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The War on Wal-Mart

The Journal Editorial Report

Paul Gigot: This week on "The Journal Editorial Report," Republican prospects in the midterm elections. Could anti-incumbent sentiment cost the GOP the majority? An in-depth look at races that could make or break their chances of holding onto the Senate. Plus, the war against Wal-Mart. Top Democrats take aim at the retail giant, hoping to score points with middle-class voters. Will it work? Those topics and our weekly "Hits and Misses." But first, these headlines.

Gigot: Welcome to "The Journal Editorial Report." I'm Paul Gigot. With recent polls showing a strong anti-incumbent sentiment among voters, Republicans, who control both houses of Congress, stand to lose the most come November's midterm elections. Ten weeks out, can the party stem a potentially devastating electoral tide? Ken Mehlman is chairman of the Republican National Committee. He joins me now from Washington.

Welcome to the program. Thanks for being here.

Mehlman: Thanks for having me. Appreciate it.

Gigot: This week, the Republican governor of Alaska finished third in a primary with only 19% of the vote. Nineteen percent for an incumbent is almost unheard of. Are we watching a big anti-incumbent tide form between now and November?

Mehlman: Well, Paul, I think every election is going to be different. It's going to be a choice between the candidates on the ballot. I do think that all over the country a lot of voters want change, and they want to see changes in policy. The question is, what kind of change do they want? I don't think most voters believe that their taxes ought to increase a lot, and I don't think they believe we ought to eliminate tools that are keeping us safe and weaken America on the war on terror. And unfortunately, that is what many of the Democrats are offering. I don't think Americans are going to go there.

Gigot: Well, Republicans ran in 2004 promising to do certain things, and they've controlled the government since that time. They promised to reform Social Security--didn't happen; promised to make the tax cuts permanent--didn't happen; talked about tax reform and health reform--didn't happen. What kind of a record are you going to bring to the voters this year to say, Look, we deserve re-election because we've done something the last two years?

Mehlman: Well, as I said, I think every election will be a choice based on what's on the ballot. Here's what I think Republicans will be able to go and say. They'll be able to go and say we reauthorized the Patriot Act, which is critical to defending America and has helped make sure there hasn't been another attack on the country, even though the Democrats tried to block us and kill the Patriot Act. They'll be able to say we passed tax cuts again this year--the fifth year in a row we've had tax cuts signed into law--even though the Democrats opposed us. They'll be able to say we've put forward outstanding nominees, like Sam Alito and John Roberts, on the court, even though many Democrats believe that we ought to have a litmus test against people who want to interpret the law on the court. We'll be able to say, for the first time in a generation, we've passed tort reform and a comprehensive energy strategy, even though Democrats oppose it. We'll be able to say that Americans no longer will have to choose between prescription drugs and food for their families or for electricity bills, even though Democrats opposed that too.

And we'll able to say fundamentally--each election being different--there's a national choice. And the choice is, Do you believe that critical tools, like the Patriot Act, like the surveillance program, like missile defense--all those tools that are keeping us safe as we face a global war against an Islamic fascist enemy--should we weaken those tools? Should we eliminate those tools? That would make Americans less safe, and unfortunately, that's what Nancy Pelosi and Harry Reid will give us if they're in the majority.

Gigot: When I talk to Republicans around the country, I hear a lot of--and these are rank-and-file voters, stalwart Republicans, but the people you really need to turn out--I hear a lot of complaining about the Republican record, particularly on spending and earmarks. Do you think Republican voters are as mobilized as they were in 2002 and 2004, and if not, what do you do to get them to the polls?

Mehlman: I think Republicans will be motivated, again, based on the choices. I was just, this past week, in two states where Republicans are very motivated. I was in Ohio. In the Senate race in Ohio, there's a huge choice. The Democrats have a guy named Sherrod Brown nominated. He is further to the left than Dennis Kucinich in his voting record--against the Patriot Act, against missile defense, against the tools we need to win the war on terror, in favor of tax increases. I think Mike DeWine will beat him. In the governor's race there, you've got Ken Blackwell, who's got a very strong record of reform and agenda for reform. There's also in Michigan, where there's been terrible job loss--the only state in the country to lose jobs three years in a row. And in that state, Gov. Granholm, I believe will lose. Dick Devos will get elected. And I think we're going to elect a senator, Mike Bouchard. So, again, I think our voters are going to be motivated by the fundamental choice on Election Day.

You mentioned spending. The deficit declined by a third this past year. It's 2.3% of the economy, the lowest number it's been at any point when America's been either at war or during the Cold War. That means it's lower than it was under Reagan, under Nixon, under Lyndon Johnson, under Eisenhower, under all those presidents. We still need to make it lower. We need to fundamentally reform entitlements. The president put forward a bold plan, and he'll continue to work on that. But the bottom line is every election comes down to the choice on the ballot.

Gigot: Let me ask you about another state, Rhode Island, where you have an incumbent Republican senator, Lincoln Chafee, who's being challenged by Steve Laffey, who's the mayor of Cranston. And he's getting a lot of support from the Club for Growth, which is a conservative group that tends to steer towards Republican candidates. Why is Sen. Chafee in so much trouble?

Mehlman: Well, obviously, first, you've got two issues. First of all, you've got the fact that Rhode Island is a very competitive state, a very challenging state. Second of all, obviously, he faces a competitive primary too. But at the end of the day, I believe that voters will vote to re-elect Sen. Chafee, and it's going to be a very competitive race. But I believe he will win, and that will be critical because, in order for Democrats to take back the Senate, they've got to do something they've frankly never done before, and we have never done before.

Think of 1994, the incredibly historic year where Republicans had our best off-year election, arguably, in a century. Even in that year, we only defeated two incumbents. The Democrats, to win back the Senate, they would need to defeat five or six incumbents, which is a very tall order. If you look at the races around the country, including Sen. Chafee's, I am confident we will keep our majority in the United States Senate.

Gigot: Ken Mehlman, thanks. Still ahead, incumbents on the brink. The Senate's most liberal Republican faces a fight from the right, as one its most conservative leaders battles a tough challenge from the left. When we come back, an in-depth look at the electoral landscape in two races that could change the face of the Senate.

Gigot: Welcome back. With just six Senate seats separating the Republican majority from the Democratic minority, all eyes are on two key races that could change the face of Congress. Joining the panel this week, Wall Street Journal columnist and deputy editor Dan Henninger, as well as Kim Strassel and Jason Riley, both Wall Street Journal editorial board members.

Dan, you heard Ken Mehlman. Do you believe his argument about Republican prospects?

Henninger: Well, I think it is Ken Mehlman's job to be optimistic. And to tell you the truth, if the war in Iraq were the issue that was before the voters right now, I think that probably the Republicans would be facing a significant wipeout. However, we've had some events--the London bombing plot, the war in Lebanon with Hezbollah--and I think there is the sense now that the whole world has--experiencing this threat from terror. And people are concerned about that. And I would regard the threat of terror, the palpable threat, as an X factor in this election.

Gigot: But, you know, Chuck Schumer and a lot of the Democrats are saying that the terror issue worked in 2002, worked in 2004, when John Kerry was on the ticket. John Kerry is not on the ticket this time for the Democrats. Can this issue work again, particularly with the problems in Iraq?

Henninger: I think it can. Terror--it's a generic issue. Voters have to decide whether the Democratic Party has a better answer to this global threat, and it's not clear to me that they're going to default to the Democrats.

Gigot: All right, Kim, you've been on the road, specifically in Rhode Island, looking into the Chafee-Laffey race. What's the mood of Republican voters there?

Strassel: You know, you were talking about the anti-incumbent mood? I mean, this is anti-incumbency on steroids up in Rhode Island. Because what you've got is, yeah, there's a lot of discontent with the Republican Party and its lack of progress. But most of that discontent is getting focused on members of the GOP who they feel are responsible for that lack of progress. Lincoln Chafee is one of those guys. He voted against Bush tax cuts, against Sam Alito, against pretty much everything that the GOP has been trying to get through the Senate. And the problem for him is that, in the past, a lot of people like Linc Chafee could look at voters and they could rely on them to say, you know, "We don't like this guy but he's better than the Democrat." And when I was up there, the whole time it was, "We might as well have a Democrat," they were so discouraged.

Gigot: Yeah, but he does provide one vote for Republicans that's crucial, and that is organizing the Senate, giving them that 51st vote if, in fact, they lose several other seats. If the vote comes down to his winning or losing and controlling the Senate, I mean, do you really want, if you're a Republican, to have him lose?

Strassel: And that is the only thing that's giving Republicans pause up there. Because they know that, you know, if they elect Laffey, who a lot of them are more in tune with, that he may not have a shot at winning that seat in such a Democratic, liberal state. And so that is what they're trying to make a choice on at the minute. And it's hard.

Gigot: All right, Jason, you've been in Pennsylvania. Rick Santorum, a conservative, No. 3 leader among Republicans in the Senate, is in trouble. Are Republican voters as motivated to come out and support Santorum as Ken Mehlman argues?

Riley: That wasn't my impression after spending a few days there last week. The anti-incumbent sentiment is there. In Pennsylvania, in addition to that, though, you have a lot of simply anti-Bush sentiment. His poll numbers in Pennsylvania are lower even than they are nationally. And what Bob Casey is doing--

Gigot: The Democratic challenger.

Riley: The Democratic challenger--is using that anti-Bush sentiment to go after Santorum, linking the two and then basically running against the president.

Gigot: We often hear that some Republican candidates around the country are trying to separate themselves from the president. What is Santorum--is Santorum doing that? And what issues is he using to try to do that?

Riley: He is doing that, and he can do so legitimately on the issue of immigration. And he's driving that hard, a hard-line stance on security first, and he is going with that. The question as to whether that'll work really boils down to--you know, Pennsylvania isn't a border state, and there aren't a whole lot of Hispanics in the state. And the ones that are, are Puerto Ricans, not Mexican immigrants. So to the extent that that's going to work in Pennsylvania, who knows?

Gigot: Well, we know Chafee opposed the war. So he's taking that stance. What is Santorum's position on the war? How is he positioning himself on Iraq and the war on terror?

Riley: He's done an excellent job of defending the war, defending his votes, and even defending what Bush has tried to do in Iraq. His tactic is to link it to the immigration debate. He's tying it in. He's making immigration a border-security issue--or, I'm sorry, he's making immigration a national security issue--

Gigot: Security issue?

Riley: --therefore linking it to the war. So he is able to talk about that.

Strassel: I also think you see a lot of Republicans actually making the distinction here, too, between believing that the war was the right thing to do and then saying that they haven't necessarily approved of the conduct of the war and the way it's been going. And you hear that across the country a lot.

Henninger: But on Pennsylvania, 124 Pennsylvanians have died in the Iraq war, the third-highest number from any state in the United States. There have been a lot of funerals in Pennsylvania. And in that--to that extent, it's going to be a bit of a referendum on the war in Iraq.

Riley: The other thing that speaks to whether Santorum's base is motivated has to do with is his own record. And I was at a rally for Casey where I ran into two people who told me they voted for both Santorum and Bush last time, and who were now switching their vote over the prescription drug plan that the Republicans passed, which they thought was going to be a political winner for them. If it's losing Santorum votes, I think he's really in trouble.

Gigot: Very quickly, Kim, if Laffey wins that primary, can he hold the seat?

Strassel: I don't know if he can. Not at the moment.

Gigot: All right. Thank you all. When we come back, it's the largest private employer in the United States, putting more than one million Americans to work. So why have Democrats declared war on Wal-Mart? That, and our "Hits and Misses" of the week when "The Journal Editorial Report" continues.

Gigot: Democrats are picking another fight with business. At least a half dozen of the party's presidential contenders have appeared at protests across the country this summer, denouncing the retail giant Wal-Mart for what they say are substandard wages and health-care benefits. It's a rallying cry many Democrats believe will prove powerful in the midterm elections. But could it backfire?

Kim, explain this to me. This is a company that employs something like 1.3 million Americans; 127 million Americans shop there at Wal-Mart during the week. Yet Democrats think this is terrific politics. Why?

Strassel: I don't think it's terrific politics with the general public or the people who work at Wal-Mart. What it is, is it's meant to suck up to the unions who are powerful in elections. And this is a union issue. This hasn't been talked about enough in the Wal-Mart campaign. What you have here are unions that are very unhappy. They have never been able to organize the largest employer in the country. But more importantly, Wal-Mart's success, its phenomenal low-cost structure, is putting a lot of pressure on their own employers. And that is causing lost jobs, fewer stores, shutdowns. And so, what you have here are unions, who are now trying through laws, like these Wal-Mart laws you've seen around the country, and through political pressure, to force Wal-Mart to actually have to take on the high cost structure that their own employers have.

Gigot: Just so people understand this union issue. You're talking about Wal-Mart entering, now, the grocery store business, which is very heavily unionized at Kroger, Safeway, Jewel, companies like that. And they have a relatively high cost structure, so when Wal-Mart goes in, they undercut the prices. That's one reason they can charge lower prices. And these unions are upset because they hurt the employment at Kroger and Safeway.

Strassel: That's absolutely right. And it's retailers, too. There are retailers who are unionized, and Wal-Mart is not.

Henninger: Another point to keep in mind here. They have singled out Wal-Mart. But Wal-Mart is not an absolutely unique company in the United States. Their earnings come in--their profit margin was about 3.7% last year. Their share price in mid-2003 was $57; it's down to $43 now. They need to increase those margins. They operate on a thin supermarket-like margin. And if they were to do all of the things the Democrats are urging them to do, they'd be wiped out. They'd go out of business. And it's no different whether you're a Wal-Mart or Target or Costco or any other big corporation.

Riley: And I think the grocery-store point is very important here, because it reveals the other agenda here. One agenda is unionizing Wal-Mart. But if you look at the unions driving this anti-Wal-Mart campaign--the United Food Workers and the Service Employees Unions--these are not manufacturing unions. These are grocery-store workers. And their separate agenda, aside from just organizing Wal-Mart, is to stop Wal-Mart from opening more grocery stores. Period. So there are a couple agendas going on here.

Gigot: Let me read to you, Jason, though, a quote from Joe Biden, who may be a Democratic presidential candidate in 2008. He said recently, "My problem with Wal-Mart is that I don't see any indication that they care about the fate of middle-class people. They talk about paying them $10 an hour. That's true. How can you live a middle-class life on that?"

Riley: It's a class-warfare line. I don't think it'll work for a couple of reasons. One, most of the people who shop at Wal-Mart, I think, like their bargains too much to care what Joe Biden says about what they should be doing and where they should be shopping. And separately, the people who don't shop at Wal-Mart--these sort of big-city elites who probably have never been in a Wal-Mart and wouldn't shop there if they had the chance--are lost to the Republicans already.

Gigot: Can you live on $10 an hour?

Strassel: OK. Well, first of all, you're also talking about the difference between having no job and living on $10 an hour. I mean, this is what we saw in Chicago with this new hyperminimum-wage law that they wanted to impose on Wal-Mart.

Gigot: For $13 in wages, the minimum.

Gigot: Thirteen dollars in wages. Wal-Mart said, "OK, we're not going to build any more stores in Chicago." Now, for the inner-city community in Chicago that has a very high unemployment rate at the moment, that is the difference between zero dollars in wages and $10 in wages.

Henninger: And again, Joe Biden's complaint is with a globalized world. All of retail in this country, all of manufacturing, are under the same cost pressures as Wal-Mart is. So if they want to fight, it's like shoveling sand into the tides, if you're going to complain about Wal-Mart.

Gigot: Wal-Mart recently sent a letter to its 18,000 employees in Iowa, and it's doing that at some of these states, basically trying to say, Look we're going to be attacked here in this political campaign, and you ought to know about it, and you ought to fight back. Could this potentially backfire on Democrats in some of these states if the Wal-Mart employees get mobilized?

Strassel: I think that's absolutely right. First of all, you know, the unions like to complain that they can't organize Wal-Mart, but who makes that decision? It's Wal-Mart employees for the most part, and most of them don't want to be organized, and they don't actually appreciate this political pressure that's on them at the moment. The other thing is middle-class Americans understand that Wal-Mart really lowers the cost of their living, and they appreciate its existence.

Gigot: Now, one thing Wal-Mart is doing here is its also coming out for "progressive," quote-unquote, causes like raising the minimum wage. It's finally endorsed that. It brought in Al Gore recently--the CEO, Lee Scott, and said, Look we're terrific on global warming. Look at all we're doing to keep global temperatures down--to the extent Wal-Mart can do anything about that. But is this a sound political strategy, Kim?

Strassel: Well, you know, to the extent that they were going out there trying to get everybody to like them, I mean, I think the recent campaign from Democrats suggest it hasn't worked. I mean, I think it does show a weakness, and from a company that's historically been known for holding firm on--

Henninger: It's a sound business strategy. Zogby has shown that 76% of their customers voted for Bush. They need a higher customer base. Why not go this direction?

Gigot: All right, Dan, last word. We have to take one more break, and 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, Viacom chief Sumner Redstone gives Tom Cruise the ax. Dan?

Henninger: Yeah, he's the head of Paramount Pictures, and he fired Tom Cruise last week. And he fired him because of his oddball, self-indulgent behavior, such as jumping up and down on Oprah's couch and things like that. Now, sure, there's Hollywood money reasons here. But the thing was, Redstone cited his "unacceptable" behavior. I think this is a wonderful trend. Extreme exhibitionism by celebrities and noncelebrities has become one of the most annoying phenomenons in our time. They somehow think all the rest of us should share in their egomania. But you know what? Wrong, Tom. You're fired.


Gigot: A trend, Dan?

Henninger: I hope so.


Gigot: Next, a potentially significant breakthrough in stem cell research--Kim?

Strassel: Yeah, this has to do with a study out this week that showed that researchers have found a way to actually create embryonic stem cells without destroying embryos. Now, I think this is a huge hit, not just for the scientific community, but for the Bush administration and those in Congress who had continued to actually put restrictions on federal funding on stem cell research. And here's why. Because while that created a huge controversy, it was also a challenge to the scientific community, saying, If you want federal money, you're going to have to figure out a way to do this that doesn't morally offend millions of Americans. They've now done it. It's not going to put an end to the debate. But it's a huge step forward.

Gigot: All right, Kim, thank you. Finally, federal prosecutors drop charges against former investment banker Frank Quattrone. Jason?

Riley: Yes, this is basically an example of overzealous federal prosecutors looking for a high-profile target in the wake of all the Enron scandals. And they settled on Frank Quattrone. They rifled through his emails. They sullied his name. They put him on trial twice. And now they're saying basically, Never mind, you're free to go. You don't have to admit any wrongdoing. You don't have to pay any fines. You can even go back to investment banking now. I mean, in addition to, you know, turning this man's life upside down for three years, this is a huge waste of federal resources and money, and just an appalling lack of prosecutorial discretion. And they ought to be ashamed of themselves.

Gigot: Do you think that the decision on Quattrone is a signal that maybe the tide has been turned here on white-collar prosecutions, and that they're going to be more judicious in the cases they bring?


Riley: I wouldn't bet on it.

Gigot: You don't think so?

Riley: No.

Gigot: But I give Michael Garcia credit--the U.S. attorney here for--

Riley: No, he didn't start this. That's right.

Gigot: --doing what his two predecessors did not.

OK. Thank you. That's it for this week's edition of "The Journal Editorial Report. Thanks to Dan Henninger, Kim Strassel, and Jason Riley. I'm Paul Gigot. Thanks to all of you for watching, and we hope to see you right here next week. Watch selected clips from "The Journal Editorial Report" at

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