This is a rush transcript from "Journal Editorial Report," June 8, 2013. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," the NSA's data mining programs. Another example of government overreach or a necessary tool in the fight against terror?

Plus, the hits keep on coming for the IRS. Cincinnati workers claim Washington officials helped direct the Tea Party probe. And Congress goes after lavish spending at the embattled agency.

And President Obama hits the road to tout his health care overhaul and he claims that premiums go down in the nation's largest state. Should you believe that?

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

Outrage from both the left and the right after the U.K. Guardian newspaper reported Wednesday that Verizon has been handing over phone data for all of its customers to the National Security Agency under a secret court order. Subsequent reports reveal that the monitoring is broader, including data from all three major phone companies, as well as credit card and all Internet records. Critics are calling the wide-scale surveillance another troubling example of government overreach but the White House calls it a critical tool in the fight against terror.

Joining the panel this week, Wall Street Journal columnist, Mary Anastasia O'Grady; editorial board members Matt Kaminski and Joe Rago.

Let's get some facts on the table here, Joe. The government is collecting under this court order meta data, telephonic meta data. What is meta data?

JOE RAGO, EDITORIAL BOARD MEMBER: Meta data is basically data about data. For a phone call, it is which number called which number, how long the call lasted, and that kind of information. Information about the call, but not the content of the call. So it is not eavesdropping. It's not the lives of others. It's essentially just --

GIGOT: It is not what I'm saying to you on the phone?

RAGO: Right --


GIGOT: It's just the fact that I called you, what my number was, and what your number was. And why are they doing this? What do they hope to get out of this? Critically, with the breadth of the surveillance.

RAGO: What they are looking for is, essentially, they are looking for the needle in the haystack, right, and this is the hay stack.

GIGOT: The terrorists' activity?

RAGO: Right. So what they're looking for is what's normal. They are saying, hey, hey, hey. And when there is a deviation from that normal baseline, that's the needle. So it's much like credit card companies are on the lookout for fraud. Maybe you go on a shopping spree in a totally new city, they might flag that as unusual or suspicious.

GIGOT: Because maybe your credit card has been stolen.

Mary, what do you think of this? What is your view of that kind of data gathering?

MARY ANASTASIA O'GRADY, COLUMNIST: Paul, when I look at a program that collects this information about what American citizens are doing, run by the federal government and specifically the Obama administration, I think, what could go wrong?

You know, honestly, we had a federal government program that let high-powered weapons be carried over the Mexican border in the drug war that was designed by our Justice Department. We had ObamaCare. Don't worry, you are going to be able to keep your doctor. We've got it under control. We had Benghazi. I don't have to go into the details of that. We've had the IRS event. We had the surveillance of a FOX News reporter. You have to see this in the context of this administration. This is why people are upset, because they feel like you have an administration that is not accountable for the misuse of power when it happens.

GIGOT: But --

O'GRADY: Even if it doesn't come from the top.

GIGOT: But the administration would say, look, this had been going on in the Bush administration, so it's not us. In fact, we're better than the Bush administration because we put this all, subject this all to a court order and the judge has signed off on this.

O'GRADY: I think the reach was broader than it has been before. And I think that, you know, it is a continuation in a way that -- people feel they were mislead this administration feels it is going to be less intrusive in our lives. We had the director of National Intelligence, in an open hearing, say there wasn't any such thing going on. So people feel like they have been lied to.

GIGOT: Matt?

MATT KAMINSKI, EDITORIAL BOARD MEMBER: But in the other cases, there has been clear abuse or competence in government authority. In this case, there is no victim here. This was a very narrow program. Yes, we got all of the numbers, as Joe was explaining, you need that data to be able to find --


KAMINSKI: But they were trying to find al Qaeda terrorists either in the country or outside the country using very sophisticated electronic tools. If the government were to use that information to do anything else, to tap your phone, they have to go back to a judge and say, we found this, we have probably cause to think someone has done something, is doing something bad, can we look into their e-mail or listen in on their phone calls?

GIGOT: Do you think there has been abuse on this, Mary, or is more the concern that there could be abuse of this data?

O'GRADY: Oh, yes. No, for sure, it is the "could be." I think the -- the reason why I go through this track record is that in each of these cases, the higher ups, the management says, hey, we didn't know what was going on. So either they are not doing their jobs or they are lying. But that is very disconcerting.

GIGOT: But the Congress has approved this and been in on this. In fact, Saxby Chambliss, the Republican on the Senate Intelligence Committee, said just about every member of the Senate has known about this for years and then you have the FISA court, which doesn't reassure me because I don't think judges have any particular expertise about this.

KAMINSKI: Right. That was supposed to be the check on this type of surveillance.

GIGOT: Right.

KAMINSKI: This is during the Bush years. They say you are doing this with a warrant, you're going after these people without controls. Now, everything is being run through this secret FISA court, subject to unelected judges, and that was supposed to fix the problem.

O'GRADY: There is a question about what good it does, I think. You have the Tsarnaev brothers on the watch list, and they weren't being watched.

GIGOT: They could have found them out perhaps by looking at the YouTube video --


-- which didn't require this kind of, this kind of --

O'GRADY: Yeah, they're collecting this mountain of evidence, which could be abused, and then, as I said, what good is it?

GIGOT: Mike Rogers, the House Intelligence chairman, said it had stopped an intelligence threat. Now, we don't know that specifically, but Roger's honest in my experience.

KAMINSKI: Absolutely. But this is -- it's important to remember, the total context here. The backlash is because he had these other abuses. The other reason that people are pushing back is because President Obama himself is inviting a bush-back. He's continued Bush policies while, at the same time, criticizing them. He gave a speech last month where he said to Congress it is important to revoke the authority that the president got after 9/11 to attack Al Qaeda because that war is winding down. He's trying to limit himself or asking Congress to do so. So people are taking that invitation and attacking programs that are working.

GIGOT: You -- briefly, Joe, this does not worry you?

RAGO: I don't think so. You are starting to see a break on the right. But the merit to this programs that Congress knows about in classified briefings will sustain it.

GIGOT: All right, thank you all very much.

When we come back, another bad week for the IRS as Congress zeroes in on the agency's lavish spending and Cincinnati workers implicate Washington officials in the Tea Party targeting.


GIGOT: Well, things went from bad to worse for the IRS this week with reports that two employees in the agency's Cincinnati office told congressional investigators that superiors in Washington helped direct the targeting of Tea Party groups. This, as IRS officials faced a grilling on Capitol Hill over lavish spending on employee conferences, a whopping $30 million over three years.

For more, I'm joined by Wall Street Journal assistant editorial page editor, James Freeman; Wall Street Journal's editorial page writer, Collin Levy; and Washington columnist, Kim Strassel.

Collin, you followed the hearings this week. What did we learn as those Tea Party groups testified on Capitol Hill?

COLLIN LEVY, EDITORIAL PAGE EDITOR: Well, we heard some amazing first-hand details this week, Paul. We heard that the National Organization for Marriage has its donor list leaked to the Human Rights Campaign for Political Enemies. We hard that the Coalition for Life of Iowa was told that it had to pledge not to picket Planned Parenthood if it wanted to get its 501(c) status. And we heard from the Tea Party of Wetumka, Alabama, which said that it had to wait 459 days before it heard anything from the IRS. And then it heard directly from Lois Lerner that it had more intrusive questions to answer.

GIGOT: So is there a larger theme emerging from these anecdotes, which are really troubling?

LEVY: The larger theme is that this is something that came from Washington, but in which the taxing power of the federal government was being used to further a political agenda.

GIGOT: James, you went down to Washington and talked to Cleta Mitchell, who is one of the lawyers representing these Tea Party groups, and a real expert on campaign finance. What did you learn?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: First of all, that this reform -- excuse me, that reform has not occurred get. A lot of IRS brass likes to pretend that this was some problem that has happened and now it's stopped. A lot of these groups are still getting the treatment from the IRS, still haven't heard back on their applications. Also, it just underlines her clients -- and she directly heard from people in Cincinnati. What they apparently told Congressman Issa's committee is Washington was running the show. These were not locals running amok.

GIGOT: Kim, these two officials, these Cincinnati officials are saying, look, we weren't -- this wasn't something we ginned up in Cincinnati on our own. We were taking direction. That really brings it back to Washington and the Treasury Department, which supervises the IRS.

KIM STRASSEL, WASHINGTON COLUMNIST: They were. And one of women pointed out that the lawyer who was directing her back in Washington, she said he micromanaged her to such an extent that she found it demeaning. That was the word she used. Which also leads to the conclusion, Paul, that this was unusual activity as well, that not only was direction coming from Washington but this was out of the ordinary.

GIGOT: Collin, one of the defenses that the administration is using is that liberal groups were targeted too. Did we have any evidence of that this week?

LEVY: No. I think what came from these interviews with the Cincinnati employees were not just the idea that they were micromanaged, which Kim's point is exactly right, but also that there were some very specific details. They sent seven cases to Washington. They said specifically that that went up there. And also, that they know that the targeting started at the request of Washington. So that was -- the original advice, in March 2010, was coming from Washington D.C.

GIGOT: Kim, you wrote a fascinating time line this week in your column about how remarks from the president and senior Democrats, in 2010, going out for the next couple of years where they, where the president deliberately mentioned, explicitly mentioned the so-called secret groups, even linked them to foreign funders unspecified, and that kind of tone set from the top, do you think that could have been what galvanized IRS officials?

STRASSEL: There comes a point, Paul, where these things become more than coincidental. You say, "mention," actually this was a major campaign theme of the president, his administration, most of his allies, at exactly the time that the IRS was putting out its first official "be on the lookout list," telling agents to flag Tea Party groups. The president and his allies almost on a daily basis were out there saying "a threat to our democracy, these so-called social welfare groups, they're posing as social welfare groups, they might be run by foreign corporations." So you've got a president of the United States suggesting these groups could be breaking the law. And now you have the IRS at exactly that time investigating them. What a link.

GIGOT: James, where do you think this goes from here?

FREEMAN: Sadly, we are not seeing a lot of evidence that the Department of Justice is taking this all that seriously. We are going to have to rely on congressional investigators and private lawsuits to try and pull out what exactly happened and how gave the order. I think Kim has written very effectively about how the president was setting a tone that labeled these people as bad guys. We want to establish within that bureaucracy or above the bureaucracy who gave the order to say we're going after conservatives.

GIGOT: Collin, briefly, the party planners at the IRS --


-- who spent all this money on the conference, is that a side show or is this making the point that that 5 percent sequester cut in the budget, that they have room to do that?

LEVY: Yeah, well, it's good thing to see that someone was having fun between 2010 and 2012. Right? This really was recent history and I think any effort to dismiss this as being from a prior era is a little bit troubling in terms of whether or not the culture is really changing.

GIGOT: He is the acting commissioner of the IRS who is supposed to be doing the cleaning up.

All right, Collin, thanks.

Thanks to you all.

When we come back, selling ObamaCare. Supporters are touting reports out of California and other states that rates will go down under the new insurance exchanges. Should you believe it?


GIGOT: President Obama was in San Jose, California, Friday, touting the merits of his health care overhaul. His trip comes on the heel of a report last month, claiming that insurance premiums will actually go down under the Golden State's new exchange, but is that really the case?

We're back with Kim Strassel. And Wall Street Journal editorial board member, Joe Rago, also joins the panel.

Joe, initial reports, premiums going down. Now we say, not so. What is the story?

RAGO: What the California folks did is they didn't compare the new ObamaCare plans to the plans that are already sold on the individual market today. What you've got is all these regulations and mandates coming in that are going to increase the cost of insurance.

GIGOT: New regulations.

RAGO: New regulations and mandates. What they did was they compare it to plans where those regulations and mandates had already been imposed.

GIGOT: Ah. So they were comparing it against some other market, not the current one in California.

RAGO: Right. And if you have individual health care insurance in California today, you are going to be looking at premium rates that are 20 to 30 percent higher, double, in some cases, over 100 percent. So it was a bait and switch, and probably a deliberate one here.

GIGOT: You really think that maybe these people were trying to essentially fiddle it in a way that --

RAGO: California is a flag ship of the Affordable Care Act. They are the ones that embraced it early one. They are doing all of the work. They are not like the other states that have said to the federal government, you take care of this. They are the leader here. This is the bellwether.

GIGOT: Dan Kessler, the Stanford Health economist, who often writes for us, wrote for us this week that one of the other problems with what California is doing is that they are narrowing the network of doctors and providers who will be available to you under certain kinds of insurance. So that you won't have the choice that you thought you had. And that can reduce costs somewhat because certain providers may charge less. But it does means that you are not going to be able to get the doctors you necessarily want.

RAGO: Right. If you're in Los Angeles, Cedar Sinai is not part of any exchange plan. And so I think people are in for a pretty rude awakening. Maybe they like their doctor. They are not going to be able to keep their doctor.

GIGOT: So Cedar Sinai is out of that exchange and you have an exchange product, you'll have to pay extra to go to a Cedar Sinai doctor, something like that?

RAGO: Or they won't treat you at all.

GIGOT: OK, Kim, let's turn to the politics of this. Despite all this, the president and Democrats are saying, they're telling everybody, and journalists, look, we are going to embrace this health care reform. We're going to run on it in 2014. What is the strategy there?

STRASSEL: Well, this has been coming from the White House. You saw it with the president's speech. But they have been also been giving briefings to Democrats, making the argument, look, yes, there are going to be big problems with the rollout of this but it's only going to be worse if we, as a party, flee. You have to wrap your arms around this. And you have to tout the benefits of the law, in particular, things that we think sound good to the public, things like the pre-existing conditions aspect, or the fact that younger people can stay on their parent's policy for longer.

The problem that Democrats are having is there really is just no good news anywhere to be talking about. And the example that you mentioned, in California, first, they ran and said, look, premiums will be lower. That got debunked. Now they had to turn around and say, well, actually, yes, they will be higher but it will be OK because you will be getting better health care. They're twisting themselves into pretzels here to try to spread some good news, but it is just not working for them.

GIGOT: They are really worried, Joe, that a lot of people will not sign up for the exchanges. Particularly, the young people, who, guys like you, think you are going to live forever.


We know better, when you're my age. But, you don't want to pay that money because you can spend it on other things, what the insurance will cost. And that will screw up and will mess up the whole actuarial tables on insurance.

RAGO: Right. And what the insurance industry calls this, the technical terms is "adverse selection," where you just get a lot of sick people going --

GIGOT: Going into the exchange, getting covered.

RAGO: -- no one young and healthy to off-set those costs, so costs keep rising, then people keep dropping out. Then you get an insurance debt spiral. I think that is really what they are worried about here, just a huge spike in costs beyond what the regulations and mandates are going to cause on their own.

GIGOT: That is why they are saying, please, get out there. They're having all these people go out and recruit and try to get young people. And we are going to see more of this from the president, I assume.

RAGO: Absolutely.

GIGOT: All right. Joe, thanks very much.

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


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


KAMINSKI: Paul, here's a miss to Turkish Prime Minister Recep Tayyip Erdogan, who has, for the last week, been facing very big, genuine pro-democracy protests in Istanbul. But he doesn't understand that people are asking him to be more open and democratic. He's come out making very combative speeches. The markets have hated it and he's made a small crisis much worse for himself and for one of leading the Muslim countries.

GIGOT: It fits his pattern.


O'GRADY: Paul, this is a hit for the TSA which has finally decided --

GIGOT: Transportation Security Administration.

O'GRADY: Security Administration, you know those guys. I know them very well.


They finally decided -- too well. They finally decided that knives, baseball bats, golf clubs and, my favorite, Irish hurling sticks --


-- will not be allowed on carry-on on airplanes. Now, I understand they are looking for explosives, but if they are going to strip search granny, I think the least they could is keep these kinds of weapons away from us also.

GIGOT: All right, Mary, thanks.


RAGO: Paul, a hit this week for one of our colleagues, Dorothy Rabinowitz. This week, on the "Journal's" website, she put out a video attacking the Bike Sharing Program. She said it --

GIGOT: In New York City.

RAGO: -- it grimed New York City, quote, "the all-powerful bike lobby." The video went viral and Dorothy was subjected to all kinds of abuse, mainly from the left, which just proves that American politics lacks a sense of humor and irony. A hit for an uncompromising and indomitable journals.

GIGOT: And those of us who work with Dorothy daily understand what a pleasure it is to do so.

All right, 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 JERonFNC.

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

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