The beginning of the end of Obama's imperial presidency?

This is a rush transcript from "Journal Editorial Report," June 28, 2014. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," the Supreme Court strikes down President Obama's recess appointment as Republicans announce plans to sue over executive branch abuses. Is this the beginning of the end of the imperial presidency?

Plus, yet another twist in the IRS targeting scandal as House investigators claim Lois Lerner sought an audit of a Republican Senator.

And Hillary Clinton once again facing charges that she's out of touch. What her and her husband's response tell us about their strategy for 2016.

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

In a major rebuke to President Obama, the Supreme Court this week unanimously overturned his recess appointments to the National Labor Relations Board, ruling that he overstepped his authority when he declared the Senate in recess and installed his nominees in 2012. The decision came a day after House Speaker John Boehner announced he move forward he would move forward with a lawsuit against Mr. Obama for abusing his executive powers, accusing the president of, quote, "ignoring some statutes completely, selectively enforcing others, and at times creating laws of his own."

Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; Washington columnist, Kim Strassel; and editorial board member, Joe Rago.

Joe, let's start with this recess appointment decision. Very rare for a president to lose 9-0 on a case like this, including the liberals and including two of his own appointees. How big was this decision?

JOE RAGO, EDITORIAL BOARD MEMBER: This was pretty big under any conceivable theory of constitutional interpretation. These recess appointments were thrown out. So in terms of vindicating the Constitution and separation of powers, this is a very important decision.

GIGOT: It was basically saying that the president had decided unilaterally to say, I think the Senate is in session, therefore, I will appoint these, even if the Senate says itself it is not in session.

RAGO: Right. The Senate was conducting something called pro forma sessions precisely to prevent the White House from making recess appointments. And he said, oh, no, no, this counts as a recess, I'm going to go ahead and make these appointments anyway.

DAN HENNINGER, COLUMNIST, DEPUTY EDITOR: Quick detail, Justice Breyer even sort of arbitrarily said a break in the session should be at least 10 days. The one Obama was citing was three days. And the liberal justices simply couldn't swallow the idea that's a real recess.

GIGOT: What's the practical implication of this for the president's power to appoint, make recess appointees, the whole point of which was to say, all right, Congress, back in the founding days, took two, three months to get to Washington, so you have to be able to fill the government. But that need has really been obviated now with mass transportation.

RAGO: Right. The original purpose of the exception to the advice and consent power has kind of disappeared over time. It leaves the White House weaker with this decision. The case is called Noel Canning. The Senate kind of has a guide to preventing recess appointments if that's really what they want to do. These powers are sort of going to always be intentioned. The Senate is strengthened against the executive.

GIGOT: So if the Senate is controlled by the opposite party of the president, they can basically stop now all recess appointments except for every two years when Congress finally gavels itself closed. So President Obama has weakened all of his successors.

RAGO: And if you -- this was a 9-0 opinion, but there was a four- member concurrence by the four conservative justices. And they would have weakened the powers still further just to that between formal sessions gap that you were talking about. So the recklessness of these recess appointments really potentially could have weakened this power much more than the court actually went through with.

GIGOT: OK, Kim, let's talk about this lawsuit by John Boehner against the president. This is extraordinary. Really, we haven't had such a thing before. He's going to get a full vote at the House to proceed. Why is John Boehner doing this?

KIM STRASSEL, WASHINGTON COLUMNIST: Well, we've never had this before, Paul, because we haven't had to have this before. In the past, when you've had presidents overreach, step on congressional powers, Congress itself has stood up and sort of slapped presidents down. That's often served to make presidents think very hard about doing something like this. This Democratic Senate has chosen -- invited the president to do things like these recess appointment, and so the White House has felt very emboldened. So John Boehner feels this is one of the only options to doing -- trying to stop the president doing this. He's going to go ahead. And this is aimed at everything from the president unilaterally changing Obamacare, changing immigration law, creating laws or regulations that should in theory be done by Congress.

GIGOT: And also doing something that's called suspending the laws, which means essentially refusing to enforce certain elements of a statute - -

STRASSEL: Exactly.

GIGOT: -- on immigration, for example, saying that the Controlled Substances Act, on Marijuana, I'm just not going to enforce it in a couple of states, that sort of thing. So they want him to obey the law?

STRASSEL: Yes. And this is -- now, the curious question will be, of course, whether or not -- this is unprecedented. So the question is whether or not John Boehner, the House, will have standing to bring such a suit. That's a very intricate legal discussion a lot of people have been having out there. We'll see if that manages to happen.

And this is also -- Paul, it will take a long time.

GIGOT: Right.

STRASSEL: What's interesting about this is that John Boehner is doing this really in the interest of future Congresses because this litigation will take a while to become ripe. And this may not even happen while President Obama is still in the White House.

GIGOT: Dan, is it a good idea for Congress to go to the courts to seek essentially adjudication here? Or should it be asserting its own power? As Kim suggested, they have in the past, the power of the purse and --


HENNINGER: This raises the constitutional issue at the heart of this. Basically, what the president has been doing is stripping Congress of its legislative powers. And what John Boehner is going to do is cite Article 1 of the Constitution. You can't be more -- the first sentence of the Constitution reads, "We the people." The second sentence says, "Powers to legislate shall be vested in Congress." It could not be clearer. So the courts -- I think what John Boehner is saying are going to have to arbitrate this incredible tension Obama has created between the executive and the Congress.

GIGOT: And there was another case this week, Joe, the EPA was slapped down on its carbon regulation.

RAGO: That's right, and for kind of the same reasons. The executive branch can't make its own laws.

And just to your earlier question to Dan, Obama has really inflamed the situation here, and this is really the last recourse left for Congress.

GIGOT: All right. Thank you. Fascinating.

When we come back, a new twist in the IRS scandal. With House investigators claiming Lois Lerner targeted a sitting Republican Senator, is it time for a special prosecutor?


GIGOT: Yet another twist in the IRS scandal with congressional investigators this week saying they've uncovered emails showing Lois Lerner, the former agency official at the center of the targeting controversy, suggested an audit of Republican Senator Charles Grassley in 2011. A claim that is sure to heighten interest in Lerner's emails and the two-years' worth that the IRS says were lost in a 2011 computer crash.

Wall Street Journal senior editorial page writer, Collin Levy, joins us with more.

Collin, what did we learn this week -- what more did we learn this week about those lost emails and the legal jeopardy for the IRS?

COLLIN LEVY, SENIOR EDITORIAL PAGE WRITER: Paul, starting with the Grassley point, I think what we really learned here is that Lois Lerner was willing to use your position there at the IRS for political retribution. Senator Grassley was one of the Senators who was really sort of after the IRS about what their practices were, including about gift taxes and later about conservative groups. So the fact that she was so eager to get him into exam, as she put it, really raises some questions about her motives there.

GIGOT: Yeah, it was even too much, Dan, for the IRS itself, which said whoa, whoa, whoa, Ms. Lerner, we're not going --


HENNINGER: Well, this is all in a letter that House Ways and Means Chairman Dave Camp released. And there's -- the letter back from her colleagues at the IRS said, Lois, for one thing, Senator Grassley probably is not breaking the law, and we don't really think we want to get into attacking, in effect, the former ranking member of the Senate Finance Committee.


I mean, it was even too much for them.

What it does reflect is Lois Lerner's mindset. If she's willing to go after a United States Senator, she was certainly willing to go after Patriots United in Wetumka, Alabama.

GIGOT: That's right.

And that raises even more questions, Collin, about this lost two years of emails. What have we learned this week that's new in terms of why these were lost or what obligations the IRS had to make sure they weren't lost?

LEVY: Yeah. First of all, just on the timing, real quick, Paul, we know that in June 2011, that's when GOP Senators started asking about it. And then, all of a sudden, also in June 2011, that is when Lois Lerner's computer crashed. So that's awfully odd. But we now know, what's really interesting is there's this group called Z-Street. It's a pro-Israel group. In 2009, they applied for nonexempt status. It was delayed.


GIGOT: A nonprofit. A nonprofit.

LEVY: Yes. Right, exactly. And when it was delayed, they ultimately filed a lawsuit in 2010, in August 2010, on viewpoint discrimination. Now, once they filed that lawsuit, the IRS should have been retaining all emails, all documents, anything related to viewpoint discrimination under what's known colloquially as a litigation hold. So the IRS idea that, oh, well, this was just sort of what we did, we recycled our emails, oops, the computer crashed. It really doesn't hold here because they were under a legal obligation to be keeping this information.

GIGOT: Just so viewers understand, viewpoint discrimination is illegal because the government cannot discriminate against people for having certain political views. That's what they doing. And that's what the lawsuit is all about. So what's going to happen, Collin, when it comes to trying to enforce this fact that by -- through the courts, they were supposed to have these emails?

LEVY: Right. This is what's known, Paul, in legalese as willful foliation. That means, if you didn't hold on to the emails, which you were expected to, it's as good as destroying evidence. And in white collar cases, people get in a lot of trouble for this.

GIGOT: Can the courts enforce this, in this particular case?

LEVY: Absolutely. I think they'll be able to. I think that's something that the judge is going to be able to look at. I hope he does.

GIGOT: All right. So, Kim, let's move on to what the Republicans are saying about this. What can happen here? I mean, some of them are saying let's have a special prosecutor. But if Eric Holder, the attorney general, doesn't want to appoint one, you can't force him to do so. So what recourse is there to try to get to the bottom of this?

STRASSEL: So what they're doing now is they are demanding that some of the outside agencies that Lois Lerner would have been talking to -- and these are the emails that are missing, right?

GIGOT: Right.

STRASSEL: We have some of the emails she sent internally in the IRS. The ones that supposedly are gone are those that she might have sent to the Justice Department or to the FCC or to the White House, for instance. So now you have Republicans calling on those other agencies to search through their files and hand over any Lois Lerner emails. We don't know if they're going to do that yet.

There is a big push for a special prosecutor. That's a bit of a divisive point, even among the Republicans, who are not always sure special prosecutors are a great idea. And I have some sympathy for that.

But you're right. If Eric Holder says he won't do it, then there isn't really that much recourse.


GIGOT: What should they do, Dan?

HENNINGER: I think where it's going to end up, Paul, is in the courts. The Z-Street case that Collin just described to us, this is sort of like Watergate. John Sarika (ph) finally stepped in there and ordered the White House to release the tapes. I think we're going to find a judge somewhere or other that will tell the White House, just as the Supreme Court did with these recess decisions, that you have got to comply with the law. That, I think, is where it's going to end up in a district court in the District of Columbia.

GIGOT: All right, Dan.

Tank you all very much.

When we come back, the rocky rollout continues as Hillary Clinton once again gets hit with charges that she's out of touch. What the response tells us about her strategy for 2016.


GIGOT: Well, Hillary Clinton's book rollout continues to hit some bumps with sales of the memoir down sharply in its second week on the shelves. And Clinton again facing claims that she's out of touch, following up her now-famous dead-broke stumble with the claim that she and her husband pay, quote, "ordinary income taxes, unlike a lot of people who are truly well-off." Those comments had former president, Bill Clinton, jumping to his wife's defense this week in an interview with NBC.


DAVID GREGORY, HOST, "MEET THE PRESS": Can you understand as a political matter that that could strike people as being out of touch?

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: Yeah. But she's not out of touch. And she advocated and worked as a Senator for things that were good for ordinary people. And before that, all of her life. And the people asking her questions should put this into some sort of context.


GIGOT: We're back with Kim Strassel. And Wall Street Journal editorial board member, Dorothy Rabinowitz, also joins us.

So what impression is the former Senator and secretary of state making on this book tour? Is it the one she wanted?

DOROTHY RABINOWITZ, EDITORIAL BOARD MEMBER: No, certainly not. But that's never true. What it is doing is reminding us of old times at the Clinton White House.

But, you know, the former president made an important point. That is, the things that she has done all of her life are what you should be thinking about. One of the things that strikes you about Hillary Clinton now is something that's been nagging for a long time, that people watching her, which is the lack of core values, the lack of a sense of some driving passion in her political life. And if you total it all up, what have we ever seen really? The passionate drive for office, the passionate drive for denying? There is an absolutely loud crackling absence of any notion of deep political belief, deep belief about the nation's place in the world. This is really a loud absence. You've heard murmurings about this. We don't really know who she is or what she's going to offer. What is the great world view?

GIGOT: Won't she offer, "I'm a pragmatist, I'm competent, my husband's administration was competent"? So implicitly saying, not like this one. So that would help her separate herself from Obama?

RABINOWITZ: I don't think that is a very loud or sexy call, the pragmatism thing in any event. But we've been looking at Mrs. Clinton for a very long time now, and what we see is someone who is constantly on the run, a infatigable traveler, many -- I mean, she absorbs all kinds of data, heroically. We do not see -- and, look, if I may be Margaret Thatcher, people who had a profound vision, Obama could be said to have believed in things.

GIGOT: What about this money issue, that she says, well, you know, I'm not as rich as a lot of other people, you know. She's kind of poor mouthing. Is that something that is going to stick long, some people are calling it a Mitt Romney problem. Do you agree with that?

RABINOWITZ: No. I think those things are of the moment and they pass. But I have a feeling, ironically enough, that she was being at her most rare and natural. This is the kind of thing you can imagine her actually saying in her own house and among her friends. Unfortunately, she picked the wrong thing to be natural about.


GIGOT: What about this idea that she -- some of her defenders say she was called testy, contentious in a couple of her answers to the press on this book tour. And they said, you can't say that about a woman. That's unfair. You'd never say that about a man.

RABINOWITZ: It's really wonderful.


And it's a terrible preview of something much more serious, which is we are in for a big swath of exactly what we went through in the Obama presidency. And I think if something happens to bring her along into the White House, we should be prepared.

GIGOT: You mean by that, any criticism of President Obama --

RABINOWITZ: Any criticism.

GIGOT: -- was called racist.

RABINOWITZ: Absolutely.

GIGOT: And this will be, any criticism of Hillary Clinton will be called sexist?

RABINOWITZ: Absolutely. I mean, one of the readers of our paper was good enough to send me a list of all of the terms that really might upset people like "witches" or "testy," is suddenly a word that's been outlined? But the lunacy that drives the campuses in inventing all sorts of things that are demeaning to women, allegedly, is going to be hitting us in a huge shower and it is going to be a derangement that we're not used to.

GIGOT: All right.

Kim, quickly, can she be stopped on her drive for the nomination?

STRASSEL: Well, I think this has made a lot of people suddenly take a new look at this. Remember, this was supposed to be her big debut of her sort of shadow campaign and to make herself even more inevitable as a nominee. It has been so botched, and she's made so many mistakes. You can feel a little bit of rising panic down here in D.C. over some in the Democratic Party over whether or not she really is their best shot. And if she's not, what else do they do?

GIGOT: Well, they don't have any obvious alternatives so I think they're going to be stuck with her almost certainly. And her biggest problem isn't Hillary. It's the Obama record, which could be a big problem for her.

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 -- Joe?

RAGO: A miss, Paul, for the national emergency, that is the hops shortage that's devastating the American beer industry. The price of this key ingredient has are risen to $10 from $2. Bad crop and growing popularity of American beers. So brewers are responding by brewing weaker beer. Frankly, it's un-American. We're not a big fan of government intervention, but I don't know, it might be time for a bailout.


GIGOT: All right.


RABINOWITZ: Oh, yes. Well, a big hit to the voters of Mississippi for electing Thad Cochran and Charles Rangel of New York to longstanding veterans and for refusing the Kool-Aid that's been dispensed by all of those agitating for throwing them out now. Get these people who have been out of Washington long. They had better decide that we -- if they're going to transfer people, new ones, they had better be ones who can serve them.

GIGOT: All right.


HENNINGER: Paul, we are going to miss Fouad Ajami, the Middle East scholar who died last week. Fouad appeared frequently on this program. He wrote for the "Journal" editorial pages for nearly 30 years. He was an eloquent observer of the Middle East. And as a naturalized American citizen, he understood freedom. And I think his greatest desire was that his Arab countrymen could experience that freedom.

GIGOT: Yeah, he had that fundamental American optimism that so many Americans now seem to have lost. And he had the courage of his convictions because he stuck with the Iraq war, even though it became unpopular. And like so many other public intellectuals who first supported it, and even though it hurt his career. So I agree with you, Dan.

HENNINGER: But a gracious man throughout.

GIGOT: Throughout. Gracious always.

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.

Content and Programming Copyright 2014 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2014 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.