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Tough times for congressional Democrats and for Mrs. Clinton. Plus will Harvard go tuition-free?

Monday, December 17, 2007 12:01 a.m. EST

Paul Gigot: This week on "The Journal Editorial Report," congressional crackup. They came in united and promised to get things done. So why are Democrats now in meltdown mode? Plus, primary showdown. With less than three weeks to Iowa, Barack Obama has erased Hillary Clinton's lead. How much trouble is she in, and what can she do to get out of it? And what would you pay for a Harvard education? A look at what's behind skyrocketing college costs, after these headlines.

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

When they took control of Congress in January, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid pledged to work together to push through an ambitious Democratic agenda. Now, almost a year later, Democrats appear to be in full meltdown mode, with intraparty feuds raging as unfinished work piles up.

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

Kim, I want to start with you by reading a couple headlines from the newspapers this week. One from the Washington Post: "Democrats Blaming Each Other for Failures." And from The Wall Street Journal: "Intraparty Feuds Dog Democrats, Stall Congress." What is going on?

Strassel: I don't know, I think this is going to end up as some future government course under the title "How You Blow Your First Year 101." I mean, this is really bad.

What is remarkable is how far they have fallen. Just last year, they ran a really smart race. They won both Houses of Congress. They had this chance to come in. They promised that they were going to work with the other side and get stuff done. Instead, what they have done is, in every opportunity they've crafted legislation that caters to their most liberal base. And it means it hasn't had a shot of passing the Senate or of overcoming a presidential veto. And the most remarkable example of this is the war. Republicans were very un-united on this when the Democrats took over. There was an opportunity for Democrats to divide them.

Gigot: A lot of them had real doubts about the war. And yet--how many votes have they had, about 60-some votes? Sixty-three votes?

Strassel: Sixty-three, only one of which has passed. The rest were done for show, and it wasted a lot of time. None of it was designed to pass, and it's left them with nothing to their name at the end of the year.

Gigot: All right, this is a list of things that haven't gotten done, John: the 2008 federal budget, even though we're into the budget year; the farm bill; the energy bill; the alternative minimum tax patch for 2007--that hasn't passed, even though tax returns are going to be starting to file in January. The health care legislation, funding for the troops, the wiretap bill. What's the root cause of this?

Fund: The Democrats promised a policy Congress. Instead they've delivered a press-release Congress. I think Nancy Pelosi has a lot of the blame here, and so does Harry Reid. They both came in with enormous expectations on the part of their liberal base. They catered to those, as Kim said. And in Nancy Pelosi's case, she surrounded herself with a clique of close-minded allies, and she shut out the moderate Democrats completely on the energy bill and various other things. So her caucus has been increasingly leaning towards the left, which makes it easier to unite the Republicans in opposition.

Gigot: Yeah, but I think if you talk to--I mean, the Democrats would say, Look, this isn't our fault. This is the president; he's vetoing it. And those obstructionists in the Senate, the Republican--Republicans had 49 votes, and they can block something because we need 60 to get something done. So don't they have a point there?

Henninger: They have a point. They've made the point. But I think it's an increasingly weak one. I mean, you can only run at the war so many times and fail with those votes when you control Congress.

We talked a little bit here about the liberal base. I think we have to understand, it's not as though they just are trying to please some people out there in the country. The left wing blogosphere has had a material, direct effect on the way Democrats run their elections.

Gigot: Driving the agenda.

Henninger: Well, not only drive the agenda, but they have--in the last election, for instance, they put up candidates in the primaries that were not the Democratic Party's central pick, and their primary candidates won. So the candidates in Congress are very aware of the fact that, A, those people can run against them, B, raise money against them and hammer them in their own districts. They're quite intimidated by the blogosphere.

Gigot: Steve, let me ask you about the alternative minimum tax debate because this thing would cover--if they don't fix it, it would likely cover 22 million more Americans this year--that is, 2007--many of them middle-class, and most of them in high-tax, liberal Democratic states with Democratic senators. Don't they have a self-interest in getting this done so that they aren't accused of allowing a tax increase to take place?

Moore: Yeah this is the real central fiasco. It's at the center of the dispute among Democrats. On the one hand, they don't want to tax 22 million middle-class people in their first year of taking control of Congress, but it gets to another point. You talked about the influence of liberal blogs. Don't forget you've got another influence on the Democratic Party, which is the people who fund the party, and that tends to be Wall Street, corporate America. And they re pushing Democrats in this other direction. And so they're saying No, don't tax us to pay for the alternative minimum tax.

I think the Democrats are going to face a very big problem if they don't get this fixed next year, and the average American--let's say with about $75,000 of income, with a couple of kids--is going to face a $2,000 or $3,000 tax increase.

Gigot: Steve, what about the pay-as-you-go promise the Democrats made, which is that if they were going to cut taxes at all--which this alternative minimum tax would be technically a tax cut--they said, We're going to pay for that with either tax increases or spending cuts. Is that promise going by the boards?

Moore: Yeah, this is where Nancy Pelosi and Harry Reid really look like Laurel and Hardy. This is one of their primary promises, Paul, on the budget was they were going to pay for it, we were going to have balanced budgets again. And the first major tax bill that comes along, they can't find a way to pay for it.

Gigot: All right, so how in the world, Kim, do they get out of this? Can they regroup, kind of pass one or two things this year maybe, get out of town, regroup, come back in January and unite with a common agenda? You think that's still possible?

Strassel: Well, it's not going to happen this year, although they are learning some lessons. Interestingly, late this week, the Senate actually passed an energy bill. It was an energy bill they had agreed on with Republicans and with the White House. They'd done it the week before, but they they'd wasted a week having ridiculous votes on it that they knew weren't going to pass.

They do know how to get stuff done if they're willing to sort of swallow their pride and again not cater to the liberals in their party. The question is whether or not they're going to do it next year when we're in an election and when there's going to be even more pressure for them to sort of stand and define themselves as Democrats.

Gigot: All right, very briefly, John.

Fund: The Democratic Party's going to be defined by the nominee. If the nominee is Hillary Clinton, normally that would be a unifying force, but she's such a polarizing figure, it may make the Democratic Party's problem in image even worse.

Gigot: All right, hold that thought. We'll be back on that.

When we come back, it's been a good couple of weeks for Barack Obama. With Iowa less than a month away, can Hillary Clinton regain momentum? Our panel debates when "The Journal Editorial Report" continues.

Gigot: Welcome back. With Iowa and New Hampshire less than a month away, Hillary Clinton's once-commanding lead over Barack Obama has all but evaporated, leaving the former front-runner scrambling to regain momentum.

We're back with Dan Henninger, John Fund, Kim Strassel and Steve Moore. And also joining the panel, deputy taste page editor Naomi Schaefer Riley.

John, you have been predicting, as have I, that Hillary Clinton will win the nomination. What accounts for her recent stumbles? How serious are they?

Fund: I think she's going to have to really fight for the nomination now. She's run a safe, incumbent-oriented, uninspiring campaign. She's also made some stumbles, and as voters come closer and closer to having to decide the nominee, a lot of them are saying, Is she really the most electable candidate? Some of them are pulling back, thinking maybe not.

Gigot: Oh really? So maybe Obama is the most electable candidate, Dan? Do you hear that a lot?

Henninger: No, you don't hear that a lot. If he wins in Iowa, believe you me, you're going to be hearing it a lot. But you had this amazing incident of the Clinton campaign, one of their campaign people, putting out the idea that because Obama used marijuana when he was 21, this was going to come up, and this was regarded as a smear. Now, negative campaigning is always part of politics, but you know what? That's kind of been taken off the table, right, for the Clinton camp. So they've got to go at him on the basis of comparisons, and I think that's very difficult, because the two of them basically agree on everything.

Gigot: Kim, one of the things that surprises me here is the ham-handedness of the Clinton campaign when they have tried to attack Obama. You had what Dan mentioned as one episode. Then you had the other one, they went back, the opposition research, and found a kindergarten essay where Obama had said he wanted to be president, as if Bill and Hillary haven't wanted to be president from the womb. What accounts for that ham-handedness?

Strassel: This is really dangerous territory. And it's kind of surprising that Hillary would do this, too. One of the reasons she has done as well as she has, I think, is because she has managed, kind of remarkably, to keep this entire campaign about the "new Hillary": the person who went to become the senator, the new collegial Hillary who works with Republicans and wants to get things done.

When she goes out and does these sort of ruthless attacks, or these sort of silly attacks, it reminds a lot of voters out there about the Hillary who was first lady and the one who is ambitious, who will mow over anyone who gets in her way. And that makes people wonder if they really want to go back to that period in time. It's not good for her.

Gigot: Naomi, Barack Obama has a big new ally on the campaign trail, Oprah Winfrey. Never done this before. Who is Obama trying to reach with that pairing?

Riley: It's exactly the people Hillary wants to reach--Hillary's base, middle-aged women who watch Oprah. And it's amazing to watch. First of all, Oprah's message so conforms with Obama's message--this message of hope and, you know, a new future.

Gigot: Postpartisanship.

Riley: Yes, exactly, and a new tomorrow. But on the other hand, you see Oprah sort of breaking out in a way. She's now talking about how Obama is the first person--was the first person to be against the war in Iraq. You never hear Oprah talk about things like that. She's only been, up until this point, a kind of we-have-to-support-the-troops kind of woman. And now, to hear her talking in this partisan way. I'm curious about how it's going to go over with her audience and Barack's fans.

Gigot: I wonder. Obama's message as the agent of change--it may be better for the moment. It may fit the political moment and the political public mood better than Hillary.

Fund: This is why campaigning as an incumbent is hurting Hillary. Seventy percent of the country thinks we're moving in the wrong direction, and they want change. Hillary says she is change, but she looks like something out of the past. And in fact, the more that Bill hangs around and constantly is recorded as saying he's going to second-guess Hillary's campaign and fix it, the more people are reminded they're bringing back the Clintons, they're not bringing change.

Gigot: But wait a minute. I thought Bill Clinton was supposed to be an asset, because the two of them had experience, she'd been in the White House with him, he'd be there to counsel. This was part of the campaign theme. This was her raison d'être.

Fund: He is an asset if he stays in the background. But he's incapable of doing that. Like a moth to the flame, he has to go and be public.

Gigot: Dan, is there a Plan B here for Hillary? Can they regroup, come back and refocus?

Henninger: They can, but you know, Paul, it's a crucial moment. If Obama wins in Iowa, it would be a huge--I think it would be similar to when Gene McCarthy almost beat LBJ in new Hampshire in 1968. It was interpreted basically as victory over an incumbent president. I think it'll be very hard for Hillary to overcome it if Obama does that. The dam will burst.

Gigot: I thought Obama had to win Iowa. Certainly he has to win Iowa. And then he also has to go on and win in new Hampshire. And then you've got South Carolina, where the African-American vote will be, what, 50% of the primary vote?

Fund: Close.

Gigot: Close--Democratic primary vote. So I think--doesn't he have to sweep the field?

Fund: Hillary has so much money, so much momentum, so many endorsements, I think that he would literally have to do that plus more, because, remember, Hillary and Bill are ruthless fighters. They know how to destroy their opponents. They don't want to have to flatten Obama, but they will if necessary.

Gigot: So she's got enormous resources in reserve--Kim, does she?--to be able to fight this all the way to the end. And as John said, they're not known for giving up easily, the Clintons. So you would expect that if Obama wins the early states, this is going to be a fight to the finish, all the way.

Strassel: I think you're going to have this in both races. It looks as though we're going to be going all the way up, at least until Feb. 5 before we maybe know who a nominee is in either party.

Gigot: All right, so, John Edwards--just very quickly, Dan--he's still out there. He's hoping to pull up--win in Iowa, an upset. Does he have a shot?

Henninger: I think he has a long outside shot if the two of them sort of destroy each other this way, it's a very dangerous moment. And Edwards is an experienced campaigner. I think if he plays his cards right, he may survive Iowa.

Gigot: So he has to run up the middle, basically, if the other two decide to--

Henninger: He's got to stay away from the mud.

Strassel: One thing he's doing, though, is he's sort of highlighting how little policy that there has been discussed between Hillary and Obama. I mean, you might not agree with his policy--this is this guy who's out there and trying to run on the strength not just of his personality, which is strong, but also a lot of very strong policy points. And it has underlined that this has been mostly about personality in terms of the frontrunners.

Gigot: Yeah, national health care and union antitrade pacts.

OK, Kim, thank you.

Still ahead, Harvard unveils a new plan to makes its Ivy League education more affordable. But why does college cost so much in the first place? Our panel has some answers, after the break.

Gigot: Harvard University announced this week that it would expand aid to students from families making up to $180,000 a year, eliminating the need for many of them to borrow money for college. Administrators there say the new policy will place the cost of a Harvard education on par with major state-run universities.

Naomi, you went to Harvard. We try not to hold that against you. But why did Harvard make this decision?

Riley: I think it's a nice decision. We should applaud it. But really, they made it because they had their backs up against a wall. In September, Sen. Chuck Grassley was holding hearings to see whether colleges should be required to spend a higher percentage of their endowments. Right now, Harvard has a $35 billion endowment.

Gigot: Astonishing.

Riley: It is astonishing, absolutely. And it grew $5.7 billion just last year. And they're not required to spend any of that. Private foundations are required to spend about 5% of their endowments, but universities, which are, of course, tax exempt, typically spend about 3% to 4% of it.

Gigot: So they're figuring their back is to the wall, they've got to start spending like this and start offering some benefit to students. Otherwise, the politicians will force them to. That's the calculation.

Riley: Right. So they poured a measly $22 million into this little plan of theirs, where if you make less than $180,000, you only pay 10% of your income. So it's nice, but clearly they knew that they had to do something quickly; otherwise Congress was going to intervene.

Henninger: And since it's only costing them $22 million, some have pointed out they could actually let most of these people go to their college for free. It wouldn't be that expensive.

And we mentioned the endowments. The economics of these colleges is changing. That's not just from alumni contributions. Mainly it's from stock-market investments. They've become very shrewd--not just Harvard, but a lot of other schools--at investing their money. And it is allowing them, in some sense, to kind of pull away from the alumni and the rest, because they just basically get all of this money out of the stock market, and then they have to figure out what to do with it. The economics of colleges--it's being rewritten.

Gigot: Steve, a lot of--the complaint I hear often from Americans is that the middle class in college is squeezed, because if you're rich, of course, you can't afford it, and if you're poor, you end getting up some kind of grant or aid, but the middle class can't afford these. So what Harvard is doing, and which other schools may have to follow is some way, is actually going to help middle-class parents.

Moore: Yeah, but it shouldn't be that way. I don't know, Naomi, what it cost for you to go to Harvard when you went there, but now it's up at like $46,000 a year. These tuitions are just outrageous, Paul. I mean, we're seeing a doubling of tuition costs in the last 10 years. And when you think about it, education and college, it's an information industry. It's a technology industry. Costs should be falling; they shouldn't be rising.

And I think one of the problems here is it's very much like the problem in health care, where the people who are getting the service aren't the ones who pay for it, and that's what is causing this incredible inflation in college costs that are putting it out of the reach of many middle-class families. When you talk about a family with $180,000 income that can't afford to send their kids to Harvard, tuitions are out of control.

Gigot: Hey Steve, but we don't want price controls, do we, Naomi?

Riley: No.

Moore: Not at all. We want the free market here.

Riley: We definitely don't want price controls. The other thing, which is interesting to point out, is that we say there's a $46,000 price tag on this college education. But really, I mean, it's like airlines. Everybody has a different price tag. They ask you what your income is, and then they'll tell you how much you can pay. If that happened in any other industry, you'd call it price discrimination.

Gigot: But people are still willing to pay it, because if you look at the long-term career earnings of somebody who goes to college versus somebody who has a high school diploma, they're roughly about twice more. And growing--the gap is growing.

Riley: That's absolutely true. There is an argument that a college education is still worth it.

Gigot: It's worth it--even a Harvard education.

Riley: Even a Harvard education is still worth it. But I think in the free market, people would pay for that.

Henninger: One of the things we have to understand is that a lot of these institutions are huge corporations now. They employ thousands of people, and they need a lot of money to do that. It's not just students anymore.

Gigot: All right, Steve, sorry, we've got to go.

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

Gigot: Winners and losers, picks and pans, "Hits and Misses." It's our way of calling attention to the best and the worst of the week.

Item one, a hit for the FISA court. FISA court, Dan, what is that?

Henninger: That's the most secret court in America. And a big thumbs-up hit for the Foreign Intelligence Surveillance Court, the wiretap court. In August, the ACLU asked them to turn over all the legal documents and data behind the Bush warrantless wiretap program.

Gigot: For al Qaeda suspects.

Henninger: For al Qaeda suspects and such. And the court not only ruled again ACLU, but they issued a public opinion, which they almost never do. And District Court Judge John Bates said releasing this information would severely compromise the U.S. war on terror. And he went further than that. He said, "All these possible harms are real and significant and quite frankly beyond debate." So a big thumbs up for Judge Bates for bringing some common sense to tapping terrorists.

Gigot: All right, Dan, thanks.

Next, a hit to millions of homeowners out there. Naomi, this is supposed to be a horrible season for homeowners. What do you have?

Riley: I would like to give a hit to the tens of millions of American homeowners out there who are actually paying their mortgages. Because, let's face it, if I don't give them a hit--I mean, the federal government isn't giving them anything, apparently. As was recently announced, the lenders and George Bush have reached a little compromise here, where about 145,000 homeowners are going to get bailed out of mortgages that they can't afford. They're going to pay lower interest rates, or interest rates are going to be frozen.

You would think the entire American economy rests on the back of about 100,000 homeowners. It's amazing. But really, there are plenty of responsible people out there who got into mortgages that they can afford. They're making their monthly payments. They're giving up some other things in order to do it. But that's life, and we sign our mortgages and we have to live with them.

Gigot: All right, Naomi, thanks.

Finally, some celebrities who actually make sense. Steve?

Moore: Paul, I don't normally get my news from the TV show "The View," and I don't normally get it from people like Rosie O'Donnell. But last week, on the show "The View," Whoopi Goldberg had something interesting to say about taxes. She says we should eliminate the death tax. She said it's not fair to tax people when they die, that it's a double tax. She got a rousing ovation from the middle-class audience. And so for this, Whoopi, I want to induct you into the supply-side economics hall of fame. I just wish more members of Congress had the common sense of Whoopi Goldberg.

Gigot: Steve, is the estate tax going to be repealed this Congress, do you think?

Moore: There's going to be a big push by the Republicans. In 2010, it goes away. In 2011, back up to 55%.

Gigot: All right, Steve, thanks. 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, and we hope to see you right here next week.