This is a rush transcript from "Journal Editorial Report," December 22, 2012. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," as the residents of Newtown, Connecticut, bury their dead, tough questions about how America treats the severely mentally ill, and protects society from them.

And House Republicans' Plan B to avoid a fiscal crisis collapses. Is there a Plan C or are we headed off the cliff?

And top State Department officials testify on Capitol Hill about the Benghazi attack. But we'll have to wait a little longer to hear from Hillary Clinton. Could her role in that debacle hurt her plans for 2016?

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

As the nation copes with the shooting deaths of six adults and 20 children at an elementary school in Newtown, Connecticut, efforts turn now to preventing the next tragedy, with President Obama appointing a task force to study gun violence, and members of Congress calling for stricter gun control measures.

But my guest this week says the heart of the problem is not the availability of weapons, but the abundance of individuals with severe mental disorders who are not being treated.

Dr. E. Fuller Torrey is the founder of the Treatment Advocacy Center and author of the "Insanity Offense: How America's Failure to Treat the Seriously Mentally Ill is Endangering Its Citizens."

Dr. Torrey, welcome. Good to have you here.


GIGOT: You've written for us you're not opposed to gun control, but the access of mental ill people to guns is a bigger threat. How many people are we talking about across the United States?

TORREY: It's both a gun problem and a mental illness problem. We have about seven million severely mentally ill people in the United States at any given time. Of these, half are not being treated at any given time.

And about 1 percent or 70,000 are potentially dangerous at any given time.

And we're not treating those people.

GIGOT: How do we get around to treating them? We don't know, for example, that Adam Lanza really was mentally ill. We haven't seen if -- we don't know if there was a formal diagnosis. So how do we identify those people and make sure they get treatment?

TORREY: Most of the potentially dangerous people we can identify.

You can walk into the police station in any small town in the United States, say, who are the potentially dangerous people that you know about?

And say, well, John over on Fourth Street, we have to go and visit every two weeks because he gets a gun out and threatens to kill his neighbors.

We know basically who the potentially dangerous people are. But we often, because the way the laws are written in most states, we can't do anything until they actually act. Until they've actually committed a crime.

GIGOT: Well, explain that. Why to we have to wait if police departments and others know? When you say the laws -- the way the laws are written, how does that work? Or in this case, not work?

TORREY: Paul, these are state laws --

GIGOT: Right.

TORREY: -- so they vary from state to state. Connecticut, as an example, has among the most stringent, restrictive commitment laws, so the only way you can get somebody treated in Connecticut is if they are overtly a danger to themselves or others. You can't treat them because they are potentially, because they have exhibited dangerous, dangerous behavior in the past. You have to wait until they actually do something. They also -- Connecticut's a good example of one of only six states that does not have assistant outpatient treatment. Which means you can treat the person living in the community on the condition -- they can live in the community on condition that they take the medication. Connecticut doesn't even have a law like that.

GIGOT: So, but who makes that decision when you say assist outpatient treatment. For example, in the case of an Adam Lanza, who would make that decision about the fact -- saying, look, you would need to take this treatment, otherwise, you're going to have to be incarcerated?

TORREY: The petition could be filed by the mother or by another family member or by a member of the police, for example, if they thought the person was dangerous. They then would have to be examined. I'm talking about a typical state.

GIGOT: Right. Sure.

TORREY: And they would have to be -- they then would have to be examined and they would have to have a court hearing. They would be defended by a lawyer. So, it's a judicial process that then says, yes, you have exhibited dangerousness. We think you may be dangerous.

And remember, Paul, half these people don't know they're sick. They won't take medication voluntarily --

GIGOT: Sure.

TORREY: -- because they don't think there's anything wrong with them. And they then are basically adjudicated by a judge that says, yes, you can continue to live at home or wherever you're living on the condition you take medication. If you don't take medication, we have the legal right to put you in the hospital and stabilize you.

GIGOT: These laws seem reasonable on its face as you explain it. Why -- what is the opposition to this kind of assisted outpatient treatment?

TORREY: Very strong opposition from the Civil Liberties Union. From


GIGOT: The ACLU, American Civil Liberties Union?

TORREY: ACLU, Bashlon Center (ph), here, in Washington, has been a major impediment. And a lot of people believe that nobody should ever be treated involuntarily.

Well, that flies in the face of the fact that we treat people with active tuberculosis involuntarily when they won't take medicine. We also restrict people who have Alzheimer's disease and don't know they're sick. So, we do this for other conditions, but we have a lot of trouble thinking through this clearly for people with severe mental illness.

GIGOT: You mentioned in your op-ed for us that the number of activity psychiatric beds for severely mentally ill patients has declined in the last 50 years from more than half a million to fewer than 50,000. I guess this is part of that movement you're describing against incarcerating the mentally ill. But you're saying that that decline in those beds has endangered the American public?

TORREY: It has, because if you try to get somebody who needs hospitalization into a hospital today, it's virtually impossible. As one of my colleagues says, it's easier to get somebody into Harvard than it is a mental hospital.

We have really only one out of the 20 beds that we had 50, 60 years ago, given the increase in population. 95 percent of the beds that we used to use were treating people with severe mental illnesses are now closed.

GIGOT: What are the states that do this well? You said Connecticut doesn't do it well. But which states do? What's the evidence that they're succeeding.

TORREY: The states that are using assisted outpatient treatment -- New York is a good example. They're using it, not widely, but they're using it. And the studies have shown that assisted outpatient treatment decreases hospitalization, decreases arrests, and time people spent in jail. And there are studies from both North Carolina and New York showing that this kind of treatment will decrease episodes of violence as well.

There's now a recent study from a county in California showing it's also cost effective. For every dollar you spend on this program, you save up to $2.

GIGOT: And you can do this -- you say, the evidence is such, you can do this without abusing the civil liberties of people and incarcerating them for months or years on end, or treating them against their will for months and years on end.

TORREY: Well, you're treating people against their will sometimes for long periods of time, although they're living in the community, if they have no awareness of their illness.

GIGOT: Right. OK.

TORREY: If they really think the CIA is sending those voices in their head and they have no awareness of their illness, and the CIA is telling them to do various things, these people need to be treated for a long periods of time, but they can be done so while they live in the community.

GIGOT: OK, Dr. Torrey, thanks so much for being here. Fascinating insights.

Still ahead, the House Republican Plan B to avoid a fiscal crisis collapses. Is there a Plan C, and is President Obama willing to make more concessions, or are we headed off the cliff? Our panel weighs in when we come back.


GIGOT: House Speaker John Boehner's effort to pass fallback legislation to avert a fiscal crisis collapsed Thursday night when he was forced to pull his so-called Plan B from the House floor after some conservatives balked at provisions to let tax rates rise on those making over $1 million dollars. Is there a Plan C in the offering or is America headed off cliff?

Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; editorial board member, Mary Anastasia O'Grady; and "Political Diary" editor, Jason Riley.

So, Jason, where do we stand right now with the collapse of Plan B?

JASON RILEY, POLITICAL DIARY EDITOR: Well, it's no fun being John Boehner right now. He's still in a tight spot. And the concern that the Republicans have is that Obama's hand will strengthen if we go over the cliff and tax rates go up.

But I really think the buck stops with the president here. When you go into the negotiating sessions, Paul, and you're expected to make concessions, but you're expect to get something in return. And Boehner made a major concession on rates. And the president is giving him nothing in return to take back to his caucus and say, this is what happened in the horse trading. It's an all or nothing. Obama seems determined to humiliate the opposition.

GIGOT: Boehner made two concessions. The first was $800 billion on the table in revenue but don't raise rates. And then when the president said no, you're got to raise rates, he said, OK, I'll make a concession on rates. He made an offer first that said we'll vote for a million dollar tax increase on those making more than a million dollars, but give me something in return. Then, those negotiations went nowhere. So then John Boehner went to Plan B.

And I mean, I think you sense, at least when I talk to Boehner's people, the enormous frustration with the president that they're not going him anything to take back to his conference members and say, you know what, this is worth violating your tax pledge. And that's the problem. So, it seems to me that, you know, he's -- the president's almost saying, you know, go over the cliff, don't care, I know I can blame you and so what?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Well, the -- excuse me -- the atmosphere is so toxic at this point, Paul, that -- we've talked about the cliff as though the two sides are trying to negotiate something for the good of the economy. But the Republicans in the House, at this point, believe that a large part of the negotiation is to disadvantage them politically, and that the president has a track record of having done that.

You remember back when Ryan's budget was introduced and you had Medicare reforms in it? That was followed by these TV commercials about literally throwing grandma off the cliff.

Obama never turned -- shut down his political campaign. And we know now a lot of what happened the last four years was fed into the presidential campaign apparatus.

If you're a Republican, you've got to be sitting there saying, if I make a step wrong on Medicare reform or one of these issues, it's going to be used against me in the 2014 election, and I'm not going there.

GIGOT: Yes. That's what they just didn't want to take that step, because they figured then they'll suffer. It will be very bad vote. And so, I mean, John Boehner is in a very tough spot, as Jason said, because, ultimately, if you can't deliver the votes on the floor, you either have to turn it over to the Democrats and pass something with a handful of Republicans and Democrats, which may be what happens, or you end up going over the cliff.

MARY ANASTASIA O'GRADY, EDITORIAL BOARD MEMBER: You know, I think the main problem for Boehner is actually not what he does, but how -- who it gets blamed on. That's what he has to work harder on, communicating to the American people there are three branches of government. You know, we didn't elect President Obama to be the dictator. We have another branch which -- where the Democrats lost.

And people who voted for Republicans were very concerned about the size of government, Paul. I mean, they've allowed this to be a debate about tax rates, but the real problem, I think, for most Republicans and people who voted for them is that they see how the cost curve is just bending up at a rate that is just unsustainable. I mean, the country cannot survive the kinds of increases in entitlement payoffs that will occur if there's not reform.

GIGOT: Yet, there's, at least in my reporting, the president has offered only one substantive entitlement reform and that's a change in how we calculate inflation for benefits and tax brackets. And that was agreed to last year. It's really minor in the scheme of things. Nothing else that is sustainable.

RILEY: I think the president is overplaying his hand, Paul. He's going to need Republican votes next year to raise the debt ceiling. He'll need Republican votes if he wants other second-term agenda items, like immigration reform. And humiliating them now is not going to make that any easier next year.


HENNINGER: Well, he could certainly -- the fiscal cliff is, in some sense, artificial. The president has it in his power to extend the current tax rates for everybody into next year, say, for six months, and then get down to some serious negotiations after the Congress reconvenes.


GIGOT: But, Mary, should Republicans be willing to raise rates? Say, we lost the election. You know what, we're just going to -- we just have to do it.

O'GRADY: Well, I think that if the president had put something that was like $1 of tax increases for every $4 that he was cutting, then there could be an argument for doing that. But he's not there.

GIGOT: All right, Mary, thank you.

Still ahead, four State Department officials removed from their post after a report about the U.S. consulate attack in Benghazi.


GIGOT: A scathing report released this week blames systemic failures in leadership and management deficiencies at the State Department for inadequate security at the U.S. consulate in Benghazi before the September 11th attack that killed Ambassador Chris Stevens and three other Americans. In testimony before Congress this week, two top advisors to Secretary of State Hillary Clinton vowed to do better and to improve security at U.S. diplomatic posts around the world. Clinton herself was scheduled to appear, but is reportedly recovering from a concussion sustained last week and has postponed her testimony until January.

We're back with Dan Henninger and Jason Riley. And Wall Street Journal foreign affairs columnist, Bret Stephens, also joins us.

So, Bret, what did we learn this week about the attack that's new?

BRET STEPHENS, FOREIGN AFFAIRS COLUMNIST: Let me correct you. This was not a scathing report.


This was a report that said there were failures in middle management. It says, in its last sentence, that no disciplinary actions are warranted. Four officials did resign. It gives us a timeline of what happened, which largely corresponds with what all of us know by now happened in Benghazi. It tells us that the CIA had no information about impending attacks, even though there was a dozen CIA officers on the ground. This is not a scathing report.

GIGOT: Well, what is it.

STEPHENS: This is a whitewash report. This is --

GIGOT: This is a whitewash? You would go so far as to say this is a whitewash?

STEPHENS: Yes. This is a report -- First of all, aside from the first sentence, Hillary Clinton's name is never mentioned. This is a report that says, at the State Department, certain boxes weren't checked. There wasn't proper coordination between this bureau and that bureau. There should have been more proactive management. You've heard this report, reports just like these a million times. There are 25 recommendations. Hillary Clinton says they are all going to be implemented. You can rest assured that in 12 years from now, we'll be scratching our heads and wondering why it these recommendations didn't prevent the next attack.

RILEY: Paul, the panel, which was appointed by Secretary of State Clinton --

GIGOT: Right.

RILEY: -- did not interview her before reaching the conclusions. So we have a panel appointed by the secretary that conveniently clears her of any wrongdoing.

GIGOT: Well, it doesn't. It just doesn't mention her.

RILEY: Right. So basically --

GIGOT: No individual.

RILEY: No individual.

STEPHENS: It doesn't mention her, the second tier --

GIGOT: So these four individuals --


STEPHENS: These are assistant secretary of state level --


GIGOT: Or lower levels.


GIGOT: So they were basically forced -- I mean, are they just scapegoats?

STEPHENS: They fell on their swords and four, you know, who were responsible, supposedly responsible for embassy security. Fell on their swords.

But the report itself says no disciplinary -- there's no reason for recommendation for disciplinary action. That's the last line of this report.

So, what you have here is basically saying, look, you know, there were management failures, Paul, and they had tragic consequences. We know the State Department is a large bureaucracy with eyes on many, many countries. Terrible things happened. We hope they won't happen again.

You know what? We had the same thing in Nairobi and Dar as Salaam in 1998, another report with recommendations as to how to better secure these sorts of facilities. Didn't happen. 10 years from now, we'll be revisiting this same sort of story.

HENNINGER: Well, what they've done here is reduced this to a bureaucratic screw-up. And the issue that hasn't been addressed is what was U.S. policy in Libya, specifically eastern Libya. The CIA was in eastern Libya, and they were there, we know now, because Al Qaeda was using that part of the country to recruit people into the terrorist organization. Now, what was the U.S. State Department and the Obama administration's policy towards Libya?

Between the lines of this report suggests it was reflected in a kind of light footprint. They thought Libya was going all right. So I think there was a distinct break between the CIA and the State Department over that part of the country. That is what has to be figured out.

GIGOT: That light footprint was, in fact, explicit policy. Maybe not explicit, but we basically said, after Qaddafi fell, we washed our hands of Libya more or less. You had a few State Department and CIA people there. But we more or less said the Qataris and the UAE, United Arab Emirates, they would take care of arming things, and we let them arm the Islamists because that's who they support.


GIGOT: And now the Islamists are gaining in strength against an elected government.

STEPHENS: But this is reflective of a broader pattern of a sporadic attentiveness that this administration shows toward the foreign policy challenges that confront. It's broadly reactive, not proactive. And you know, basically, said, hey, Libya, we've been there, done that. Qaddafi is gone. On to what might be happening in Cairo.

GIGOT: So what are the implications for Secretary Clinton and her -- and I assume -- we all assume she'll run for president.

STEPHENS: Well, this -- if Secretary Clinton, I think, could not have hoped for a better report than the one that she got, because, let's face it, management failures, as we said, management screw-ups happen all the time. This was very regrettable. We've been there, done that. It's time, as the saying goes, to move on. She's going to like what she finds in this report because it has no specific accountability for her.

GIGOT: All right.

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


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

Dan, first to you.

HENNINGER: A hit to Newark Mayor Cory Booker, who announced this week that he probably will not challenge Chris Christie for the governorship next year. Instead, he's thinking of running for the Senate, challenging Frank Lautenberg, a Democrat who is 88 years old. If this works out that means New Jersey keeps Chris Christie as the governor, which I think is the best job for him. And we might get reform-minded Democrat in the Senate.

GIGOT: All right.

HENNINGER: Good deal.

GIGOT: Mary?

O'GRADY: A hit for a new report that finds that U.S. teen smoking has dropped to a record low. I think we should celebrate this, not just for the results, but also because it shows us that we have the ability to discourage drug use, in this case, nicotine, by regulating, taxing, and stigmatizing the drug use. And it's too bad that our culture, particularly Hollywood, wouldn't try the same thing with other drugs.

GIGOT: All right.


STEPHENS: This is a hit to the human race. Congratulations, it's the weekend and you are alive. The world has not ended. And, no, I'm not referring to the Mayan apocalypse that supposedly took place on Friday. I'm referring to the fact that we had yet another climate summit in Doha, Qatar. Nobody paid attention. The climate moves on. The latest estimates are that the temperatures might rise 1 degree Celsius by the year 2100. I think you're all -- you might now live to see that, but you're definitely going to live to see another day.

GIGOT: So, Mary, there's a role for government to play in deterring and dissuading certain kinds of personal behavior?

O'GRADY: I think that the government can regulate things that we agree, as a society, we don't want. And we do that with cigarettes, we do that with alcohol, and we should do it with other drugs.

GIGOT: All right. Thanks, Mary.

And remember, if you have your own "Hit or Miss," please send it to us at jer@foxnews.com. And follow us on Twitter, @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. We hope to see you right back here next week.

Content and Programming Copyright 2012 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2012 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.