How threatening was government cyber attack to Americans' security?

This is a rush transcript from "Journal Editorial Report," July 11, 2015. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," a massive government data breach claims its first political casualty as the true magnitude of the cyber attack is revealed. So just how big a threat does it pose to personal and national security and what should the U.S. do about it?

Plus, the much-hyped Sanders surge. Is it real? Does the Vermont Senator pose a serious threat to the Clinton machine?

And Rick Perry delivers a frank speech on race and opportunity as he and other Republican candidates court minority voters. Is it a message that will resonate in 2016?

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

The embattled chief of the federal Office of Personnel Management resigned Friday after it was revealed this week that a data breach exposed the personal data of more than 21 million government employees and contractors, not the 4.2 million the agency initially reported.

Here with a look at the extent of the hack and how big a threat it poses to personal and national security is Wall Street Journal columnist and deputy editor, Dan Henninger; and columnist, Mary Anastasia O'Grady; and Bret Stephens.

So, Mary, how big a problem is this? Let's start with the personal security issue, people whose data has been stolen.

MARY ANASTASIA O'GRADY, COLUMNIST: Paul, it's just mindboggling when you think about the kinds of questions that are being asked of these people by the federal government when they're applying for these jobs. They ask all kinds of things about their personal history. Everybody has something that they did in college or they look for relatives and neighbors that might say something that you didn't tell them. I think one of the big problems here is not only might that information might be in the hands of our enemies, but the blackmail problem gets really serious because there's stuff in that file that people don't want made public.

GIGOT: We're talking 19.7 million background investigations. These are often called FBI full field investigations where the FBI agents go out and ask you, your neighbor, your friends, people, well, tell us about Mary O'Grady. Tell us about her. You know, what kind of person was she? There can be -- this data is, you know, it's unvetted. It could be in there. It could be drug offenses for people, financial problems, marital issues, all kinds of stuff that could really be used, if someone wanted to harm you, against you.

BRET STEPHENS, "GLOBAL VIEW" COLUMNIST: Back when he was still a Senator, Daniel Patrick Moynihan wrote a whole book about this. Part of the problem is that we have so -- we have decided that so many people have to come under various classifications, have permission. So many people have to be --


GIGOT: Investigated.

STEPHENS: -- have to be investigated before they can work for government that we've created essentially this pot of intelligence gold for people like, let us say, the governments in China or Russia and elsewhere to exploit. Part of the problem here is that the boundaries of the security state have grown so expansive that they're now vetting 21 million people.  We don't have -- we can't exercise control over numbers that long.

GIGOT: We should add Social Security numbers for all these people, too, Dan.


GIGOT: I would think every one of these people would be entitled to a new Social Security number, as well as access to know what the -- what the hackers might have on them. So let's -- so if you were hacked, say, you should have access to that total file. Would you agree?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Oh, I think so, absolutely. The processing of that would be a tremendous undertaking, and probably OPM would not be able to do it. Katherine Archuleta was assuring people back as far as June that they were on top of this. Obviously, they were not. I mean, she's in charge of one of the most sensitive agencies in the government. What is her experience to run something like that? She was the national political director of Barack Obama's 2012 re-election campaign. She's also the head of something called the Latina Initiative.  She's a politico, right?

GIGOT: Right.

HENNINGER: That is the kind of person they have put in. Paul, this has been happening over and over again. The IRS was hacked. That was hacked by thieves who could use that information to steel and create false tax returns. The Secret Service has experienced a meltdown. Last two years, the Veterans Administration. What is going on inside the federal government? They seem utterly incompetent and it's become dangerous.

GIGOT: What about national security, Mary? How big a threat to not just individuals, but I'm talking about overall security in the United States.

O'GRADY: That's the point about the blackmail. I mean, I think you have so many people who are exposed who are important in our national security work, who are now, you know, their personal lives are exposed. And some of them will not even have done anything but, like you say, Social Security numbers, the testimony of some neighbor that could be damaging to them.

But I think to Bret's point, I think what et cetera really important here, not that it's going to matter in the end, but the federal government is just too darn big, and it's a monster now. It cannot control -- you know, this woman is going to be responsible for this particular breach, but this government is just too much -- has taken on too much.


GIGOT: Is it an act of war, Bret? Is this an act of war?

STEPHENS: Well, it's an adversarial act. We have to respond in an adversarial way. We're not going to succeed by simply being on the constant cyber defense. We have to go on cyber offensive, not just against countries like North Korea that hacked last December of Sony Pictures but also the Chinese. And in a systematic way. The president --


GIGOT: What does that mean?

STEPHENS: Well, look, the president, a couple of years ago, met with Xi Jinping, the leader of China --


STEPHENS: And come to a gentleman's agreement on the issue of hacking.  Jinping wasn't listening to him --


-- for one second in part because of --


STEPHENS: -- China derives from hacking companies of some of our defense agencies and so on. The CIA has taken a huge hit. The CIA has to assume every one of its agents around the world has been exposed.

GIGOT: Yeah, OK.

All right. When we come back, they're calling it the Sanders surge or the Bernie boomlet. Despite the media hype, does the Vermont Senator pose a real threat to Hillary Clinton?



GIGOT: Democratic presidential frontrunner, Hillary Clinton, gave her first national interview of the 2016 campaign this week, dusting off an old Clinton campaign tactic and blaming the vast right wing conspiracy for her troubles in the polls.


BRIANNE KEILAR, CNN CHIEF POLITICAL CORRESPONDENT: Nearly six in 10 Americans say they don't believe that you're honest and trustworthy. Do you understand why they feel that way?

HILLARY CLINTON, D-PRESIDENTIAL CANDIDATE & FORMER SECRETARY OF STATE:  Well, I think when you are subjected to the kind of constant barrage of attacks that are largely fomented by and coming from the right, this has been a theme that's been used against me and my husband for many, many years.


GIGOT: The interview comes as the media continues to hype a so-called surge by Vermont Senator Bernie Sanders. But does the self-avowed Socialist really pose a threat to the Clinton machine?

We're back with Dan Henninger. Manhattan Institute senior fellow and "Wall Street Journal" columnist, Jason Riley, and assistant editorial page editor, James Freeman, also joins the panel.

So, Dan, what's behind the Bernie Sanders surge?

HENNINGER: Well, I would say what's behind it is a lot of dissatisfaction in the Democratic Party with Hillary Clinton.

GIGOT: What's behind that?

HENNINGER: What's behind that? What's behind that is that, in 2008, the Democratic left took control of the party from the Clinton machine, which owned the Democratic Party.

GIGOT: In the person of Barack Obama?

HENNINGER: In the person of Barack Obama. And they over the last six or seven years have come to run the Democratic Party. They do not trust Bill or Hillary Clinton. They think that they will put one foot in Wall Street and one foot in the big money, which they have, and they will not represent left wing -- the left policy agenda. And Elizabeth Warren was going to be there original standard bearer.

GIGOT: That's right.

HENNINGER: She said, I'm not going there. And Bernie Sanders stepped forward. And all of these disaffected left wing Democrats are, for the moment, getting behind Bernie Sanders.

GIGOT: How worried should Hillary Rodham Clinton by the Sanders challenge?

JASON RILEY, COLUMNIST & SENIOR FELLOW, MANHATTAN INSTITUTE: I don't think she has much to worry about. He doesn't have the establishment support.  He doesn't have very broad based support. So the polls show so far it's mostly comes from white states, one of the whitest states in the country.


GIGOT: One percent of Vermont is black.

RILEY: Right.


I think the only states that's whiter is Maine --


So he doesn't have the appeal. I agree with Dan, it's more of an anti- Hillary sentiment here than pro-Bernie Sanders sentiment going on here.

GIGOT: But if he represents -- Bernie Sanders represents the liberal base, which is the beating heart of the party now in the Obama era, James, doesn't that give him a shot perhaps to at least give her a scare, maybe in Iowa, maybe win in Iowa, maybe give her a scare in New Hampshire?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Oh, yeah. That liberal base, that left wing base, you might call it, has gotten much bigger in the Obama era, as we've been talking about. Whenever a candidate is pulling 25 percent, 30 percent in polls in Iowa and New Hampshire, as Bernie Sanders now is, I think it would be a big mistake to dismiss them as a non threat, especially if you are Hillary Clinton and given the liability that is she has a candidate.

RILEY: What he can do, and if there is reason for her to be concerned, is that he can expose some of her vulnerabilities, and bring in a more -- or make the race more attractive to a more plausible candidate. Maybe a John Kerry or Joe Biden gets in because Bernie Sanders has exposed vulnerabilities of Hillary Clinton. I think that's her only deal real --

GIGOT: Why isn't Bernie Sanders himself -- OK, he is taking the risk of running. These other guys are sitting on the sidelines, assuming Elizabeth Warren isn't running. So Sanders is saying but I'm in. And he's taking the lead. Why isn't he a plausible president?

HENNINGER: Well, he's not a plausible president because the Democratic Party, as it now exists, is the party leaders, and so forth, are going to get behind Hillary Clinton.

GIGOT: As they are right now.

HENNINGER: He may win in Iowa. He may win in New Hampshire. He is not going to win in the rest of the primaries. He is not going to get more delegates than she does. You have the party control super delegates. The people who depend on the government distributing money in terms of subsidies and public jobs where the rubber hits the road are going to be supporting Hillary Clinton because she'll deliver it. Bernie is an outlier in that sense. He is a Birkenstock liberal, who is just simply attracting those people and giving them sort of a day in the sun.

GIGOT: So how is he affecting Hillary Clinton's campaign so far, James? I would argue that his doing well in the polls has coaxed her finally to do her first interview. Get out there. She can't stay behind a rope line forever. That's one of the affects. What else -- how else is he affecting it?

FREEMAN: So far, he is pressuring her to move left. I think we're going to find out Monday just how much that pressure has impacted when she rolls out her economic plan in a speech. Now, she said this week on CNN she wants economic growth to be faster and fairer. Now, we like the faster part. I think compared to the Obama era, where it's all about pumping up financial assets and stagnant wage growth for the people at the bottom, I think a lot of people might like the fairer part, too. But it depends on the details. Whether Bernie is going to be forcing her to the left, or perhaps the center, we'll find out Monday.

GIGOT: Do you agree with Jason that he could force somebody else into the race? Maybe a Biden or a John Kerr, assuming John Kerry gets an Iran deal?

FREEMAN: She's vulnerable. I think the polls tell you that, so, absolutely, if he continues to surge. And this is not -- again, this is not just a media craze. And you have lots of voters at his events very excited, very energized --


GIGOT: All right, the ever hopeful James Freeman here.


When we come back, despite Donald Trump's anti-immigration tactics, some GOP presidential candidates are courting minority voters as they make the case for Republican policies. Is it a message that will resonate in 2016?



RICK PERRY, R-PRESIDENTIAL CANDIDATE & FORMER TEXAS GOVERNOR: And I'm here to tell you that it's Republicans, not Democrats, who are truly offering black Americans the hope for a better life for themselves and their children. I'm proud to live in a country that has an African- American president. But President Obama cannot be proud of the fact the prevalence of black poverty has actually increased under his leadership.


GIGOT: Former Texas Governor Rick Perry in a speech to the National Press Club last week making the case that Republican policies have improved the lives of black Americans. Perry is not the only GOP presidential candidate who is courting the minority vote this time around. So can the GOP expand its base in 2016?

So, Jason, the press corps wants to talk about Donald Trump and his comments about Mexicans, but Perry's speech was very interesting for a Republican. What is he up to here?

RILEY: I think he is making the case that liberal governance has not done a lot for black America. And he says just look at the track record here.  Look at cities that liberals have run, from Chicago to Detroit to Washington, D.C., to Baltimore, and look how blacks are faring in these places. And he says the big problem here is poor political representation.

GIGOT: And contrast that with results in Texas.

RILEY: Exactly. And he says they like to talk about income equality but they don't talk about the simple cost of living, what zoning laws have done to San Francisco in terms of driving --


RILEY: High taxes, the difficulty of starting your own business and so forth. He wants -- he thinks blacks would be better off taking advantage of our two-party system, and he's right. The left takes the black vote for granted, and he says -- and he even criticizes the Republican Party --


RILEY: -- for not doing more black outreach. So I think it's very encouraging to see a Republican speaking this way.

GIGOT: Dan, what do you think of this? I mean, I've long thought this is the way Republicans should speak about a lot these issues. Because let's take education. Because these -- a lot of these policies, the Democrats, they just keep these kids in these horrible schools, denying them opportunity. That's a big opening for Republicans, it seems.

HENNINGER: Well, Chris Christie, as governor of New Jersey, has spent a lot of time in black cities in New Jersey making this argument in town halls. Marco Rubio and Jeb Bush are going to make the same argument. What they have to overcome is that the Democrats are running almost totally on identity politics. In fact, they present an identity culture -- blacks, women, gender. And the whole idea is --

RILEY: Class.

HENNINGER: If you're black, if you're a woman, if you're gay, the Republicans are against you, and that's all you've got to know, vote for us.

GIGOT: And they need to polarize the electorate by gender and race.  That's their strategy.

HENNINGER: That's right, yeah.

GIGOT: Turnout in those areas.

But this is also an opportunity i think, James, because it means Republicans should say, look, we're the party that can transcend that and unify -- we have a message for everybody and that can be, I think, for a lot of swing voters, and not a lot of minority voters, a plausible, popular theme.

FREEMAN: That's right. And virtually all of the non-Trump Republican candidates are making more of an effort. You could say almost all of them certainly will be better than Mitt Romney was last time around in reaching out --


GIGOT: Who didn't even want to talk about that?

FREEMAN: Right. Or talked about, in terms of Hispanics, self-deportation and other such things.

But I think the big problem for Hillary or any Democrat is that the winning Democratic coalition of the Obama years is built on massive record-setting turnout and black votes in the 93, 95 percentile. So Republicans don't have to improve much to create an enormous problem for her. Which even if she wins 80 percent of the black vote and it's OK on turnout, it's a disaster politically.

GIGOT: Oh, if Republicans got 20 percent of the black vote, they're going to win the White House.



RILEY: The other thing I think Republicans should do, and Rick Perry knew this, don't go through the black establishment. Don't go through the NAACPs, the Al Sharptons and so forth. Take your message directly to black voters. And I also like the fact he didn't appeal to them as black Americans, per se. He appealed to them as Americans. Talked about what unites us all, safe neighborhoods, good schools, jobs and so forth. I think that's a very important message to send.

GIGOT: Is that going to transcend the arguments like the South Carolina flag, which the South Carolina Republican legislature and governor have now taken down?

RILEY: Well, I will not miss this flag, Paul, but the fact of the matter is that taking down that flag is not going to eliminate one out-of-wedlock birth. It's not going to attack the black homicide rate. It's not going to narrow the achievement gap in school. It will eliminate one excuse that the left will use for all of those disparities, but other than that, it's not going to do much.


GIGOT: All right. Thank you, Jason.

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


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

James, start us off.

FREEMAN: Paul, this is a miss to the Washington subsidy that almost nobody needs. Normally, when the government wants to redistribute wealth, it talks about some critical unmet need that wouldn't be addressed, but for the subsidy. Thanks to Congresswoman Marcia Blackburn and FCC Commissioner Mike O'Reilly, we're learning more about the Lifeline phone program and research the government has been sitting on showing that only one out of 20 recipients of cell phone subsidies would not have phones if it weren't for the subsidy.

So we can say miss to the Obama phone, but some of his predecessors are responsible for the program, too.

GIGOT: All right.


RILEY: Paul, this is a miss for Obama Education Secretary Arne Duncan, who, like the president, has decided to send his children to private schools. Now this wouldn't be a very big deal except for the fact both Duncan and Obama are adamant opponents of school choice, private school vouchers for poor kids. So I think we have a little bit of hypocrisy going on here. Ted Kennedy, the late Senator from Massachusetts, was also a proponent of public schools for other people. He never found one good enough for his own children.



HENNINGER: Well, this is a big miss for federal judge, Gerald Bruce Lee, who ruled this week that the Washington Redskins can no longer claim the Redskins logo as a protected trademark. He said it disparages Indians.  It's ironic. Every Indian logo out there is meant to convey positive force, the Cleveland Indians, Atlanta Braves, Kansas City Chiefs. The next one coming, though, I know what it's going to be. The animal rights people will challenge the Chicago Cubs logo. Those poor little, furry bears are being disparaged.

GIGOT: All right, Dan, thank you

Remember, if you have your own hit or miss, be sure to tweet it to us at JERonFNC.

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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