Shutdown showdown: GOP strategy good or bad politics?

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This is a rush transcript from "Journal Editorial Report," September 21, 2013. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," House Republicans decide that defunding ObamaCare is the price of keeping the government open, setting the stage for a showdown in the Senate. Is it a smart strategy for the GOP?

Plus, a newly uncovered list of targeted groups shows how and why the IRS singled them out for scrutiny.

And two years after Scott Walker's reforms, a look at what's happened to Wisconsin's unions now that public workers have a choice.

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

Yielding to pressure from conservatives, House Republicans decided this week to strip funding for ObamaCare from a stopgap spending bill that would keep the government running past September 30th, setting the stage for a showdown in the Senate next week as a shutdown looms.

Some in his own party have called the move political suicide, but House Speaker John Boehner had this message for his critics and his Senate colleagues.

(BEGIN VIDEO CLIP)

SPEAKER OF THE HOUSE JOHN BOEHNER, R-OHIO: ObamaCare's driving up the cost of health care. It's destroying millions of American jobs. It is a train wreck. It'll have to go. But we've done everything humanly possible over the last two and a half years to make our point and we're going to continue to make our point. It's time for them to pick up the mantle and get the job done.

(END VIDEO CLIP)

GIGOT: Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; Washington columnist, Kim Strassel; and editorial board member, Joe Rago.

So, Kim, does this mean that the Ted Cruz, Republican, the Senator from Texas, who has been pushing this strategy, does this mean the House is now on board the Cruz train?

(LAUGHTER)

KIM STRASSEL, WASHINGTON COLUMNIST: Well, Senator Cruz has won this battle, although what he wins we don't yet know. I mean, here's the reality, John Boehner had no option but to go ahead with this. Guys like Ted Cruz and the Club for Growth and Heritage Action (ph) had suggested this was a matter of principle that Republicans vote for this. So Boehner didn't have enough votes to do anything but have a vote on this. This now goes to the Senate. But, yet, already, we've had Senator Cruz and everyone acknowledge what everyone should've known from the start, they don't have the votes to pass this in the Senate.

GIGOT: All right. So --

STRASSEL: So Harry Reid is going to pass it out and send it back to the House and we're looking at potential shutdown.

GIGOT: And we don't know what the House will do there.

But is there, Dan, is there a strategy here that you can detect to achieve some kind of outcome? And what is that outcome?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Well, the outcome presumably is to repeal or somehow overturn --

GIGOT: I know, but I've talked to these people privately, Dan. They don't think they're going to -- even Ted Cruz and Jim DeMint and these guys, they say, well, we're not going to be able to defund ObamaCare.

HENNINGER: Well, Ted Cruz has said publicly that he thought he was going to some sort of generate grass-roots uprising the way people were molded against going to war in Syria and he was going to do something similar here. ObamaCare, whatever feelings are about it out there, it was not going to produce a grass-roots uprising. So to the extent he has a victory, it's going to be a pyrrhic victory.

Now my understanding is that Harry Reid is going to do is hold a series of votes. A couple of these procedural votes are going to allow the Republicans to vote for the measure that deletes funding for ObamaCare. But after the second procedural vote, he's only going to need 54 votes to pass more amendments. And that is when they will vote to simply strip it out --

(CROSSTALK)

HENNINGER: -- send it back to the House. The House is, I think, going to vote for the clean continuing resolution and move on, having made this, quote, unquote, "point."

GIGOT: I'm not so sure that that might -- I mean, that might be true, but are you sure they can get a clean resolution through? Or are we back to the place where they're going to send another bill with the de-fund ObamaCare thing over to the Senate and we do go to a possible shutdown?

JOE RAGO, EDITORIAL BOARD MEMBER: Right, well, they're transferring the leverage to the Senate where the main Democratic goal is to delete the sequester, increase --

GIGOT: These are the automatic spending cuts that have been taking place and are already law. And the Democrats don't like that. They want to get rid of that.

RAGO: Right, and they will if the House can't get 218 votes for a bill.

GIGOT: What do you think is going to happen?

RAGO: We're headed towards a shutdown. Everything's getting folded into the increase in the debt ceiling where it's a hostage Republicans can't shoot, so they're losing their leverage. And the guys who are pushing this plan just do not have a rational end game here. They're going to lose everything on health care and they're going to lose on domestic spending.

GIGOT: So you're not very optimistic about this.

But, Kim, the best case scenario the Republicans say, look, if it goes to a shutdown, the voters will blame the president for doing it because he's so insistent on keeping ObamaCare. When the public turns on the president, then they'll force some kind of concessions on the Democrats, maybe a delay for a year on ObamaCare. Is that the best-case scenario you can see here?

STRASSEL: It's the best-case scenario but it's also wishful thinking, Paul. There's not one shred of evidence out there in polls that if a shutdown comes, the president is going to take the blame for it. He'll have the media on his side. He'll have the bully pulpit. He will put this on Republicans' shoulders. And in the best-case scenario, Republicans will share the blame which ought to be the last thing they're looking for as they go into this next election hoping to take back the Senate and keep the House.

GIGOT: What's the worst case scenario, Dan?

HENNINGER: The worst case is the shutdown and then this tsunami of bad publicity washes over the Republicans. They have no strategy for dealing with that.

Paul, I kind of doubt it's going to happen. Senator Mike Lee, of Utah, who is associated with Cruz on this, has said, shutdowns are bad, it's not worth shutting down the government over this bill. I think they're going to step back from the brink.

GIGOT: From the brink. But if they don't and some Republicans insist on that kind of a showdown, could they put the House majority in jeopardy?

HENNINGER: I think they could put the House majority at risk with this strategy.

GIGOT: In 2014.

Is that a possibility, Joe?

RAGO: I think so. And I think that's what President Obama wants to happen here. I think it's the only kind of disruptive event that could change the status quo.

(CROSSTALK)

GIGOT: Go ahead, Kim, yeah?

STRASSEL: You know, there is one more possibility here. There is now talk about when Senator Reid sends us back to the House, stepping back from de-fund and instead putting something in this bill that might indeed give Republicans some leverage over Democrats. For instance, a provision that strips this special subsidy that the White House just decided to keep dispensing to congressional staff for their own health care. Democrats are very scared of something like that. They don't want to see that subsidy go away. Perhaps if you put that in a bill, it might increase Republicans' negotiating leverage in upcoming fights like, for instance, over the debt ceiling, to get changes in ObamaCare.

GIGOT: Interesting twist, Kim. And we'll be watching to see if that happens.

All right. When we come back, new evidence in the IRS targeting scandal as a just-released list reveals what groups were singled out by the tax agency and why.

(COMMERCIAL BREAK)

GIGOT: Fresh evidence this week in the IRS targeting scandal as newly uncovered documents showed the tax agency flagged political groups, the vast majority of them conservative, based on the political views represented in their literature, raising concerns about so-called anti- Obama rhetoric, inflammatory language, and emotional statements made by the nonprofits seeking tax-exempt status.

Wall Street Journal senior editorial page writer, Collin Levy, joins us with more.

So, Collin, this has been percolating behind the scenes as we've been all talking about Syria and the shutdowns and everything else. What are we learning about -- that we didn't know before?

COLLIN LEVY, SENIOR EDITORIAL PAGE WRITER: Paul, I think what we got this week was a much fuller account of exactly which groups were targeted and why. And I think we're also getting a very good sense now of what the IRS internal process was.

This document that you're referring to is basically a list that Washington IRS officials were keeping in 2011 that looked specifically at Tea Party groups and a lot of other conservative groups, and made specific notes about whether or not those groups were engaged on, quote, unquote, "propaganda," what kind of status they were seeking, other areas of concern. You mentioned the emotional statements, also issues of specific comments about whether or not their websites had comments about President Obama.

By the way, none of those made any reference to comments about conservative candidates. So there is a sense they were looking for anti- administration rhetoric.

GIGOT: And this was reported by USA Today, correct?

LEVY: Correct. Yes, correct.

GIGOT: So we don't know who the source was for this for this, but presumably it came -- somehow got there through some of the investigators.

So, Collin, what's your sense of what this means? Does this really show once and for all that the Washington headquarters knew about this from the beginning?

LEVY: I think it's absolutely clear the -- some of the numbers that were out of the House Ways and Means Committee this week. I think they did an accounting that showed that 83 percent of these groups overall that were targeted were Republican or conservative-leaning groups. Only 10 percent were less leaning groups. And of those, the actual approval rate for the tax-exempt status was much different for the conservative groups. The conservative groups were seeing approval rates that were less than half, about 45 percent. The left-leaning groups were seeing approval rates of about 70 percent. That's a really big difference.

GIGOT: Yeah, that's a pretty shocking statistic.

Kim, the Government Oversight Committee, House committee, came out with the interim report on this in the investigation this week. Any good information in there?

STRASSEL: The big point of that report, Paul, was the idea that after a number of interviews with IRS employees and documents pointing out that what this shows is that IRS officials we now know were highly aware of the political environment that was going on in 2010 when all of this started. Aware that the president was out there every day, talking about shadowy or shady conservative groups, suggesting that these groups somehow were walking on the wrong side of the law, and that these employees not only knew that there was -- they heard that call and clearly were answering it but, in addition, they were looking for cases that they felt would get media attention. And there were several references to this in documents. So --

(CROSSTALK)

STRASSEL: Clearly, know that political environment was influencing the IRS in that.

GIGOT: So even if there wasn't a direct order from anybody in the White House or treasury that said do this to these groups, the implication of what we know so far is that these employees at the IRS heard this political environment, heard what the president and the Democrats were saying, and said, you know what, yeah, we'll do that, we'll look into this on our own.

STRASSEL: Yeah. Look, when the president of the United States is out there suggesting that there is an entire group of organizations that potentially are violating the law, people listen. And in this case, the IRS was listening.

GIGOT: Implications, Dan?

HENNINGER: Well, look, the president in his State of the Union speech in 2010 denounced the Citizens United decision, which allowed corporations to participate in political campaigns, while the Supreme Court was sitting in front of them. We now know, from the lady at the center of this, IRS official, Lois Lerner, said explicitly that they were concerned that these Tea Party groups were going to challenge the IRS on Citizens United and then, in turn, allow them to start accepting political money. They were absolutely obsessed with the idea that Citizens United was going to be challenged by the Tea Party groups and were looking for any possible reason to keep them at bay. And I think that's what has driven this entire process.

GIGOT: Speaking of Lois Lerner, Collin, you came up with e-mails from Lerner -- between Lerner and her staff that also illuminated an angle here. What happened?

LEVY: Yeah, the e-mails with Lerner basically showed that she was very closely watching this in February 2011. And also that, you know, she actually made some sort of off-hand comments about the role that the FEC might play in help sort of aid all this.

I want to mention one other thing though, Paul --

(CROSSTALK)

GIGOT: The Federal Election Commission is the FEC.

LEVY: Sorry.

GIGOT: That's right. Yeah, go ahead.

LEVY: Of course. I'm sorry.

The one other thing that happened this week, too, that was interesting was we also learned that in addition to the targeting that happened on the front end, that after a lot of these groups were approved by the IRS, a lot of conservative groups were then flagged for follow-on sort of surveillance to make sure that they were -- you know, they were actually being watched by an examinations unit in Dallas that was making sure that they were comporting with the tax-exempt status that they had sought.

GIGOT: All right.

LEVY: So there was actually a second layer to this -- now.

GIGOT: All right. This is all fascinating stuff.

And we should point out that Lois Lerner declined to testify to Congress. She's welcome on this program any time. But she's not speaking about this at this time.

When we come back, is big labor in trouble? Wisconsin sees a sharp drop in union membership following Governor Scott Walker's reforms. And the AFL-CIO votes on a controversial new plan to boost its sagging membership. We'll have both stories next.

(COMMERCIAL BREAK)

GIGOT: Some new signs of trouble for big labor as membership woes plague unions across the country. In Wisconsin, state unions have lost tens of thousands of members since Republican Governor Scott Walker's reforms became law in 2011 as public workers opt out of representation. And at its annual convention in Los Angeles this month, the AFL-CIO voted to invite nonunion workers to join its ranks in an effort to bolster sagging membership roles.

So, Collin, what's been going on in Wisconsin here two years after these reforms took effect?

LEVY: Yeah, it's no question the unions are taking a big hit here, Paul. The news recently was that the Kenosha Teachers Union was de- certified after missing a key deadline in that process. And that was big news because Kenosha was seen as a big union, real union stronghold. And that's something that's been going on across the state. You've seen the Wisconsin Education Association Union has lost about half of its members since 2010.

GIGOT: Right.

LEVY: AFSCME has also seen its members fall. The "Milwaukee Journal Sentinel" reported that it has seen the members fall from 9,000 in 2010 to

3,500 in 2012. That's just a huge blow.

GIGOT: Right.

LEVY: This is affecting union finances and morale, for sure.

GIGOT: AFSCME is the Association of County Municipal and State Workers.

So what's behind this? Is it the fact that the union now no longer has a monopoly on bargaining power?

LEVY: Yes, for sure. Scott Walker's Act 10 reforms basically gave all -- it basically required workers to recertify their union by -- with a

51 percent majority vote every year. So the union now has to basically earn its members' respect.

GIGOT: Well, I can see, Kim, this is why the unions fought Walker's reform so dramatically because they really were worried that if they no longer had government putting them in the cat-bird seat in negotiating authority that when union members get a choice, pay dues, don't pay dues, they often say, you know what, I think I won't pay dues.

STRASSEL: Well, and that's why you see, for instance, such a ferocious protest among unions for the movement in recent times -- some of the states that have been attempting to move to Right-to-Work states, which also give workers a lot more freedom to not pay dues to a union, for instance.

And some of this also gets to what we were talking about this AFL-CIO vote that happened recently at convention to open up its doors to nonunion members. Part of this is a reflection of the fact that all across the country, union membership is dwindling. As recently as 20 years ago, about

20 percent of Americans were unionized. Today, that number is closer to 11 percent. So now they're opening up their doors to other groups, alliances of groups, like the NAACP and the Sierra Club, in an attempt to keep their strength.

GIGOT: Right. I want to talk about that.

But the nature of the union movements is also changing, Dan.

HENNINGER: Yeah.

GIGOT: The private-sector membership down to 6.6 percent. Public union membership still up at about 35.9. Now that's even down from 37 percent a couple of years ago. So the power within the union movement has shifted to public workers not to the old manufacturing industries.

HENNINGER: Well, there's no question about it. And that's what the Democratic Party has now aligned itself with. I argue that that's why the Democrats simply vote for more public spending because their support comes from the people who are going to spend that money, these public employees.

But to Kim's point, what you've got to keep in mind here is a union is ultimately about a bargaining unit, right?

GIGOT: Sure.

HENNINGER: If you belong to a union, you have a bargaining union --

GIGOT: It's what it --

(CROSSTALK)

HENNINGER: -- you bargain for higher wages.

GIGOT: It's about getting better pay, better benefits, more job security. That's their pitch.

HENNINGER: But these people who are being invited into the AFL-CIO, the Sierra Club, women's clubs, even student clubs --

GIGOT: You're invited, Dan.

HENNINGER: I'm invited.

(LAUGHTER)

But they have no relationship to a workplace or a bargaining unit. The idea is that the union will now just become a political force in American politics. A lot of members of traditional unions are not happy with --

(CROSSTALK)

GIGOT: Why not?

HENNINGER: Because it moves -- it undermines the central idea of a union, which is to bargain for higher wages. And they don't like the idea they're going to be associated to this progressive club. Some of them politically don't want to be associated with that.

GIGOT: Well, if you're with environmentalists and they kill the Keystone Pipeline that kills thousands of union jobs.

HENNINGER: The Labor's Union International Unit is publicly opposed to aligning with those environmental groups because they want to work on those pipelines.

GIGOT: All right, thank you all.

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

(COMMERCIAL BREAK)

GIGOT: Time now for "Hits and Misses" of the week.

Collin, first you today.

LEVY: Paul, this is a hit to the Fourth Circuit Court of Appeals, which ruled this week that "liking" a political candidate on Facebook is constitutionally protected free speech under the First Amendment. Chief Judge William Traxler wrote that a "like" is basically the Internet equivalent of putting a political yard sign on your front yard, and that's something that the Supreme Court has ruled is constitutionally protected free speech. So this may mean your news feed on Facebook is now going to get clogged up with political commentary, but it's good news for the Constitution.

GIGOT: Great. Can't wait for that.

Joe?

RAGO: Paul, the Census Bureau put out new data this week on real income growth in the states, or lack there of. On average, a 6.6 percent decline through the country. 11 percent in Ohio, Florida, Michigan. But there was one economic bright spot, Washington, D.C., which saw a 23 percent increase, beating out all other states. So a miss for America's government boomtown.

GIGOT: 2011 that was?

RAGO: This is over the 2000s.

GIGOT: OK. All right.

HENNINGER: Well, Paul, ObamaCare starts October 1st. And in preparation, Cleveland's biggest employer, the renowned Cleveland Clinic, announced it's going to have to cut $300 million out of its budget. It's going to offer early retirement to quite a few of its employees. And then that may be followed with layoffs. Now clinics like the Cleveland Clinic Medical Centers are the same in Pennsylvania and other states. And if they start getting hammered like this, I think people are going to greet ObamaCare with a lot of raspberries.

GIGOT: OK, Dan, thank you.

And remember, if you have your own "Hit or Miss," please send it to us at jer@FOXnews.com. And be sure to follow us on Twitter at JER on FNC.

That's it for this week's show. Thanks to my panel and to all of you for watching. I'm Paul Gigot. Hope to see you right here next week.

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