This is a rush transcript from "Journal Editorial Report" March 8, 2014. This copy may not be in its final form and may be updated.

STUART VARNEY, GUEST HOST: This week on the "Journal Editorial Report," tempers flare on Capitol Hill as Lois Lerner declines once again to answer questions from Congress. So why is she talking to the Justice Department instead?

Plus, vulnerable Democrats breathe a sigh of relief as the administration announces yet another Obamacare delay.

But if you thought that was the only trick up the president's sleeve this midterm election year, wait till you see his budget.

Welcome to the "Journal Editorial Report." I'm Stuart Varney, in for Paul Gigot.

Fireworks on Capitol Hill this week as former IRS official, Lois Lerner, once again refused to answer questions at a House Oversight and Government Reform Committee hearing. Committee Chair Darrell Issa says contempt charges against Lerner could come as early as next week.

But some Democrats are crying foul, with ranking member, Elijah Cummings, calling the House's investigation into the targeting of Tea Party groups one-sided and un-American.


REP. ELIJAH CUMMINGS, D-CALIF., RANKING MEMBER, HOUSE OVERSIGHT AND GOVERNMENT REFORM COMMITTEE: I am a member of the Congress of the United States of America. I am tired of this.


CUMMINGS: We have members over here, each who represent 700,000 people. You cannot just have a one-sided investigation. There is absolutely something wrong with that and it is absolutely un-American.


VARNEY: And joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; Washington columnist, Kim Strassel; and editorial page assistant editor, James freeman.

Dan, to you first.

As I mentioned earlier, Lois Lerner refuses to answer questions from Congress but she is talking to the Justice Department. What is with that?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: The issue is what part of the Justice Department is she talking to? An issue like this would normally be handled by the Public Integrity Section of the Department of Justice. It's always been done that way. She is not talking to them. She is talking to the Civil Rights Division, which is run by Barbara Bosserman, who is an Obama partisan. That makes you wonder, what is the point of her talking to the Department of Justice?

I think what is going on here is that the Obama people understand they are on very thin ice with this IRS investigation because abuse of power is not merely a political expression. It's a federal felony. You start pulling on that string and finding other people who conspired to impede a federal investigation, a lot of individuals are going to have very significant legal and political exposure. Lois Lerner is the one they are all hanging on to.

VARNEY: James, it sounds like a harsh question but I'll phrase it, is the fix in?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: I think it's a reasonable question. I talked to Representative Jim Jordan this week, who has been leading, along with Darrell Issa, this investigation. He is saying Lois Lerner has been given a grant of immunity by the administration and its signals. He's saying the president's FOX News interview Super Bowl Sunday saying there is not a smidge of corruption here. A few weeks before that, in our paper, you had the FBI official saying there are not going to be criminal charges here.

The question is what is she really afraid of here? Why can she not talk? Her lawyer said one of the reasons that she is reluctant to do a public hearing is because of threats against her. But, of course, all of the anger against her is because she's taken the Fifth, hasn't come clean, won't tell the story.

VARNEY: Didn't her lawyer say it's over? That was the exact expression, it's over.

HENNINGER: Yeah. I'm referring to this past weekend when there was a hint from Darrell Issa that she might testify again. The explanation was threats. But, of course, just the truth and an honest accounting to the American people would probably diminish a lot of the anger here.

VARNEY: Kim Strassel, what is with contempt charges may come next week?

KIM STRASSEL, WASHINGTON COLUMNIST: There is no recourse. This is the second time Lois Lerner has been called in front of a congressional committee. As Dan and James laid out, it really is the only place where a real investigation is happening at this moment. It's certainly not happening at the Justice Department. Yet, she refuses to speak. If you bring contempt charges, you can set the ball in motion to potentially compel her to have to testify in front of a court. Republicans, I think, you could see the frustration there in that clip you ran. They are simply stymied at this point, not just with her refusal to talk, but the IRS refuses to turn over documents they need. Some view this as the only logical next step in trying to get something that will help finally answer some questions.

VARNEY: Do you think those questions will finally be answered, Kim?

STRASSEL: It's a hard -- that is a very hard question. Everyone is clearly -- look, something's gone on and everyone knows there is a lot of liability out there. Mrs. Lerner is going to fight this as hard as she can.

And I think the biggest problem for Congress is that they are doing magnificent work on these investigations. But they lack, for instance, Justice Department ability to bring charges against people. Where this all ends in the end, it may end up being more political than a question of legal system.


HENNINGER: Let's understand the political stakes. No one made up the idea that these conservative groups were investigated. They were. Many were put out of business. If this all goes away, what that means is the Internal Revenue Service has become a weapon of politics. It can be used as an instrument of politics by an administration routinely against his political enemies. It has been done before, but not on this level. It has become institutionalized. That's what the stakes are here.

VARNEY: James?

FREEMAN: I agree. It really goes to the heart of our democratic process. If a president or his party or people supporting him can go after his opponents, I think as far as how we get to the truth, if justice won't act on it, there is private litigation out there. Jim Jordan saying, let's have a special prosecutor. He suggests the I.G. at Justice, Michael Horowitz, to take on that role.

VARNEY: Kim, you could say that the president has won. And he's gotten away with it because the rules governing political activity by nonprofits have been changed. And changed to the point where Tea Party groups cannot function as they used to function. I believe, however, Kim, there are exceptions to those rules.

STRASSEL: The joke of this is the administration is now using the targeting that happened as an excuse to formalize this targeting via these new rules. The IRS has put up these rules, will institute a crackdown on the very same Tea Party groups that were targeted in the first time, restricting their speech.

In the meantime, as we head into this midterm election season, think of all the other nonprofits under the IRS tax code that are not going to be held under that restriction, for instance, the unions, the greatest supporters of Democrats out there in this midterm election.

VARNEY: James, the effect on this year's elections that this IRS scandal will be prolonged -- the scandal won't be prolonged, but the suppression of it will be prolonged beyond those elections. Do you think that's going to happen, James?

FREEMAN: I think the big issue in the elections is ObamaCare. I think people are working on finding ways to get their voice heard even despite this action. But this is really about the health of our republic, I think, more than this particular election outcome.

VARNEY: All right, thanks, everyone.

When we come back, just in time for the midterm elections, another ObamaCare delay. But will the move really help vulnerable Democrats this November?


VARNEY: Another big ObamaCare delay this week. And you can bet some endangered Senate Democrats are breathing a sigh of relief. The White House announced Wednesday it would allow consumers to keep health insurance plans that don't meet the requirements of the Affordable Care Act until 2016, pushing the next wave of cancellation notices until well after the midterm elections.

We are back with Dan Henninger and Kim Strassel. Wall Street Journal editorial board member, Joe Rago, also joins the panel.

I'll start with you, Joe.

To the politics later, first question to you is, all these delays, where does this leave the insurance companies?

JOE RAGO, EDITORIAL BOARD MEMBER: It's dramatically increasing risk and uncertainty in the industry. There's been about 37 changes to the Affordable Care Act so far. Most of them unilateral administrative actions of dubious legality. All this churn, this ad-hoc political improvisation is getting built into the premium structure. Over time, it's probably going to increase premiums going forward next year. And it's raising questions about the larger viability of this law. Is this going to be reopened, what are the rules going to be going forward?

VARNEY: The money is just not coming into the insurance companies. It's just not there, is it?

RAGO: No. We've seen much lower sign-ups than were predicted. A lot of people who were expected to sign up just aren't.

VARNEY: Kim, it is a delay, an extended delay. I'm sure it's designed to help endangered Senate Democrats. Will it?

STRASSEL: The useful thing about this announcement is that the administration actually laid out exactly which Democrats it was designed to help and that they came out and said this fix "was engineered with the consultation of," and then they listed the names of various vulnerable Senate Democrats, like Kay Hagan in North Carolina, Mary Landrieu in Louisiana. These are Senators who have all been in trouble because they are on record of saying, if you liked your health plan, could you keep it. When they were caught with the problem that that was not the case, they have all been out saying, we are going to put legislation that says you can, indeed, keep your plan if you want it.

So the administration put this out in order to save them from having to push something through Congress and look as though they've been proactive.

VARNEY: Kim, I believe that various Democrats were named in the delay announcement. I'm going to run a brief commercial clip from an anti-Kay Hagan ad and get your response to it.

Roll it.


ANNOUNCER: Since friends often say and do the same things. Take Barack Obama and Kay Hagan. In Washington, Senator Hagan votes with President Obama 96 percent of the time. 96 percent. They even talk alike.

PRESIDENT BARACK OBAMA: If you like your health care plan, you'll be able to keep your health care plan.

SEN. KAY HAGAN, D-N.C.: If you've got health insurance now, you're happy with it, you can keep it.

ANNOUNCER: Now we know the truth. They told us the biggest lie of the year. More than 473,000 North Carolinians have lost their insurance policies because of ObamaCare.


VARNEY: Kim, that's pretty sharp-edged stuff. Do you think they can get around that?

STRASSEL: That is an ad from Americans for Prosperity. They have been out there just pounding a lot of these Democrats. In particular, Mrs. Hagan, who is on record something like 23 or 24 times in various video clips saying, if you like your health care plan, you can keep it. You can't run away from this stuff. For the average American out there, who has indeed lost their plan, and who is being confronted with a range of options that have worse care at higher prices, this is something that is going to keep coming back into their head, regardless of whether or not the administration now puts forward more of these administrative delays.

VARNEY: But, Dan, the president this week said ObamaCare is working as it is supposed to.

HENNINGER: The same fellow who said, if you like your insurance plan, you can keep it?


HENNINGER: Stuart, most of the country has been living through one of the most awful winters in living memory. What we know is it's going away in the spring, for sure. This is not going away. I mean, there were two studies that came out. MacKenzie (ph) said, apparently, only 10 percent of the uninsured have signed up or possibly have signed up for this program. The Urban Institute did a study, interviewed 8,000 people. 23 percent of the uninsured have no idea ObamaCare exists. Have never heard of it. It's incredible to think, but that is the case.

VARNEY: Never heard of it?

HENNINGER: Never heard of it.

VARNEY: Never looked at a plan?

HENNINGER: Never looked at a plan. They are off the grid.

And this administration is not going to be able to hit their numbers to bring sufficient people into this insurance pool to make it function, which as Joe was suggesting, is going to cause the insurance piece of this to degrade over time and it's going to go right into that election in November.

VARNEY: There's only three weeks to go to the deadline, end of March. We were told, going into this, that we were going to sign up or at least try to cover 30 million people who were uninsured. We are not going to come close to that. Not even close.

HENNINGER: Sure. They can't force people into the system. You have to show up somehow and they simply are not.



RAGO: Well, going forward, I think we are going to raise questions about the viability of this law. The state exchanges continue to malfunction. The federal exchange is not working as it's supposed to, despite assurances to the contrary. The question is, what's left? It's just -- It's just --

VARNEY: What is still in place? Can you tell me that?

RAGO: It's the subsidies. Everything else is completely plastic. I think they are setting up --


VARNEY: We've forgotten the taxes.

RAGO: The taxes, as well. And the regulatory precedent they are setting up here is that this is just going to change no matter who is in power. It is a very important political question for the Senate in the coming midterm. And then the presidential election, this is going to be thrown right into the middle of the presidential election.

VARNEY: Oh, yes, it is.

All right, thanks, everyone.

Well, an ObamaCare delay isn't the only election-year trick the president has up his sleeve. Wait till you get a load of his budget. The details are coming up after this break.


VARNEY: In case you missed it, President Obama released his 2015 budget proposal this week, revving up those tax-and-spend engines once again in an effort to turn out Democrats this fall and turn the debate away from ObamaCare. Will it work?

We're back with Dan Henninger, James Freeman and Kim Strassel.

Dan, I just call it a tax-and-spend budget, a way around and into a political game plan for this year. Where am I going wrong?

HENNINGER: You're not going wrong. I mean, welcome to 1933. Spending is going up --


-- 21.4 percent. It's a $4 trillion budget. Revenues are up and he has created an array of programs. We can talk about that.

But I think the political point to make here, Stuart, is that, yes, they are trying to send money out to these constituencies because midterm elections are all about turnout. At the moment, the Democrats are in trouble. They have got to get their base somehow energized, give them some reason to go to the polls. The Republicans are very energized. I think this is just one piece of it, creating new programs for preschool and so forth. Give the Democrats something else to talk about other than ObamaCare.

VARNEY: Kim, there's one thing stood out to me when I looked at this budget proposal, and that is the earned-income tax credit. That is a check from the treasury that goes out to people working on the books but don't make much money. If I'm not mistaken, this budget proposal would raise the number of people getting that check by some $13 million. I think you're familiar with this.

STRASSEL: Yeah. This is the other half of the budget. Dan is right. This is mostly about ginning up constituencies to go out and vote. It's also about the Democratic big campaign theme of this year about inequality. You see a number of aspects of this budget to back that up. The EITC is coupled with new taxes on the wealthy. What we are going to do is tax the 1 percent more and turn around and give that money to those who are not earning very much, by expanding this refundable tax credit, the EITC. This is coupled as well with proposals to raise the minimum wage.

So this is something Democrats are going to hit hard on the campaign trail. If you're with us, it's because you believe in getting those 1 percent and making sure that everybody else has more. If not, you're one of those greedy Republicans.

VARNEY: James, will it work? If that's the game plan, does it work?

FREEMAN: Fiscally, it's not going to work.


FREEMAN: $1 trillion in new taxes next 10 years, big deficits. But politically -- we've been talking about riling up the base. Certainly, a big part of that Obama base has been young people. This year, of course, it has been terrible for young people economically. But for whatever reason, they seem likely to vote for him.

And another piece you have in this budget is expanding the number of people, student-loan borrowers who can get what is called income-based repayment plans. Meaning you pay less depending on your income level. This is another big effort to say to young people, there is a stake for you this fall in cheaper student loans.

VARNEY: You could call that buying votes. But that would be a pejorative statement on my part, would it not?


FREEMAN: But dangerous. Student loan default rates and delinquency rates are now above credit cards, auto loans, mortgages.

VARNEY: Look, has the president so fundamentally changed America in the last five years -- Kim, I'm addressing this to you. Has he changed American fundamentally in the last five years to the point where this kind of class warfare, this kind of spreading the money out, take it from here and give it to there, will it work, do you think?

STRASSEL: Look, here is the problem for the president -- and you saw it. The White House was very careful when they put out this budget. What they want to focus on and get people to notice, they kept saying the deficit is falling, the deficit is falling. Now, we can talk about why that is. Mostly, it's because tax revenues are gushing in and because the president is robbing the military of a lot of money. But the thing is it's the fact that they had to talk about this means they remain worried about the political criticism and the public view of out-of-control spending in Washington. They know that's one of their greatest liabilities. I think that is going to be a big issue for many voters this fall.

VARNEY: All right, Kim, thank you very much, indeed, and everyone.

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


VARNEY: It's that time for our "Hits and Misses" of the week.

And, Kim, first to you.

STRASSEL: A hit to the seven Senate Democrats who joined with Republicans to kill the nomination of Debo Adegbile, who had been named to run the Civil Rights Division of the Justice Department. Mr. Adegbile is a cause celeb of the hard left, in part, for his work defending a notorious cop killer, a case the NAACP used to foment a lot of racial discord and to attack the very justice system that Mr. Obama has proposed giving Mr. Adegbile a role in overseeing. The whole reason Harry Reid killed the filibuster was to help ram through the president's nominees. So it is notable even his own party could not stomach this one.

VARNEY: All right, Kim, we hear you.

Joe, what's yours?

RAGO: Both a hit and a miss to the College Board for once again revising the SAT.

VARNEY: I know something about this with teenage daughters. Go ahead.

RAGO: On the one hand, the plan is about the activists who claim the SAT is the source of all injustice, rather than a test designed to base college admission on something other than wealth and privilege. On the other hand, they are returning the perfect score to the iconic original 1600, thus sparing another decade of American high schoolers from shooting for 2400, whatever that means.


VARNEY: Interesting to have it both ways, a hit and miss. That's called cheating, Joe.

Dan, what's yours?

HENNINGER: Well, Stuart, I read this week that Congressman Paul Ryan will be heading out to Cedar Rapids, Iowa, next month to attend the Lincoln Day dinner out there, raising the specter of presidential politics. Whenever this happens, a lot of us go, oh, my god, not another presidential election already. I'll tell you something. Whether it's Paul Ryan or Chris Christie or Jeb Bush, I say let the presidential revels begin. I cannot wait.


End this long national nightmare of talking about nothing but Obama.


VARNEY: Remember, please, 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's it for this week's show. Thanks to my panel and to all of you for watching. I'm Stuart Varney. Paul will be back next week. See you then.

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