'The Journal Editorial Report,' November 8, 2008

This is a rush transcript from "The Journal Editorial Report," November 8, 2008. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: Coming up next on the "Journal Editorial Report," Barack Obama's win, a historic night for the nation and a huge night for Democrats. But was it a mandate? If so, for what?

He has beaten McCain, now comes the hard part. Will president Obama be able to keep congressional Democrats in line?

Plus, the future of the GOP amid the Republican recriminations. We will look at ideas and leaders that could shape the conservative movement in the years ahead.

The "Journal Editorial Report" begins right now.

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

With Tuesday's historic win by Barack Obama and big Democratic gains in both the House and the Senate, the voters have spoken. What exactly did they say? The 2008 election was a repudiation of Republican economic management, but my guest this week says it would be a mistake for Democrats to read too much into their mandate.

Democratic pollster Doug Schoen joins me.

Doug, good to have you hear.

DOUG SCHOEN, DEMOCRATIC POLLSTER: Thanks for having me.

GIGOT: Democrats have their biggest majorities now on Capital Hill since 1976 or 7, I think your argument is this is not a mandate for a sweeping Democratic agenda, why not?

SCHOEN: Certainly, not a left-wing Democratic agenda. There was a swing in the polls to the Democrats. But it wasn't ideological. The biggest gain Democrats made were among moderates and conservatives. And that says to me, people want change that goes slowly. Voters were divided on whether they wanted government to do more or less. And there's a strong bipartisan streak in the electorate that says let's get moving, let's get government going, let's bring people together and produce real results, domestically and internationally.

GIGOT: Would you agree that the No. 1 reason that Barack Obama won was the economy?

SCHOEN: Absolutely. I think that people judged George Bush's performance and that of his administration harshly. They felt the economic crisis is largely his fault, that the unemployment numbers, which we've seen today, steadily going up, reflect a weakening economy that could be in recession and held him accountable.

GIGOT: You wrote in the Journal, Obama and the Democrats seem to govern from the center and work for a bipartisan consensus? What does that mean tangibly in practice?

SCHOEN: First, it means we have a national sense of purpose. We have a set of goals internationally about how we are going to handle the hot wars in Iraq and Afghanistan. What our common purpose is that we're going to fight global terror together. And that we're going to fashion a series of domestic initiatives on unemployment, economics stimulus, on helping beleaguered homeowners with mortgages in a way that all Americans can agree reflect gels that unite Democrats and Republicans, liberals and conservatives to try to get America moving again.

GIGOT: Let's take the economic issue.

SCHOEN: Sure.

GIGOT: If you are going to get that consensus, you have to take a tax increase often table. You are not going to get Republicans to vote for a tax increase.

SCHOEN: I've argued for that and I've suggested that.

GIGOT: For taking that off the table?

SCHOEN: Yeah, I've said, at this point, Paul, at the very least, to raise taxes on capital gains and dividends. When we are heading for recession we need to stimulate investment. That I think is a mistake. Senator Schumer, from here in New York, hardly a centrist, has made it clear that the Obama policies are a starting point and only a starting point for negotiations. Let's hope we are able to fashion an economic stimulus plan and tax package that doesn't involve taxing those most important for investment.

GIGOT: I don't know how that is going over on Capitol Hill. Let's say you are at the AFL-CIO, John Sweeney, the head of that union organization, and think we spent tens of millions elect Democrats. We want pay some back. We want some reward for our effort. And that includes this ban on secret ballots, card check, that would unite the business community in opposition to — if Barack Obama did that, went out of the box — to one of his first initiatives. How do you — if you are in the White House, what do you say to John Sweeney who says I want something back for what did for you?

SCHOEN: I would say Mr. Sweeney is, Mr. Sweeney, we are in an economic crisis now. What your members need more than card check is help with their mortgages, unemployment insurance, home heating oil this winter and aid to cities and states that are having trouble balancing their budgets. That's far more meaningful than special interest legislation that will arguably benefit union leadership.

GIGOT: Put that off a couple years. We'll see what we can do on other things?

SCHOEN: Absolutely.

GIGOT: We'll put it off for later.

SCHOEN: Absolutely. Bill Clinton got distracted by gay marriage early on in his administration. Again, putting aside the permits of that, I think he felt that undermined his ability to get things done. I think if Barack Obama went forward with card check, it would similarly hurt his ability to forge the consensus we need.

GIGOT: Already. We are getting the president-elect Obama making his first appointments, Rahm Emanuel, a member of Congress from Chicago, veteran of the Clinton administration, as his chief of staff. What do you think of that pick?

SCHOEN: I think there are clear pluses and questions. The pluses are Rahm is hard charging guy. He's a centrist.

GIGOT: Sharp elbows, though.

SCHOEN: He does. That's the part of the equation that is problematic. The sharp elbows will probably help get the agenda passed and initiated, but you worried feathers will be ruffled, that the bipartisanship we need will not be as easy to come by.

But, look, Rahm's grown up. He has been around. He's been a member of the Congress. He's bee in the business community. let's hope he's able to emphasize his strengths.

GIGOT: On Capital Hill, there's some movement. Harry Reid thinking of bouncing Lieberman, who supported John McCain, from the senate caucus, Democratic caucus. Henry Waxman, the liberal from Hollywood, is challenging John Dingle, a Michigan moderate, for chairman of an important committee. What kind of signals are these sending to the electorate about how Democrats on Capital Hill will govern?

SCHOEN: One of the real problems Democrats traditionally have when they have big majorities is keeping their ranks united. The question of Dingle versus Waxman, which reflects the internal House politics, is something that I don't think resonates with the larger electorate, but is a giant distraction at the start.

The question of Joe Lieberman is, does Senator Lieberman want to be part of the Democratic caucus? Does he feel comfortable enough working with the Democrats? Are the Democrats willing to tolerate his divergence on foreign policy, which has become wider and wider? Those are open questions that will get resolved in weeks to come.

GIGOT: All right, Doug Schoen, thanks so much for being here.

SCHOEN: Paul, thank you.

GIGOT: Still ahead, he has beat the Republicans. How can he beat the Democrats? A look at the challenges facing the new president from liberal interest groups and members of his own party, when we come back.

(COMMERCIAL BREAK)

GIGOT: He's beaten John McCain. Now comes the harder part for Barack Obama: Reining in Democrats on Capitol Hill. They've hamstrung the last two Democratic presidents. With bigger majorities next year, they could be out to do it again.

Joining the panel this week, "Wall Street Journal" columnist and deputy editor Dan Henninger, opinionjournal.com columnist John Fund, and editorial board member Steve Moore.

Dan, you heard Doug Schoen. He recommends that the Democrats govern by consensus and bipartisanship. Is that something Nancy Pelosi has in mind on Capitol Hill?

DAN HENNINGER, COLUMINST & DEPUTY EDITOR: I doubt she has it in mind. I'm not sure it matters much, Paul. We just saw that...

GIGOT: Really?

HENNINGER: Yes. Well, I mean...

GIGOT: This I've got to hear.

HENNINGER: Well, the emphasis is going to be on the presidency and in fact the treasury, I think, for at least the next six or nine months. We saw these job losses that were this week 240,000 jobs in October. We are heading into not just a recession, but a global recession. The economies of Europe and Asia are all tied into the problems that the United States is having. It will be very difficult to raise taxes in a situation like that but all of the emphasis I think of the early part of this term is going to be on reviving the global economy, which means things like trade protectionism are going to go off the table.

The best thing Obama could do now is allow that Colombia Free Trade Agreement to go through because it would send a signal to the rest of the world that his administration intends to get the global economy back up and running.

GIGOT: So, Steve Moore, the recession could be a political benefit for Barack Obama by giving him a heat shield against some of the demands of Democratic members on Capitol Hill and interest groups, do you agree with that?

STEVE MOORE, EDITORIAL BOARD MEMBER: Good luck to him in that regard. Jimmy Carter wasn't able to do it, neither was Bill Clinton. In Barack Obama, I think the Democrats have found potentially the Democratic Ronald Reagan. This guy is an incredible superstar, a once in a generation politician. I have two sisters who were out at Grant Park Tuesday night saying it was one of the best nights of their life. I have two liberal sisters. But the point is...

GIGOT: Steve, your powers of persuasion must not be good.

MOORE: Exactly. I think the problem Barack Obama and Democrats have, one interesting exit poll, only two out of 10 voters, Paul, identify themselves as liberals. Most Americans are either moderates or conservatives, which suggests, if Obama wants to be successful, he has to govern from the center.

GIGOT: Who are these interest groups and members on Capitol Hill, John, who are going to pose such problems? One is Henry Waxman, who is challenging Dingle, a moderate Democrat, moderately liberal Democrat, to run the Energy and Commerce Committee, that Pete Stark, who wants national health care, thought Hillary care was too moderate. who are the rest of them?

JOHN FUND, OPINIONJOURNAL.COM COLUMNIST: I think the special interests can be divided into two camps, those who will be patient, like the environmental community recognizing that you can't talk about global warming solutions in the middle of a recession, and those groups that are going to be impatient, the anti-war movement with regard to Iraq and the labor unions.

GIGOT: They will be impatient?

FUND: I think the labor unions are gong to insist on a vote on card check, which is illuminating the secret ballot, freeing elections, almost immediately. And the anti-war movement will be ankle biting Barack Obama from day one.

GIGOT: What about the Clinton and Carter experiences? Are there lessons on how to govern?

FUND: Yes. Both Jimmy Carter and Bill Clinton arrived in Washington with huge Democratic majorities on Capitol Hill, but they allowed the congressional leadership to steal some after the agenda and steer them into more left wing areas, and ultimately cost them in their popularity.

One of the reasons Barack Obama has picked Rahm Emanuel is he found a guy who can say no to the Democratic leadership because he used to be one.

GIGOT: Dan, I like this pick of Rahm Emanuel. He's a rough partisan, no question. You hear a lot of Republicans objecting, saying he's one who helped get the Democratic majority in 2006. But that's politics. Partisanship is part of that. I think his sharp elbows will be aimed at a lot of Democrats and interest groups on capital hill, saying sorry, we can't do this.

HENNINGER: Yes, but that could create tension inside the Democratic Party, Paul. Look, the Democratic left, which supported Obama from the beginning and contributed a lot of money to get him through those expensive primaries.

GIGOT: No question. He's against Hillary Clinton from the left with the support in particular of unions.

HENNINGER: You can't imagine those people are going to say, oh, yeah, we have a recession, we have to go away for two years and just sort of cool it. They are not going to do that. They finally have a clear shot at getting where they want to go. I think you can see real tension between a president and his chief of staff, who have to govern, and a left, who thinks their moment has arrived.

GIGOT: Steve, what's...

MOORE: Dan, when you think about...

GIGOT: Go ahead.

MOORE: Dan, when you think about what liberals want to do more than anything else, Paul, it is spend money. They are in a bit of a box for two reasons. One is that Barack Obama's most enduring campaign promise was that middle class tax cut, remember, to 95 percent of Americans. I think he has to deliver on that. But the problem is, where do they get the money for all the spending they want on the environment, education, infrastructure, aid to states. I think that's the big box. Where is the money going to come from or are they going to have the budget deficit go through the roof?

GIGOT: Maybe the answer is the budget deficit goes through the roof.

All right, still ahead, just how much trouble is the Republican Party in? And how does it come back? Recriminations and the future of the GOP, after the break.

(COMMERCIAL BREAK)

GIGOT: Well, it is all over but the recriminations. After big losses, Republicans are looking what went wrong and pondering the path forward.

Steve, you have been talking to a lot of Republicans. what do you hear them saying about what they need to do to get back in the game?

MOORE: Well, they are all over the map right now, Paul. There's no Newt Gingrich right now as we had in 1992 to sort of unite the Republicans around a common agenda. You are starting to see some conservatives rise up. It looks like Mike Pence of Indiana, will be the conference chairman in the House of Representatives. But there's no clear choice for presidential nominee in 2012. I think the party is in a bit of disarray. There's a big question, whether they play tough defense against what Barack Obama wants to do, or do they buy into this press idea that we are in a post-partisan world now, and we all get along.

GIGOT: One of the exit poll numbers that jumped out at me, John, was 51 percent of the public was saying, for the first time I've seen in a while, that they would accept more activists, bigger government. And that's clearly driven by the economy. doesn't that make life more difficult for Republicans?

FUND: Yes. Frankly, it's in part, driven by the Bush administration as he leaves office with massive spending programs for the massive bailout. I think the Republican Party has a time for choosing, as Ronald Reagan put it. Are you going to return to your small government route roots or are you going to accommodate yourself to more populous, perhaps a bigger-spending Republican Party? Not a me-too party for the Democrats, but perhaps different spending.

GIGOT: The Republicans tried that latter for 20, 30 years last century and it kept them in a more or less permanent minority, until they finally decided to offer an alternative with Ronald Reagan. I think it was Barry Goldwater called it the dime-store new deal.

FUND: Right. Well, if Obama raises taxes — if Obama has massive spending programs, if Obama pursues a left wing agenda and that doesn't work, that's a perfect opportunity for Republicans to return to their roots and say the Bush administration was an aberration. We lost our way. Now we are back and we've discovered the principles that animated our party and got us Ronald Reagan.

GIGOT: Dan, one of the things I think Republicans need is a voice who can explain Republican economic ideas, free market ideas in a way that the average person understands. John McCain had a lot of good proposals. He just couldn't explain any of them. George Bush obviously couldn't explain them very well either. He was all over the map in a lot of his economic proposals. Where is that economic voice going to come from?

HENNINGER: It probably should come from somewhere in the Congress and the House of representatives perhaps. I mean, one of the things that I think appalled the public during this financial crisis was how poorly the elected politicians were able to talk about it and address it, as though they didn't understand it. They didn't have to be able to understand they way investment bankers do, but they should have been able to talk about it.

Like Eric Cantor of Virginia, who is probably going to replace Roy Blunt as whip, intelligent young fellow; Paul Ryan of Wisconsin, who truly does understands economics, they need somebody to act as like in the British system, a shadow cabinet, a shadow treasury, who can articulate a Republican point of view.

FUND: There are also people outside of the Beltway, Bobby Jindal, the governor of Louisiana. Mitch Daniels, the governor of Indiana used to be Bush's budget chief and frankly left because of the overspending.

HENNINGER: Paul, we need a way to elevate individuals like that. They get no publicity in the off years. No one knows who they are. And that's a big problem for a Pawlenty or Sanford or even a Jeb Bush.

FUND: Another good voice would be Rob Portman, former budget chief.

MOORE: You know, the one thing that I hear more and more from conservatives as I talk to them around the country after this election is they say they want Republicans to be the small-government party again, Paul. I think the reason Republicans have gotten their clocks cleaned now in two straight elections, '06 and '08, is a lot of conservatives felt like the Republicans acted like the big-spending Democrats, with the bridge to nowhere and projects like that.

GIGOT: I want to ask about Sarah Palin, John, because we read this week about how members of the McCain campaign staff are leaking gossip and nasty asides about the way she behaved in the campaign. What is going on here? Does she have a political future within the GOP?

FUND: Yes, but it is appalling what they did with Sarah Palin. She was a diamond in the rough and they basically tried to smash her. They mishandled her completely and now they're — because she is leaving the national stage and going back to Alaska. They are engaging in all kinds of petty gossip.

GIGOT: Is this because she was a diva or is this just trying to shifting the blame to her for their defeat?

FUND: Staffers in Washington want the next job, so obviously it can't be their fault if the campaign loss. So they're going to try to blame it on someone in Juneau, Alaska, who can't touch them.

GIGOT: I will say this about Sarah Palin though. She does — if she's going to have a national future, she has to get up to speed on a lot of these national foreign policy and economic issues because she wasn't ready to handle those kinds of questions.

FUND: If she had been talked about more by the McCain campaign as a potential nominee, she probably would have done that. But she was a surprise pick and that did not serve her well.

GIGOT: I agree with that.

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

(COMMERCIAL BREAK)

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

Item one, Russia's president welcomes Barack Obama, so to speak — Dan?

HENNINGER: Yes. The president brought to mind Joe Biden. Remember him? This week we are introducing the Joe Biden prophet watch.

(LAUGHTER)

HENINGER: It was Joe Biden who prophesized, "Mark my words, it will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking."

Well, within one day, the president of Russia steps forward, Dmitri Medvedev, and announces in a speech that he's going to place missiles on the border with Poland to counteract the anti-missile system we are planning to put in Poland and the Czech Republic. This is a clear test. He's throwing down the gauntlet to Obama.

What Barack Obama should do is say, right now that he does not plan — and publicly and explicitly — will not be intimidated by actions like this. Otherwise, we are going to be on the Biden prophet watch for weeks and weeks and weeks.

GIGOT: All right, Dan, thanks.

Next, the rebirth of term limits — Steve?

MOORE: Paul, six months ago, Michael Bloomberg, New York City mayor, said he was going to violate the city's term limits law and run for reelection. The left celebrated this and said it was the end of term limits in America.

Not quite. On Election Day, voters from states, ranging from Pennsylvania to California to Tennessee, all voted very strongly for term limits. There was an 83 percent approval rating for term limits all over the country.

It used to be said that term limits would lead to a mediocre Congress. I think most Americans think that mediocrity would be an improvement.

GIGOT: Steve, we should say that the city council in New York did overturn that term limits law. So Bloomberg didn't violate it.

All right, finally, John, remembering Michael Crichton.

FUND: Known as an author of thrillers, like the "Andromeda Strain" and "Jurassic Park," Michael Crichton was also a political scientist. He literally changed how people thought about global warming with his novel "State of Fear." One of the great points he made was government science funding has warped scientific views in many cases. He advocated the separation of science from politics where the scientists wouldn't even know the funders of their work.

GIGOT: All right, John, thanks. That will be a loss.

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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