This is a rush transcript from "Journal: Editorial Report," August 11, 2018. This copy may not be in its final form and may be updated.
PAUL GIGOT, FOX HOST: Welcome to the "Journal: Editorial Report." I'm Paul Gigot.
Voters in five states headed to the polls this week and some razor-thin results has spurred a debate within the Republican Party over just what role President Trump should play in the midterm campaign. Although the president declared victory on Twitter this week, posting that he was five for five with candidates he endorsed in Tuesday's races. Narrow margins in a special election in Ohio and in the gubernatorial primary in Kansas are causing some to raise questions about his claim that a giant red wave is coming this November.
Let's bring in Wall Street Journal columnist and deputy editor, Dan Henninger, Columnist Kim Strassel, and editorial board member, Allysia Finley.
Dan, after you look at Tuesday's results, how much trouble is the Republican Party in in November?
DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: I would say the Republican Party is, indeed, in trouble, Paul. Look, the baseline is that Ohio 12 race where Troy Balderson seems to have won by less than 1 percent with a Democrat. Look, on the scale of one to 10 in competitive House races, Ohio 12 should have been about a nine for the Republicans. Balderson should have won that by more than less than 1 percent. The remaining competitive seats, and there are about 34 of them, are all maybe a five or a six. They are going to be much tighter than Ohio 12. The math suggests that whatever happened there, perhaps women in the upper-middle class suburbs staying home, whatever happened there, is going to lean heavily on the remaining competitive Republican districts. There's no way to sugar coat it, Paul. That is the conclusion from what happened there.
GIGOT: Charlie Cook, who analyzes House races, said there's 68 more House seats that Republicans now hold that are less Republican than Ohio 12 seat. So that puts -- a lot of these are going to be in play, Kim, particularly the suburban seats, the rural areas Trump and the Republican Party still holding very strong, but it's these suburban swing districts which are most at play.
KIM STRASSEL, WASHINGTON COLUMNIST: Yes, you are seeing that in these election results. You are seeing that in polling. The Republicans have problem in suburbia, particularly among college-educated voters, women college-eduated voters, who are very down on Donald Trump. And so if you look at that Ohio race, for instance, where Balderson really fell apart was in the suburban part of that district. The farther you got away from Columbus, the more rural the area, he tallied and racked up the votes. But and it is still barely enough to win. But this is something that's a dangerous proposition for Republicans having to rely on simply large turnout from rural voters everywhere.
GIGOT: Allysia, let's broaden the field a little bit to the governors' races, which we know we tend not to give much attention to as the Congress, but are very important. And Republicans have, I think, 31 Republican seats now, including most of the upper Midwest. But what did we learn from Michigan's primaries?
ALLYSIA FINLEY, EDITORIAL BOARD MEMBER: Well, there was a much higher, like 130,000 more Democrats voted in the primaries than Republicans. And I think you're going to really have a hard time in the upper Midwest. You said Scott Walker is up for election --
FINLEY Browner in Illinois. Again, Michigan is a vacancy where Bill Schuette won the Republican primary. He wrapped himself around Donald Trump. But Donald Trump only has a 35 percent approval rating in Michigan. And I think also if you look at Kansas, if Kris Kobach wins, he's run on a very anti-immigrant line, I think that's going to really alienate voters, moderate voters even there.
GIGOT: Jeff Colyer is the competitor. We don't know who will get the nomination. That's very, very close. Kansas should be a Republican way up and you're saying --
FINLEY: Kathleen Sebelius, the former HHS secretary in the Obama administration, was the governor there, so they have had Democratic governors.
GIGOT: Kim, I know that you have been talking to sources in GOP. What are they telling you about, I guess, the optimistic line? What's the case that they are going to upset convention here and do better than anyone thinks, even if it's not quite a red wave?
STRASSEL: Yes, so here is what they'll say in the White House. Some people have been critical of the president going out and doing these rallies, talking about very controversial subjects, like immigration and trade, saying this is what is alienating these voters. Now the White House and others will make the opposite claim. They say, look, the only reason Balderson won was because Trump went out there and he excited the rural voters and he got them to turn out there. We believe that we would not have gotten a lot of these suburban voters any way. They baked it in against Trump. So the only thing we can do to combat that is get out our base, really turn them out and -- and so that's what you see happening. It's working in Ohio. So we will be able to replicate that come fall. That's their argument.
GIGOT: So their argument is, I guess, Dan, let's polarize the election on cultural issues like immigration, for example, immigration enforcement, and soft sell the economy, which is doing great, and tax cuts, let's not focus on those, let's make this a cultural battle. Smart strategy?
HENNINGER: It works for Donald Trump, there's no question about it. The question is, does it work for the other individual Republican candidates in individual races, such as Barbara Comstock running in northern Virginia, where she is in a very tight race. And cultural issues do not play. Doesn't play in the seat that's being vacated in New Jersey by Rodney Frelinghuysen. Clearly, a very centrist seat in which the Republican is competing with a highly-financed former Marine, woman and prosecutor. In those situations, Paul, I don't think the cultural issues are going to play. They are going to have to run on what they have achieved, which is an extraordinarily strong economy. And some of these candidates are asking, let me do it myself, I can carry it if the president doesn't come in here and ruffle the waters with immigration and trade wars.
GIGOT: I guess the politics of this are different in the Senate, Allysia, briefly. You have Trump in the cultural division. May work better in some of the states, like North Dakota, Missouri and Indiana where Trump won.
FINLEY: Maybe, but you have to consider that there are three Senate seats, Arizona, Nevada and Tennessee, that Republicans currently hold that could be in play for Democrats for just the opposite reason, in so far that immigration backlash against the president's immigration policies may hurt Republicans there.
GIGOT: Particularly in Nevada.
FINLEY: Nevada and Arizona.
GIGOT: Less so in Tennessee.
FINLEY: In Tennessee, but they have a strong Democratic candidate there.
GIGOT: In Phil Bredesen, the former governor.
All right, thank you all.
Still ahead, President Trump goes on the attack, blaming bad environmental laws for exacerbating the devastating wild fires in California. We will take a look at the president's claims and what is contributing to the blazes when we come back.
(BEGIN VIDEO CLIP)
JERRY BROWN, D-CALIFORNIA GOVERNOR: This is part of the trend, the new normal that we have to deal with. And we are dealing with it humanly, financially and governmentally.
(END VIDEO CLIP)
GIGOT: Firefighters in California battling several major blazes across the state, including the largest wild fire in its history. The Mendocino Complex Fire is now bigger than the city of Los Angeles and officials say it may not be contained until September.
President Trump seized on the issue earlier this week, suggesting that California's environmental policies have exacerbated at least a dozen large fires in the state right now. The president tweeting that, "Bad environmental laws are magnifying the fires by not allowing massive amounts of readily available water to be properly utilized." He added, "Must also tree clear to stop fire from spreading."
We are back with Dan Henninger, Kim Strassel and Allysia Finley.
So California, Allysia, why are the fires as severe as they are?
FINLEY: Well, they were pretty severe last year and they've started earlier this year. One reason is the really high temperatures, especially up in the north. You have a heat wave, high heavy winds --
FINLEY: -- and a lot of dry vegetation after seven or eight years of drought. We had -- plus, you had actually one wet year, which --
GIGOT: The last, the previous year.
FINLEY: That was the previous year, which actually provided more vegetation overgrowth, and so the fires have more fuel to burn.
GIGOT: OK, let's take a couple of the president's issues. The water. Is there a shortage of water to fight the fires?
FINLEY: Not to fight the fires. But there's a shortage of water in California, a huge shortage.
GIGOT: What's the problem?
FINLEY: The problem is that there are environmental restrictions to protect fish, mainly the smelt and salmon in the delta where all the rivers in the north run in to.
GIGOT: And that's where the water is in the mountains of Sierra --
FINLEY: Right. And Lake Shasta. And they are using some of that water to fight the fires. But because of these pumping restrictions, very little of the water actually moves down --
GIGOT: Where does it go?
FINLEY: Instead, it basically goes out to the ocean.
GIGOT: So they literally take fresh water --
GIGOT: -- that they could use down south and pump it out to sea?
FINLEY: Pumping, right.
GIGOT: OK. So what that does, it does not hurt in the north where the fires are now, where they have plenty of water to fight it. But where it hurts is creating further dry conditions in the central valley and the south.
FINLEY: And in the south land, and in southern California where you've had fires. One now raging in southern Orange County, south Orange County.
GIGOT: All right, Kim, let me go to you. I know you follow closely when it comes to tree clearing and fires in the west. Is the president on stronger ground on that claim he made?
STRASSEL: Oh, absolutely. This is the ground-zero problem for why you are having fires. And, by the way, not just in California, but throughout the Pacific Northwest, Alaska, other places where, going back 20 years, the federal forest -- the logging ban in federal forests kicked off a trend, and you see it, too, driven at the state level by very bad environmentalist policies. It's a leave-it-alone approach. The USDA did a report in December and said 129 million dead trees in California. And there's a reticence at the government level to go in and really do any lugging, cutting, thinning. And this is what's providing the fuel for these fires. When they get raging, you can't stop them.
GIGOT: This is a puzzle for me, Kim. And I'm a midwestern and not a westerner. But why wouldn't environmentalists want healthy forests? So why wouldn't you want to clear some of this stuff out so that it is less vulnerable to these raging fires?
STRASSEL: Well, it's the problem with most modern green environmental policy, is it actually doesn't do much to help nature. It is an involuntary reflexive belief that man should not interfere at all. You do not manage nature. You let nature take its course. But if you are going to do that, you going to end up -- for instance, right now, they estimated and Sierra Nevada has had four times as many trees in them as you would in a normal healthy forest. We used to be able to have these massive fires that can just burn and clear everything out, but we can't really allow that anymore given population and the devastation they cause. So your alternative is to go in and manage them mechanically with cutting.
GIGOT: Dan, Jerry Brown, the governor out there, has -- he blames climate change. Of course, he blames just about everything bad that happens out there on climate change. But at some point, when do you take responsibility, as a political leader, and -- OK, let's say he's right and this is related to change in climate, the government has to do something.
HENNINGER: They do have to do something, but Jerry Brown and the Democrats, the greens, have put themselves in a position where they're very simply incapable of moving.
And I want to pick up the point that Kim was just making. One alternative to this is, in these vast areas of running controlled burns, where you burn down some of the forest to clear the area, I mean, they are forests. They are full of trees. Trees are wood and wood burns. But for the last 100 years or 200 years or so, this country has set aside vast areas of the west and they have not -- and they've been untouched, as Kim suggested. They are too big for the federal government to manage, even if they were going in and doing that sort of thing. And as she suggested, if you allow logging companies to go in, private owners, they would be responsible for keeping these forests in healthy shape. They are not healthy.
GIGOT: Quick question, Allysia. How much does the state of California spend on tree cutting?
FINLEY: Very little relative to how much they are spending on the electric car subsidies.
GIGOT: Which is about --
FINLEY: They are spending about $300 million on electric cars subsidies and giving, maybe spending $30 million on tree cutting.
GIGOT: So 10 times on electric car subsidies for rich people in the suburbs.
All right, when we come back, the Trump administration stepping up sanctions this week on Iran and Russia. What the moves signal about the administration's approach to both countries, next.
(BEGIN VIDEO CLIP)
NIKK HALEY, U.S. AMBASSADOR TO THE U.N.: We are going to continue to be loud with the international community that there have to be changes from Iran.
(END VIDEO CLIP)
GIGOT: The Trump administration stepping up sanctions this week on both Iran and Russia. The White House said Wednesday that it will impose fresh sanctions on Moscow after determining that it used a nerve agent on British soil in March in an attack that sickened the former Russian spy and his daughter and killed a mother of three. This, as re-imposed sanctions took effect on Tehran, the first since President Trump pulled out of the Iran nuclear deal earlier this year. The president warned Tuesday that anyone doing business with Iran will not be doing business with the United States.
Cliff May is the founder and president of the Foundation for Defense of Democracies.
So, Cliff, welcome back. Good to see you again.
Let's start, though, with Turkey. I want to talk briefly here at least about Turkey. The president using sanctions and serious sanctions to try to get the Turks to return Pastor Brunson to the United States. What do you think of the use of sanctions for that purpose?
CLIFF MAY, FOUNDER & PRESIDENT, FOUNDATION FOR DEFENSE OF DEMOCRACIES: Well, I think, in general, this administration recognizes a rule, and that is any nefarious behavior that you do not punish, you, in effect, license. So we have multiple countries now taking Americans hostage. That Turkey should take an innocent pastor -- he's been there 20 years. He ministers to a small flock of Protestants. He's being accused of things there's no evidence whatsoever that he is in any way involved in anything nefarious there. The idea that he can be held hostage and various demands made on this is pretty astounding, especially when you consider Turkey is a NATO ally, And I think Trump has been very frustrated by Erdogan on this and on other scores as well.
GIGOT: But it's going back and forth. Erdogan says, I'm not going to give in. And Trump is ratcheting up, saying he will double metals' tariffs on Turkey. And you've seen what's happened to the Turkish Lira, just really falling out of bed and creating real nervousness across a lot of currency markets. So there may be some global implications here. How risky is this?
MAY: It's risky, but it's mostly risky to Turkey. And you would think that Erdogan would do the rational thing, which is say, OK, America is my ally, we are NATO members, I can't be holding an innocent American in prison for years, and I have to -- I have to do something about that or I have to make up with them. Instead, of course, Erdogan is moving closer and closer to Russia. And NATO, after all, is meant to protect Europe from Russia predominantly. He is also undercutting American policy vis-a-vis Iran. So he is the best friend-emy, certainly an unreliable ally. And I think a crisis is coming with Turkey sooner than later.
You mentioned Russia. President -- the Trump administration imposed -- ratcheting up sanctions, this time for chemical weapons use, that nerve agent in the U.K. But here is the question, John, a lot of people are asking. The Trump administration did this. How does this mesh, fit in with the president's clear desire to have better relations with Vladimir Putin?
MAY: Yes, you know, what's interesting here is that Trump's rhetoric has been conciliatory towards Putin. His policies have been very tough, I think arguably tougher than any administration we have seen. We've had five sets of sanctions this year alone. This is going to be very difficult for the Russian economy. We are already seeing the Ruble fall. We are seeing other problems with the economy and -- in Russia. And more sanctions are coming. So his policies are very tough. He's really insisting that Russia begin to change its behavior even while he, rhetorically, certainly, in Helsinki, is being very solicitous of President Putin.
GIGOT: It's interesting to watch that contradiction and see how it evolves.
Let's turn to Iran, the third country that has seen tougher sanctions. In this, the president is disagreeing with his European allies, who don't like the fact that the U.S. has imposed these sanctions and moved this week to try to protect its own businesses and say you can do business with Iran. But is the president winning this disagreement with the E.U. governments?
MAY: Yes, the president is winning. I think -- I think it's distressing that our European allies are trying to undermine the president's policy here. I know they don't particularly like President Trump, but the policy is meant to create change in Iran. At the very least, we should not be funding the nefarious behaviors of Iran, whether it's supporting Hezbollah or Shiite militias in Syria or in Bashar al-Assad, supporting the Houthi rebels, continuing with missile programs. We know that Iran in various ways was violating the Iran nuclear agreement, the JCPOA. The Europeans have been trying to undermine our policies. They are not succeeding because Europe is still relatively free. The governments can -- can't tell the businesses what to do and the businesses are being told by their compliance officers and others, look, we can do business with Iran but we will cut out from the U.S. market, and the U.S. market is absolutely essential to us, the Iranian market is not. Increasingly, we are seeing European businesses saying we are going to abide by the U.S. sanctions, we don't want secondary sanctions on us and we don't want to be cut out of the market. That's very frustrating for the governments. But the governments of Europe deserve to be frustrated because they should be acting with us to curve the nefarious behaviors of Iran.
GIGOT: Cliff, we don't have much time, but let me ask you one final question what about Iran. And that is John Bolton this week, the White House national security advisor, said the U.S. policy towards Iran is not regime change, it's design to change its behavior. Is that really true or do they secretly, privately really want regime change?
MAY: Look, they cry no salty ears for regime change to happen. But if they can change the behavior of the regime, that is helpful. If the regime says we have to cut back on some of our overseas commitments to various terrorist groups, that's useful. If the regime says let's sit down and negotiate a better JCPOA, we have to do it, that's helpful. If nothing else, there are protests in the streets and the Iranians know who to blame. They blame their own government for the depravations they're suffering because they know that the oil wealth is being spent on Hezbollah and Hamas and Houthi rebels and others, not on them. And I expect they'll be infighting among the ruling mullahs as a result of this as well.
GIGOT: All right, thank you, Cliff May. Appreciate it.
Still ahead, Facebook and YouTube banning controversial radio host, Alex Jones, and setting off debate over social media and free speech.
PAUL GIGOT, FOX HOST: Facebook and YouTube banned controversial radio personality and conspiracy theorist, Alex Jones, this week saying the InfoWars host violated their policy against hate speech. Jones' detractors say the move was a long-time coming, but others argue that it's just the latest and not the last example of social media companies silencing voices they don't agree with.
And they are pointing to a tweet by Democratic Senator Chris Murphy, of Connecticut, who wrote this week, quote, "InfoWars is the tip of a giant iceberg of hate and lies that use sites like Facebook and YouTube to tear our nation apart. These companies must do more than take down one Web site. The survival of our democracy depends on it."
We are back with Dan Henninger, Kim Strassel, and Wall Street Journal deputy editor features editor, Kyle Peterson.
Let's talk about the legality first, try to break this down. These companies, is it -- can they decide what runs on their platforms legally?
DAN PETERSON, DEPUTY EDITORIALS FEATURES EDITOR: Yes, absolutely. It's private property. That content is living on their servers. And what Facebook wants to do is specifically is Facebook sees itself as a community. It wants to be a placed that teenagers feel comfortable spending some time. And so what -- the way I like to think about it, when you're on Facebook, you're not on a public forum. You're at Mark Zuckerberg's open mic night, and if you get up on stage start singing the Nazi national anthem, be prepared to be asked to leave.
GIGOT: You decided to run an op-ed in our paper and it's libelist, though. We are responsible. They are shielded from even that -- from those kinds of liable suits, are they not?
PETERSON: Yes. There was a law passed in the 1990s that gave them immunity from that, specifically for user-generated content. So the difference is, a lot of the stuff that goes on Facebook, most of it, virtually all of it is not reviewed by anyone before being posted. You, as the user, get to put it up.
GIGOT: Do you agree with that? Should we not have that exception to these platforms?
PETERSON: That's a tough question. If you remove that exception, it's hard to see how those companies can operate, because they would have to employ hundreds of thousands of people to review everything that possibly went up. They are trying to go after the problem with algorithms and, reportedly, they're having some success, specifically with getting the machines to recognize violent content and to recognize nudity and take that stuff down more or less automatically.
GIGOT: As a policy matter, as a principle matter for the publishers, you agree -- you think they should -- they were right to take down Alex Jones?
PETERSON: I think that, honestly, that's for users to decide. The Internet is a big place, and Twitter came out this week and specifically said it would not ban out Alex Jones.
GIGOT: Because they hadn't violated Twitter's rules.
PETERSON: Right. So people had a choice. If they want to live in a more walled garden, they can go to Facebook and they can feel comfortable having their teenagers on there. And if they want more free speech, if they want to see what Alex Jones is putting up, they can go to Twitter.
GIGOT: Kim, what do you think about this as a matter of policy on the part of Facebook? As I recall, you did a Praeger video linked to your book on, of all things, free speech, and it was, in fact, banned for a while?
KIM STRASSEL, WASHINGTON COLUMNIST: Yes, they claim it was by algorithm but it was a very odd situation. Look, I agree with Kyle. They absolutely have the right to do this. They're not common carriers. They are not required to just offer their platform for anyone, no matter what their views. Should they have? No. I have two reasons why. One, it is going to fuel the views among conservatives that there's a disproportionate crack-down on conservative voices. And that's going to further polarize the debate over social media and may come back and hurt these companies, who even now, Republican congressional members are gunning for them.
But look, also, I think it was a problem of how they did it. The issue with Alex Jones for a lot of people is supposedly that he publishes fake news. But that's not why they removed his stuff. They did it because they said that his content was hate speech. That is a very slippery slope. And it gives these groups the ability to essentially censor the way the Senator that you mentioned at beginning was talking about, any views that they don't like under the very broad category of hate speech.
GIGOT: Alex Jones, Dan, is a pretty particular voice. I don't consider him a conservative in any normal sense of the word. He's a just a provocateur. He spreads false information. He spread falsehood about Chobani and immigrants. He was sued and he had to retract that and apologize to get a lawsuit against him dropped. He said falsehoods about the Sandy Hook massacre.
I mean, if you're going to ban -- so I mean, that would be the argument they would make. But he's not a traditional conservative. And don't put us on the slippery-slope to say we are going to start banning other conservative voices.
DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yes, that is the voice -- I mean, that's the argument conservatives will make, and they should make it.
I mean, you know, InfoWars, there's probably part of the population out there that is susceptible to those kinds of conspiracy theories. They have always been out there. But this is a country of 325 million people. Let's say a million people have attached themselves to InfoWars and Alex Jones. Is that a threat to the country? Well, it wasn't just Facebook and YouTube that banned him. He's now been banned by virtually all the social media platforms, LinkedIn, Pinterest. Apple has taken him off their iPod listings. The only real platform that he's on now is, indeed, Twitter. So the question is, if you sort of -- where do you draw the line? I think Chris Murphy, the Democratic Senator, in the remark at the beginning, let the cat out of the bag. People like him will push beyond Alex Jones and start including, say Rush Limbaugh, as a purveyor of hate speech. And there will be pressure on these sites to draw the line much more broadly against conservative opinions.
GIGOT: Kyle, what about that argument, that this is just the start of what would be an attempt to ban conservative voices generally?
PETERSON: The question I would have for people making the argument is, in April, Facebook had banned the white nationalist, Richard Spencer. And did it make the news? Not really. So the question I have is, what's different now? And the only answer I can come up with now is Alex Jones is pretty good at making a raucous.
GIGOT: You think they can make those distinctions?
PETERSON: I think they have to. Who else can make those distinctions? It's Facebook's decision to make. And their users can decide how to react when they do.
GIGOT: All right, an interesting debate.
Still ahead, the Big Apple declares war on Uber, voting to cap the number of ride-hailing cars on its roads. So will other cities do the same?
GIGOT: The Big Apple putting the squeeze on a rapidly growing industry this week, capping the number of for-hire vehicles it allows on its streets. The New York city council voting to address what it says are a number of issues that have cropped up as the use of Uber, Lyft, and other ride-hailing services has grown, including increased traffic, a dip in public transit use, and financial woes in the taxi industry. So how will this affect riders and drivers? And will other cities follow New York's example?
We are back with Dan Henninger, Kim Strassel and Allysia Finley.
Kim, let me start with you. Bill de Blasio said this week, he took a victory lap, and said, we did this to show that we will not back down from any big company. Why did he really do it?
STRASSEL: He really did it to protect the cab industry in New York, which they gave a lot of other reasons, oh, you know, congestions, people are not riding the subway anymore. That's not what this is. This is about protecting a very complex system of regulations and medallions that New York issues. And they have kept the number of cab medallions artificially low to drive up the price of them and to regulate how many cabs were there.
That all got blown apart when these app companies started coming in. And it has put a lot of distress on cab companies. And there has been some financial fallout. But that's called new technology. And the answer shouldn't be to now try to extend that licensing and regulation to the entire new field, but rather to start over and deregulate and let competition work.
GIGOT: Dan, is this going to fix congestion in New York? I know, as a loyal New Yorker, somehow I'm not seeing that?
HENNINGER: No, it is not going to fix congestion, unless the city does a better job of managing the construction projects that have closed down the lanes of every other street in Manhattan.
GIGOT: And the subways. What about the subways? How many -- how many --
HENNINGER: Let's talk about the subways, because it's a big element here. Ride-sharing in Uber, Lyft and cars like that is being used by people who are abandoning the subways. And it's not just the wealthy in Manhattan. It's mainly middle-class workers who live in the outer boroughs, the Bronx, Queens and Brooklyn. They would rather ride-share than take the subway. It's a vote of no confidence in the subways, which have a huge responsibility to fix their infrastructure at enormous costs. And if people pull away from subways, they are going to erode further. And I think the city solution has been, rather than deal with the reality of the public transportation system failing, they're simply going to suppress Uber and Lyft.
GIGOT: Let me put up here the "New York Post" headline on Friday this week, "Transit Apocalypse," about the latest shutdowns in the subways and the delays, which are so extraordinary, Allysia. Bill de Blasio, good Socialist, good liberal, why would he care about the taxi cartel?
ALLYSIA FINLEY, EDITORIAL BOARD MEMBER: They're big donors in city council.
GIGOT: Break the code.
So that's the reason he does it. But I guess they want to push everybody into subways as well?
FINLEY: I think that's exactly right. The last two years, you had decline in subway users, a decline in revenues as well.
GIGOT: That's not because of the ride services as much as it is --
FINLEY: Because they are breaking -- subways are breaking down.
FINLEY: And 70,000 delays per month, and that has not improved, despite all of the billions that they are pumping into the system. And so this is-- the ride-shares are an escape route. They're charter schools for transportation.
GIGOT: Competition, for charter schools for public school's competition.
FINLEY: Right. Definitely. They want to keep people in the public system.
GIGOT: Kim, what do you think the future is for ride-sharing services across the countries. Millions of Americans, tens of millions, use them. They've become a great alternative. If you're new to a city, you don't know how to work the subway. The cabs aren't available. You call an Uber, you call a Lyft, you get a ride. Are other cities going to start to restrict this for the same reasons?
STRASSEL: Yes. This is one of the big new urban battles across the country, because you are going to have other cities -- the ones that are actively debating this right now, as far away as Texas to the west coast. And you're going to have politicians who are going to want to do the union bidding them and protect their cab monopolies. And you'll have residents of the cities who are going to revolt. And in the past, the fear of that revolt has reined in these politicians and they have lost some of these prior battles against Uber and Lyft. They now seem to be plunging ahead anyway. But this could reverberate badly on some politicians. It seems to elude them, but if they would have tried so hard to protect their horse- and-carriage industry, they wouldn't even have a cab industry right now. Change is coming and the consumers want it.
GIGOT: Yes, I think sometimes Bill de Blasio would have been a great mayor in the horse-and-buggy era.
When we come back, 10 years after the 2008 financial panic, our own James Freeman brings us the untold story of the Citigroup bailout and other alarming episodes from the 200-plus-year history of one of the nation's largest banks.
GIGOT: It's been 10 years since the 2008 financial crisis and the bailout of too-big-to-fail financial institutions, like Citigroup. And in a new book, James Freeman and Vern McKinley tell the untold story not only of Citi's rescue, but of the 206-year history of what was once the nation's largest bank.
James Freeman is assistant editorial page editor at the "Wall Street Journal" and coauthor of "Borrowed Time, Two Centuries of Booms, Busts and Bailouts at Citi."
So, James, welcome.
JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR & AUTHOR: Thanks for the --
Thank you for your patience as --
FREEMAN: I enjoyed this process about as much as my family did.
FREEMAN: So, anyway, I appreciate it.
GIGOT: That's right. You got a good product out there --
FREEMAN: Oh, thank you.
GIGOT: -- a good story and good work.
So 10 years after the financial panic, what's your biggest lesson?
FREEMAN: Well, I think what we see when we look over this two-century history is that 2008 was not a one-off perfect storm, unexplainable, unexpected event, but it was the culmination of a century of the government standing behind Citi, and the bank going through crises, and it was such a contrast from the first century where, for 80 years roughly, it becomes the biggest bank in the country. It's an island of super ability. It's a rock that, in times of crisis, depositors come to. And there was no government standing by.
GIGOT: So what happened? What changed?
FREEMAN: Well, it really is the creation of the Federal Reserve. When you look at this bank that -- it was so strong before the government was standing behind it, it would actually rescue the federal government at times when it was in stress. It would rescue cities that were having trouble.
FREEMAN: But then after -- it's almost amazing how quickly the bank deteriorated after the taxpayer safety net, the Federal Reserve, comes in. The bank starts making really disastrous loans overseas. They opened a branch in Russia in early 1917, and people can kind of imagine how --
FREEMAN: It actually made money a few months before the Communists took it over. Pretty soon, they needed help from the government.
GIGOT: That comes with that implicit - lender of last resort, for sure.
GIGOT: Maybe implicit guarantee as well. The -- but going to 2008, do you think that Citibank could have been let fail, and would the financial system have survived?
FREEMAN: I think it could have because I think that you certainly can do what the law said, which is you seize the ensured depository within this giant Citigroup financial holding company. You pay what it costs to make people whole, if there are any depositors that need money. And that certainly would have been far less than the amounts the government spent both in terms of direct investment and the exposures guaranteeing so many of Citigroup's customers.
GIGOT: As some would say, hey, we pull back, so no harm no foul.
FREEMAN: Yes. I should say, in the crisis of '08, it is difficult, and you can be the obviously run the experiment again. You had the government creating all of these problems across the financial landscape in terms of driving all banks into housing investment. So --
GIGOT: Making it easier to borrow, very easy to borrow. Easy guarantee, because of the government guaranty --
GIGOT: -- of Freddie Mae and so on?
FREEMAN: Yes. So part of what we try to do with the book is to say not just look at 2008. And what is amazing about 2008 is how little explanation, how little math, how little real analysis went into the too- big-to-fail measure. But also, how do you avoid getting to that point. How do you avoid getting to this moment where all of the regulators are -- I should say not all. Sheila Bair was a dissenting voice at the FDIC. But almost all the regulators simply take it as an article of faith that America can't live without this big bank, that it has to be saved regardless of any real analysis.
GIGOT: On that point, how do you prevent us from getting there again?
FREEMAN: I think this is a great time, with the economy going well, banks healthy again, making a lot of money, to start reducing that taxpayer safety net. You don't want to jar the markets. It wouldn't happen in 24 hours. It would happen over time, where you start eliminating the implicit and explicit benefits. And part of that is they created, in the Dodd-Frank law of 2010, essentially codification of the bailout scheme, where it's now clear in the law. And like before the crisis, that instead of protecting the bank and depositors and putting the holding company into bankruptcy where all failing firms ought to go, there's now a special place where too- big-to-fail banks go to get better treatment.
GIGOT: Every single politician, at least Democrat politician, says too big to fail is over. Is it?
FREEMAN: It's not over. It's not over. And I think --
GIGOT: They next time we get there, they'll be another big bailout of Citigroup?
FREEMAN: Well, I think it's -- you look at the history, and once the federal safety net comes in -- they ran into trouble in 1920. They got federal assistance in the 1930's. They ran into trouble in late 70's with lending to Latin-American countries, a real estate crisis. You know, 2008 was not their first real estate crisis. So I think unless something changes, we are going to have to grit our teeth and watch these awful bailouts again.
GIGOT: We need you writing editorials on the financial system again --
FREEMAN: Yes, sir.
GIGOT: -- to block that.
All right, here we go. We have to take one more back. When we come back, "Hits & Misses" of the week.
GIGOT: Time now for "Hits & Misses" of the week.
Kim, start us off.
STRASSEL: Paul, we found this week that about five years ago, the FBI discovered a longtime staffer for Democratic Senator Dianne Feinstein was actually spying on her and reporting back to Chinese intelligence. It quietly and discreetly went to the Senator and she immediately dismissed to this person. So my miss here is for the FBI on the question of, yet again, why the same courtesy of a preliminary briefing was not given to Donald Trump when they had suspicions about his own campaign aides. Yet again, another reason to wonder what all was going on in this FBI investigation.
GIGOT: Excellent, Kim. Thank you.
PETERSON: I'll give a miss to Hollywood, specifically west Hollywood, which, this week, the city council there passed a resolution unanimously calling for Donald Trump's star on the Hollywood Walk of Fame to be removed. They reason for the miss is because, whatever you make of Donald Trump's politics, he is definitely a television star, having hosted "The Apprentice" for more than a decade. But it's probably not going to happen because the Chamber of Commerce, which actually controls the stars, says, once you are a star, always a star. Which is why even Bill Cosby is still there.
GIGOT: All right, Kyle.
FINLEY: This is a miss to the Oscars. The rates have been tanking in recent years. Probably because they are way too long and most people have not seen the most-nominated movies, like "The Shape of Water." Now they are condescending to the people with more taste by adding a new category for best popular film. This feels a little bit like a consolation prize for viewers.
GIGOT: All right.
HENNINGER: Paul, I am giving a hit to Socialism for its entertainment value. We all know about Socialist Alexandria Ocasio-Cortez. But then, this past weekend, Markos Moulitsas, the editor of the "Daily Kos" Web site, said all Democrats have to embrace Socialism or be declared irrelevant to the Democratic Party. Days later, a reporter asked Ben Jealous, the Democratic candidate for governor, whether was he would self- define as a Socialist, and he said, "Are you kidding me?" Welcome back, Karl Marx.
GIGOT: All right.
That's it for this week's show. Thanks to all of you for watching. I'm Paul Gigot. Hope to see you right here next week.
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