• With: Joel Klein

    This is a rush transcript from "Journal Editorial Report," June 1, 2013. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: Eric Holder under fire, will the White House stand by its embattled attorney general?

    And can President Obama change the subject before the scandals take their toll?

    Plus, the new national education standards that have some conservatives crying foul. Former New York City Schools Chancellor Joe Klein tells us why he supports the common core.

    Welcome to the "Journal Editorial Report." I'm Paul Gigot. Well, the IRS scandal continued to unfold this week with new evidence suggesting that the targeting went beyond Tea Party groups and involved more than a few rogue employees in the tax agency's Cincinnati office.

    Wall Street Journal senior editorial page writer, Collin Levy, has been following the story for us. She joins me, along with deputy editor, Dan Henninger and Washington columnist, Kim Strassel.

    So Collin, you wrote this week about a case of a pro-Israel group that seemed to have been targeted after -- right around the time that the administration was pursuing some policies that that group opposed.

    COLLIN LEVY, THE WALL STREET JOURNAL: Right, Paul. I mean, we really saw some coalescing stories of targeting from other groups this week. This group that you're referring to, the pro-Israel group called Z Street, and they basically had a situation where an agent told them that any groups that had issues related to Israel were getting special scrutiny in Washington, D.C.

    We've also heard now from a doctor's group called Doctors for Patient Care that was actively opposed to ObamaCare that they may have been -- one of the doctors there may have been personally audited. You know, this is in addition to, you know, the information that came out this week about Lois Lerner having signed on.

    GIGOT: Lois Lerner was the -- she's now on suspension, but she ran that Tax Exempt Department. Let's go at the Z Street story a little more detail. They actually identify the agent, Diane Gentry, the IRS agent who told them that she had been instructed to single groups like this out. This was the -- the timing was also strange, was is not? Because it occurred at a time when this group was opposing some of the policies of the administration, they were pursuing the Palestinian peace process.

    LEVY: Well, right. I mean, basically what was happening was there were stories at the time that gee, a lot of these pro-Israel groups are supporting west bank settlements and things like this and at the same time that they're getting tax exempt status. So it's entirely possible some of these IRS agents were getting these cues one way or another. That, this is opposed to the administration's policy priorities and I think it was said specifically to Z Street that some of the scrutiny was to see whether or not the Israel groups were in lock step with the administration's policy priorities.

    GIGOT: And we called Miss Gentry to see if she had any response or comment on that story and we didn't get a returned phone call. So Kim, what's the ultimate vulnerability here for the administration? Is it really that want to find out how widespread this practice was? Was it extended to Romney donors, for example? Whether it extended to any groups that opposed the Obama agenda? Is that ultimate thing we're looking for here?

    KIMBERLY STRASSEL, THE WALL STREET JOURNAL: That is the ultimate problem is that this scandal could just continue to unfold and unfold. Look, everyone, the truth is, Paul, everyone has an issue with the IRS. What this has done is emboldened people to speak out about issues that they've had and you're beginning to see connections put together and strange timing put together and intersections of officials who were looking into this put together.

    And that is the issue for the administration is that this story becomes not what they claimed rogue agents working on their own, but rather a more targeted and direct assault on any organization opposed to the administration or its policies.

    GIGOT: A kind of ethic or culture that targeted certain ideas. Go ahead.

    DANIEL HENNINGER, THE WALL STREET JOURNAL: Well, you know, staffers for the Ways and Means Committee have gone to Cincinnati and they are interviewing the workers involved in that division down there in Cincinnati. If at any point in this some of these federal workers feel that they are vulnerable and say that they were given signals by political appointees that they should do this, we're talking about a new ball game at that point. And this amazing figure of Douglas Shulman going up to the White House 157 times, three times as many as Katherine Sebelius who is running --

    GIGOT: Let me ask but that because the defense for Shulman from the White House is, well, this was just ObamaCare in which the IRS has a significant new role, so what do you expect?

    HENNINGER: Katherine Sebelius is the secretary of HHS. She was the one who is going to be in charge of implementing the entire thing, went up to the White House about 50 times. He was up there three times as many times as she was. I'd like to know who he was talking to, lower staffers about IRS regulations or maybe people around the Oval Office.

    GIGOT: Collin, we're also seeing lawsuits come out against the federal government by some of the groups that were aggrieved here. Our friend, Cleta Mitchell, has one on behalf of Tea Party groups, they're charging essentially bias enforcement or what they call, viewpoint discrimination. What do you make of these suits and their prospects?

    LEVY: Well, I think these suits are going to be a really important way for us to learn more about what happened. You know, there was a lawsuit filed this week by the American Center for Law and Justice. They brought out a lot of information that people hadn't heard before, notably that it wasn't just in Cincinnati, that there were two offices in California, as well as they had letters from Washington, D.C.

    And they also have made clear in this lawsuit that they had letters that were signed by Lois Lerner that were part of those intrusive questionnaires and, and that these questionnaires have been coming up until one month ago. That completely contradicts the IRS' position that all of this targeting stopped in May 2012. So that's an entirely different ball game.

    GIGOT: All right, lots more to discover here. When we come back with more IRS hearings to come and growing calls for the attorney general to resign, can President Obama move beyond the controversies that are dogging his administration before they do permanent damage to his poll numbers and his agenda?


    GIGOT: Growing calls this week for the resignation of Attorney General Eric Holder as lawmakers raise questions about his role in the targeting of journalists in leak investigations and how truthful he was about the matter when he testified before Congress earlier this month.

    The White House says Holder has its full support. Is the controversy keeping President Obama from moving beyond the scandals dogging his administration? We're back with Dan Henninger and Kim Strassel and Wall Street Journal political diary editor, Jason Reilly also joins the panel.

    So Kim, please explain to our viewers this discrepancy between what Holder said to Congress about what he knew about the Rosen subpoena and now what we've learned later.

    STRASSEL: Here is what Holder told Congress recently. I'm paraphrasing but closely. He said, in regards to the potential prosecution of journalists over disclosure of information, this is not something I've been involved in, that I've heard of or that I think would be wise policy. Now, these two sentences have become a huge issue because as we know, he had already at this point signed a search warrant for James Rosen of Fox News in which the government claimed he was a potential co-conspirator for doing his job. And so that seems to be at complete odds with his statement to Congress.

    GIGOT: All right, Jason, what do you make of this? Are you buying the later week regrets by Holder that they're leaking out that, I'm reconsidering this, you know, I don't like the way this was handled, you know, please let's sit down and discuss?

    JASON RILEY, THE WALL STREET JOURNAL: No. I'm not buying it, Paul. I think you knew exact -- he knew exactly what he was doing and particularly I'm not buying it given that the president wants to put him in charge of the new protocols for handling leaks, even though he has broken the old protocols for handling leaks. So no, I don't buy it at all. I think this is another example of an AG serving as a lightning rod for his boss in the White House. I think that's the role that Eric Holder is playing.

    GIGOT: Do you think, Dan, that he thought, you know, I could get away with this because it's Fox News and the rest of the press corps won't care because it's Fox News because ultimately it will come out because they're obliged to explain this to the press within 90 days. The fact there was a controversy the administration says we did tell them after 90 days, not two years later, which is what we finally found out.

    HENNINGER: They might well have. You recall this was 2010. In 2010, Fox and the White House were in a real battle. There was a lot of tension between the two of them. I think unless -- they might have indeed unless the AP subpoenas had not created this synergy between these two things. Together, the press is pretty upset. So this thing is operating at several levels. You got the press upset here. You got the Republicans thinking to perhaps tag the administration with these scandals. Then there is the legal issue of whether Eric Holder lied or didn't lie to Congress of the that's going to be the most --

    GIGOT: What do you think on that point, the truthfulness to Congress?

    HENNINGER: I think he was untruthful to Congress for sure, but I don't think they'll be able to establish that conclusively in a way that would cause Holder to feel he has to resign.

    GIGOT: Kim, you wrote you thought the press scandal -- the investigation of the press on leaks is actually the administration's biggest vulnerability of all three scandals. Why do you say that?

    STRASSEL: Well, it's not the one that the public is focused on, right. They don't care much about this issue.

    GIGOT: Sad to say, they don't care much about the press, that's true.

    STRASSEL: They're actually happy to some degree to see this happening to the press. Here is the problem for the president. This enraged two groups that are absolutely critical to him and his political success. One is the press, which is in the past largely served as cheerleaders, but now is furious over this and at a time when the administration has these other scandals swirling around. So they're more inclined to dig into them.

    The other is his own liberal activists who have found this offensive not just on first amendment grounds but also has revived a lot of fury over his national security policy, like the patriot act and wire tapping. Some of them are calling for Holder to resign. That could put pressure on Democrats to join that fray.

    RILEY: Well, I think the key is will Democrats join the fray, Kim. But I think you might be more optimistic than I am about the press' ability to stay mad at Obama. This is a group of people that feels a thrill up their leg when the man speaks.