• With: Joe Rago, Kim Strassel, James Freeman, Allysia Finley

    RAGO: Job lock is supposed to be about the flexibility to switch jobs or start your own business. Here they are giving people an incentive not to work, to leave the labor force or to work less. I don't think that is a good thing. They are also saying these aren't lay-offs, it's just people choosing not to work. There's really no difference if you think about a job as a contract between a seller of labor and a buyer of labor. This is really reducing the number of jobs, reducing the number of workers, and harming growth over long term.

    GIGOT: This calculation the budget office made does not include the jobs employers might not offer because they said -- because of the mandate or because of the penalties that increase costs. They said they couldn't include that calculation because it was hard to model and the law has been delayed for a year.

    RAGO: Right. Too hard to calculate so we're just going to ignore that. I think this is a significant underestimate and we'll see much larger harms over the longer term.

    GIGOT: Kim, what are the political implications of this going forward? Republicans have been making a big issue of this this week. But Democrats have been fighting back ferociously, as we've heard. Is this just going to be one of those academic debates or will this have real political consequences?

    STRASSEL: No. The importance of this report is what's been happening up to now, is you've been -- Democrats have been swathed by headlines that have to do with the practical effects of the law. Again, how this is harming individual Americans because of the way it's changed their health care. What this adds is now a big macro-economic argument that the Republicans are also going to be leveling against Democrats this fall that

    the law is undermining the economy.

    And given how fragile the economy is, that is something that will resonate with voters.

    GIGOT: OK, Kim, thanks so much.

    President Obama insists the IRS did not specifically target conservative groups apply for tax-exempt status, that it was simply an oversight, but new evidence released this week may prove otherwise. That's next.



    OBAMA: That's not what I'm saying. That's actually --


    BILL O'REILLY, HOST, THE O'REILLY FACTOR: No, no, but I want to know what are you saying. You're the leader of the country.

    OBAMA: -- corruption.

    O'REILLY: You're saying no corruption?

    OBAMA: No.

    O'REILLY: None?

    OBAMA: No. There were some bone-head decisions out of --

    O'REILLY: Bone-head decisions. But no mass corruption?

    OBAMA: Not even mass corruption. Not even a smidgen of corruption.



    GIGOT: That was President Obama affirming to Bill O'Reilly that there was no corruption whatsoever within the IRS when it came to targeting conservative groups applying for tax-exempt status. But new evidence suggests the IRS knew what it was doing as far back as 2012. An e-mail from the Treasury Department's Ruth Madrigal to a group of IRS officials, including Lois Lerner, who used to run the tax-exempt organization unit, says, "Don't know who in your organization is keeping tabs on (C)4s. But since we mentioned potentially address them off plan in 2013, I've got my radar up." And "This seemed interesting." Interesting for sure.

    But other than sparks flying, what is going to come of this?

    Kim, let's start with you. You were following the hearing this week.

    What did we learn that we didn't know before?

    STRASSEL: The Obama administration has this new line that there was no corruption, no targeting, this is just all caused by some low-level employees in the Cincinnati office of the IRS, who didn't understand a confusing law on governing 501(c)4 groups.


    GIGOT: Right. But did we learn something that contradicted that this week?

    STRASSEL: Yes. The entire hearing, in fact, contradicted that. We found out the administration appears to have been thinking about and working on these regulations to govern 501(c)4 behavior going back to 2011. We also heard House Ways and Means chairman, Dave Camp, lay out all his evidence, yet again, as to why that entire narrative is false, given the fact you have plenty of employees who have now testified that this was run out of Washington, and that there was no confusion involved in this at all, that this was all about some sort of political agenda from D.C.

    GIGOT: There is new e-mail evidence that links the interest in the Washington headquarters in these tax-exempt status outfits. And do we have any doubt that the decisions on delaying these tax-exempt decisions were made in Washington?

    STRASSEL: None. We do know there was a Cincinnati line screener, who initially looked at one of these and flagged one of these Tea Party applications and said this seems to be something that would get some media attention, given all the news about these groups. Sends it off to superiors. After that, this operation was run out of Washington, out of Lois Lerner's office and out of the chief council office at the time, who is one of the only political appointees at the IRS.

    GIGOT: Lois Lerner has resigned, of course, I think, with a pension, if I'm not mistaken.

    FREEMAN: Yes.

    GIGOT: And she took the Fifth before Congress. If nothing is amiss, there is not a smidgen of trouble here, as the president suggests, why would she take the Fifth, James?

    FREEMAN: Good question. I think he now owns this problem because, last year, when the scandal came out, he was keeping his distance from it.

    He's now repeating this falsehood that it was rogue employees in Cincinnati. As Kim said, this week, and going back to last summer, a lot of sworn testimony from IRS officials saying, no, it was run out of Washington.

    I also think what was interesting this week was interview excerpts released by House investigators from former IRS chief, Steve Miller, saying all this focus on (c)4s in terms of new rule making was not the result of some flaw in the law. It was not the bureaucracy. It was coming from politicians, specifically Democratic Senator Carl Levin on the Hill.

    GIGOT: Kim, the IRS has issued, as you suggested earlier, a new draft regulation on (c)4s, which we should say are nonprofit groups that can participate in politics as long as their effort doesn't exceed 49 percent of their work. This rule has created a lot of controversy. I think it's more than 20,000 comments now. The vast majority of them negative against this draft rule. The Republicans have asked the IRS's new chief, John Koskinen, to withdraw that regulation. Is that going to happen?