Illinois, where these cities, even larger -- once a larger city does this, this game is really going be to be in the tank.
GIGOT: What does it do to the availability -- what will this do, Allysia, of the availability credit potentially to other cities?
FINLEY: Well, it's going to increase the interest rates. How much of bad paper borrowing, and especially in California, because California's really the epicenter of this. You have Vallejo. You have San Bernardino, who also declared bankruptcy. You have Fresno, Sacramento, who are also in trouble. And they're probably going to have to be paying more to borrow.
GIGOT: Stockton, if the bondholders take the loses, Stockton will be frozen out of the bond market for a long time, I assume?
FINLEY: They should be.
(LAUGHTER)
You can't just wipe out bondholders and not expect --
FREEMAN: And also, I mean, all of these California cities, you start to wonder about them. As Allysia and others have written, this is a state where middle class people are fleeing. If you think of sort of long-term growth and the ability to fund these big debts, it's hard to see it in California. You throw on top of it this kind of ruling saying the bondholders are going to get beaten up, shall we say, in polite parlance --
(LAUGHTER)
-- while all of these union pensions untouched, it could be a very rough road.
(CROSSTALK)
FREEMAN: -- and issuing more debt.
GIGOT: Where public unions are really, really powerful, beware, lenders.
We have to take one more break. When we come back, "Hits and Misses"
of the week.
(COMMERCIAL BREAK)
GIGOT: Time now for "Hits and Misses" of the week.
Kim, first to you.
STRASSEL: A miss to the news that Simon & Schuster will be paying Hillary Clinton some untold sum for her second book, this one detailing the quote, "dramatic moments of her time as Obama's secretary of state."
(LAUGHTER)
I have to assume this will be a short book since, by all accounts, Mrs. Clinton spent her time on one big global tour without accomplishing anything. In fact, Paul, there were some of us were cynical enough to believe that the only reason she acted as secretary of state was so she could bide her time in the public eye and bolster her foreign policy credentials and further position herself to run for president, say, by writing a book about her experiences.
GIGOT: All right, Kim, thanks.
James?
FREEMAN: This is a miss to Cowboys owner, Jerry Jones, who recently gave quarterback, Tony Romo, a six-year, $108 million contract. $55 million guaranteed, which is more than the Super Bowl winning quarterback, Joe Flacco, has and more than Eli Manning has guaranteed, has won two Super Bowls. Romo has won one playoff game.
GIGOT: This is a hit for Jerry Jones for Packers fans. We want to wrap him up --
(CROSSTALK)
GIGOT: All right.
Yes, Joe?
RAGO: Paul, maybe you've been following the amazing Atlanta cheating scandal, where among dozens of public school teachers, even the superintendent, anything you could do to a cheat on a test and falsify students scores, they did. And for the union, it's not about criminal indictments but an indictment of high-stakes standards --
(CROSSTALK)
GIGOT: That's what they're saying, yes.
RAGO: Right. So this is a miss. It's like blaming the bathrobe scale for being fat.
GIGOT: All right, Joe, thanks.
Remember, if you have your own "Hit or Miss," please send it to us at jer@FOXnews.com. And follow us on Twitter at JERonFNC.
That's it for this week's show. 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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