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All-Star Panel: Did IRS profiling scandal reenergize the Tea Party?

This is a rush transcript from "Special Report," June 19, 2013. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

SEN. RAND PAUL, R - KY: I am, like most Americans, horrified that my government has gotten out of control and is persecuting people for their religious and their political beliefs, and it needs to end and it needs to end now.

SEN. TED CRUZ, R - TX: Do we trust the IRS with ObamaCare and our health care? We need to abolish the IRS, and together we can get it done!

(END VIDEO CLIP)

CHRIS WALLACE, ANCHOR: A taste of the Tea Party rally outside the Capitol today, protesting IRS targeting of conservative groups and we're back now with the panel. Question -- what did today's rally tell us about the state of the Tea Party now as compared to back when it became a force in national politics in 2009 and 2010? Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It tells you that harassment, persecution, as with historically religious sects, increases the fervor. I think this is going to help to revive the Tea Party. It never went away but it was at its peak in the 2010 election, 2009 and 2010. But I think it tells the world, Americans, that it's alive and well.

And, you know, it's interesting the history of how the elite media and, you know, elite opinion has looked at them. It began by ignoring them. Then it ridiculed the Tea Party as a bunch of yahoos, and then it demonized them as guys who were out to shoot you. There is a shooting in Aurora and then who does ABC and NBC look at? It looks at the list of Tea Party people to see if the name will match. So it's assumed it's -- angry white male. And now all of a sudden it's been harassed. So you only harass an element as was harassed by the IRS if it's important. I think it is important. I think it's a good influence on our politics. And this is a way in which it's reviving itself.

WALLACE: You know, Juan, the rally, of course, was to protest the IRS targeting of the Tea Party and other conservative groups. And it came on a day when FBI director Robert Mueller testified before Congress you, of course, remember that recently he was asked about a week or so ago about the FBI's criminal investigation of the IRS, and he seemed to know nothing about it including who was running it. Today, he got a second chance to make a first impression, and he knew exactly how many agents were on the case, 12.  Where do you think -- not the investigation because we don't know that, but where do you think the IRS scandal stands at this point?

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, I think that it is, you know, largely an effort right now to politicize it by people like the Tea Party and efforts to gin up some enthusiasm. The rally today was very real but in terms of numbers did not match anything that we had seen before from Tea Party advocates.

And the kind of rhetoric that we saw at this rally, you know, the idea that we are going to do away with the IRS, I mean, you just have to think, is Senator Cruz pandering to people? Does he think that they are that stupid?  It's just ridiculous.

It's been a very crazy week on Capitol Hill with Speaker Boehner really under siege on this whole business about the Hastert rule because you have people who are Tea Party advocates saying unless you have a majority of Republicans willing to it back an immigration bill, don't do it. You have seen this vote on the abortion. Last week was a vote on undoing the DREAM Act. Before that was a vote on the Affordable Healthcare Act. This is all Tea Party driven. And I think it really tells a larger tale, Chris, about what's going on, the divide within the Republican Party. But when you see Rand Paul and Red Cruz, two Tea Party senators out there, I think you are looking at presidential candidates, and I think it really doesn't say much about the state of the Tea Party movement.

WALLACE: Jonah, I'm going to give you two questions to answer. First of all, I would like to you respond if you will to brother Williams' comments about the Tea Party. But also we got this new IRS controversy. We find out now that they're going to give $70 million in bonuses to IRS workers despite the fact that there was a directive from the office of management and budget in the Obama administration saying, hey, we have got a sequestration. Stop the bonuses. So have at both?

JONAH GOLDBERG, AT LARGE EDITOR, NATIONAL REVIEW ONLINE: Both. First of all, there are lots of very serious economists who think that you could have a much better tax system if you did something along the lines of abolishes the IRS or at least the income tax, which is at the heart of what the IRS does in American life.

That said, I think the Tea Parties have morphed. They have evolved a little bit. But one of the reasons why this IRS story will stay in the news is precisely because of stories like this. We were told under the sequester puppies wouldn't have homes and we would all starve to death. And now all of a sudden they might have $70 million to give out bonuses to the most scandal-ridden agency in America. That keeps the issue alive.

What also keeps the issue alive, and I think this is where Juan was right, is simply politics. And I don't mean that in the pejorative sense. You have the 2014 elections coming up. This is manna from heaven for the Republican Party as an issue. It's a legitimate issue. The administration has deceived the public on how it's handled it and how it's unfolded.  And so that makes it, even if Obama didn't order the IRS to do that, how this came to be as a legitimate political issue. And even if the investigation doesn't lead to some impeachable offense, we're going to be hearing about this for a very long time.

WALLACE: Briefly, we have about 30 seconds left, what does the fact that apparently the IRS is saying these are mandatory, we have to give these bonuses out, what does that tell you about the power of the IRS workers' union?

GOLDBERG: This is the national treasury union, and it's amazing which is -- whose PAC has given 96 percent of its money to the Democratic Party and is deeply partisan, gave over $1.5 million to Barack Obama. This also plays into the issue environment about the control of public sector unions.

WALLACE: That's it for the panel. Much more to say about all of this.  Stay tuned to see what happens when a world leader is caught red-handed at the G-8 summit.

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Special Report, hosted by Bret Baier, airs on Weekdays at 6PM ET on Fox News Channel.