• This is a rush transcript from "The Journal Editorial Report," July 24, 2010. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on the "Journal Editorial Report," Tea Party politics. The caucus is created in the House, but can the movement get its candidates elected? And will they change the GOP or will the GOP change them?

    Plus, lost in taxation. The IRS gears up to enforce its vast new powers under Obamacare, as rank-and-file Democrats revolt over coming tax increases. Can party leaders keep a lid on the dissent?

    The Journolist controversy. Do leaked e-mails prove the existence of a vast left wing media conspiracy? And is there anything like it on the right?

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

    Minnesota Congresswoman Michele Bachmann officially formed a Tea Party Caucus in the House of Representatives this week, giving the movement a formal presence on Capitol Hill. But the move is getting a cautious reception from rank-and-file activists who are warning lawmakers not to try to take over their movement.

    Republican candidates like Sharon Angle in Nevada and Rand Paul in Kentucky have benefited from grass-roots Tea Party support, but whether they can win in November is still an open question. And if they do make it to Washington, it's unclear whether they will change the GOP or whether the GOP will change them.

    Joining the panel this week, Wall Street Journal editorial board member, Jason Riley; opinionjournal.com columnist, John Fund; and senior economics writer, Steve Moore.

    So, John, let me go to you first. You've written favorably about the impact of the Tea Party this election season. Just how significant has that impact been?

    JOHN FUND, OPINIONJOURNAL.COM COLUMNIST: It's been a tremendous shot in the arm for anti-establishment Republican candidates. They won a series of primaries no one expected them to do. Now that may make it a little difficult for them to win over moderate independent voters in the fall but, right now, enthusiasm matters to politics. And all of the enthusiasm is with the Tea Party.

    I'm here in Las Vegas attending both a left-wing bloggers convention and a Tea Party convention. And I can tell you, there's a world of difference in attitude and enthusiasm between the groups.

    John, you're going to both of those conventions? You're ambidextrous, ideologically.

    FUND: I'm a reporter. I —


    FUND: — both sides.

    GIGOT: I appreciate that, John. I'm glad to see it.

    All right, Steve, what do you think about John's take on this? Has it been that significant? The real acid test comes, doesn't it, when we seen what the election results are in November?

    STEVE MOORE, SENIOR ECONOMICS WRITER: First of all, I think what surprised me about the Tea Party Movement — and I've covered it in a lot of states as well as John has. What's surprised me, Paul, is a couple of things. First, it's proven to be so resilient. When it started about a year, to a year and a half ago, people thought that was just a one-flash wonder. But it's continued to, I think, grow in influence and numbers.

    Second of all, I think the thing that's been amazing about this is how diverse it is. And this is something I think the left has really understood. It's not just, you know, white, you know, white voters. It's old people, young people, housewives, you know, people from all walks of life and, by the way, many minorities included. Now I've —

    GIGOT: And, Steve, the animating ideology here, or principle, is really economic, is it not, and the idea of too big government.