This is a rush transcript from "Journal Editorial Report," April 21, 2012. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: This week on the "Journal Editorial Report," government gone wild. What Secret Service and GSA scandals say about Washington culture and what it could mean for the president's re-election bid.

Plus, the left plays the race card to silence a free-market policy voice. Will they get away with it?

And the Tea Party is put to the test in a hot contested Senate primary. Can they defeat a political giant?

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

Another week, another government scandal. This time it's the Secret Service reeling from allegations that as many as 11 agents entertained prostitutes at a Colombian hotel in advance of President Obama's visit there. The situation has become an election-year embarrassment and follows the revelations that the General Services Administration followed a junket to Las Vegas in 2010 that cost taxpayers close to a million dollars. Both scandals play into the narrative of a bloated and dysfunctional federal government. So, is that fair?

Let's ask the Wall Street Journal columnist and deputy editor, Dan Henninger; assistant editorial page editor, James Freeman; and editorial board member, Dorothy Rabinowitz.

Dorothy, let's start with the Secret Service. Incompetence in government is not new. It's an old story. So why does the Secret Service scandal trouble you?

DOROTHY RABINOWITZ, EDITORIAL BOARD MEMBER: Well, if it's troubling, it's fascinating. And it's not incompetence, it's a loss of the mystique of many of the important things that were connected with governance itself, with the White House and everything that we used on the face of the security detail, the -- these guys with the (INAUDIBLE) hats who were the heroes.

(CROSSTALK)

GIGOT: You mean, they were -- the sense they were an elite force.

RABINOWITZ: They were the untouchables. They were the people you thought you might want to be if you're lucky. And suddenly, they're not the buttoned-down guy. These were a battalion's worth, not just two people, floating around and drinking Absolute vodka with women they didn't know, prostitutes, and cheating with prostitutes with money. These are not minor matters. They're not Richard Gere, treating the prostitute in "Pretty Woman."

GIGOT: And bringing them into a security perimeter, it would seem from the reporting. We think of the Secret Service guys, the guys will take a bullet for the president, and some of them have. I think of Tim McCarthy and getting shot along with President Reagan.

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: President Reagan, right.

GIGOT: President Reagan.

FREEMAN: Yes. Now, we think of them as an elite unit. And keeping them it in perspective, I'm not sure it's the first time an elite American unit has advanced on a bordello at full team strength.

(LAUGHTER)

But I think the fact that, as you said, this is during the mission and the president's itinerary is kind of lying around while they're engaging in this. I think shocking for people who often look at groups like the Secret Service, like elite military units, as the part of the department that works. It's the fact that this is --

(CROSSTALK)

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: It's not just a matter of personal security. It's an issue of national security here. What if this happened, say, in Moscow or Beijing or in South Korea? We have enemies out there who are trying to compromise people who are close to the president like this.

GIGOT: Open themselves up to bribes.

HENNINGER: Absolutely.

GIGOT: Yes.

What does this tell us about the culture, Dan, of the Secret Service? Anything? Do you think it's fair to ask whether this happened once or is it hard to believe that it happened only once?

HENNINGER: It is hard to believe. I think there really should be a serious investigation. It incomprehensible you could have this kind of breakdown in discipline among an elite corps like this. And I must say it does raise the question of whether Mark Sullivan should be sacked or actually --

(CROSSTALK)

GIGOT: As the head of the Secret Service.

HENNINGER: As the head of the Secret Service.

RABINOWITZ: I don't want to go back too far in history, but I think this had a beginning a long while ago. The first night Clinton spent the night in the White House, their guests were jumping up and down on the Lincoln bed. This is a kind of sign, a cultural sign --

GIGOT: How does this have anything to do with this --

(CROSSTALK)

RABINOWITZ: Wait. Because the sense that there's no longer any importance attached to the role of people serving government, in government. There's a freedom from convention, a sense of freedom of sanctity about things attached to the service of government.

GIGOT: All right. Moving on to the General Services Administration, a million bucks for a party. It's a lot of money for a party. It's not a lot of money for Washington.

(CROSSTALK)

FREEMAN: In government terms, it's a coverage charge --

(CROSSTALK)

GIGOT: Why are people so upset about this?

FREEMAN: Well, I think -- I think our colleague Peggy Noonan hit it on the head this week saying this is not a surprise they're wasting money, but it's the way they're throwing our money away and laughing about it. I worked brief in government and, I've got to say, there were a lot of people I disagreed with on policy terms, but my impression was that they were generally public-spirited people, trying to make America a better place. And what you see in this GSA adventure is it seems to be people are enjoying living high on the hog and amused by it.

GIGOT: A sense of invulnerability. The videos show, look, I'm in government, and I'm living high on the hog, and you sad taxpayers can't do anything about it, so there.

(CROSSTALK)

HENNINGER: Yes, there's something to that. But, I mean, the question is, it's this scandal in Las Vegas had not happened, are we all supposed to go, well, everything is OK with government? I mean, this was about waste and fraud and abuse, something that goes on in a government who budget is $4.5 trillion budget.

GIGOT: $3.5.

HENNINGER: $3.5 trillion. Trying to maintain efficiency in this sprawling leviathan of government without something like this happening, it's hard to credit.

GIGOT: Is it fair to use these examples to say, you know what, there's something larger wrong in government or Washington?

RABINOWITZ: Yes, because I do think that the sense of revolutionary change has filtered down. There's a kind of loosening of freedom. Anything is possible now. We've always had fraud, we've always had waste, we've always had this kind of things. What we haven't always had is the sense of the guilt-free jaunt. If you have the head of this agency writing e-mails, saying, I know I'm bad, but, hey, my wife and I said to each other it's our opportunity now and it's not going to last forever. That's a very new sense of complete separation from a sense of duty.

GIGOT: Does this affect President Obama? He's not responsible for the --

(CROSSTALK)

GIGOT: But he's not for the sex scandal.

FREEMAN: He's not responsible for any of the individual's action, but he's the one in the current political debate making the case every day that government works and we need more of it, that it needs to be bigger. So this is a problem for him. Repeated examples how it doesn't work, it's too big and spending too much. I think it's going to give momentum to efforts by Ron Johnson and Tom Coburn in the Senate to reform federal pay and benefit programs. We talk about entitlements. There are other things that need to be cut as well.

GIGOT: If the debate over government is about school lunches, Democrats tend to win. When the debate is GSA parties, the conservatives who want to cut government tend to win.

HENNINGER: So I think Mitt Romney should make this an issue in the election, I really do. In fact, the president isn't trying to stance himself from both of these scandals. He's the president. He has to bear some direct responsibility for it. It should be an issue.

GIGOT: All right, still ahead, the left plays the race card in an effort to shut down a conservative policy group. And it seems to be working. The details are next.

(COMMERCIAL BREAK)

GIGOT: Is the left playing the race card to silence a conservative policy voice? That certainly appears to be the case when it comes to the American Legislative Exchange Council, or ALEC, a group that promotes such free-market ideas as school choice, pension and tort reform in state legislatures across the country. Various left wing activists, led by former White House aide, Van Jones, and his group, Color of Change, are bullying big business to cut off funding for ALEC, claiming the organization is racist because of its support for Voter ID laws and so- called Stand Your Ground statutes, which have become controversial in the wake of the Trayvon Martin killing in Florida. So far, the campaign appears to be working with companies like Coca-Cola, Wendy's and Kraft all cutting ties to ALEC.

Dan, most of our viewers, I don't think, have probably heard of the American Legislative Exchange Council. What is it? And why is it under attack?

HENNINGER: Well, it's pretty much what you've just described. It's an association of conservative legislatures.

GIGOT: About 2,000 in all.

HENNINGER: Two-thousand of them. And they were formed in 1973. I have to tell you, Paul, we've been publishing editorials about ALEC's activities throughout that period.

GIGOT: For literally decades.

HENNINGER: For decades. They're state legislatures who get together and talk about what state legislators do.

(CROSSTALK)

GIGOT: For things like welfare reform or --

HENNINGER: Sure.

GIGOT: This idea that it's in Indiana, let's try it in California?

HENNINGER: Right, this is what you expect and want your legislators to do, and certainly, they're doing it from a conservative point of view.

GIGOT: Right.

HENNINGER: But now, all of a sudden -- you've got to keep in mind, in 2010, the Republicans won 675 legislative seats and took over legislators - - legislatures in place like Alabama and North Carolina, which they hadn't controlled since Reconstruction. And I think the left feels that Republicans are making too many gains at the state level and they threaten the status quo, public unions and the like.

GIGOT: Then why not attack the ideas. OK, we oppose school choice for the following reasons. Why play this game of saying, because you support Voter I.D. and because you support Stand Your Ground legislation -- it's controversial, no question about it, particular in the wake of Trayvon Martin -- and passed in 26 or some states with a lot of Democratic governors signing legislation?

FREEMAN: Well, it's also a lot more limited than you might think from a lot of media coverage. I think in the media, telling Stand Your Ground is sort of a blanket right for people to start blazing away when they feel scared or threatened, and it's --

(CROSSTALK)

GIGOT: And Zimmerman has been indicted.

FREEMAN: Right. But it's beyond this particular case. It's basically whether you have an affirmative duty to flee before defending yourself.

So you asked why this --

GIGOT: Yes --

(CROSSTALK)

GIGOT: Why isn't this --

(CROSSTALK)

FREEMAN: Why is the left going after the ideas, and they're not because the ideas are winners. And that's the irony, here, is why were all the corporations supporting ALEC? It's because it's not a fringe, bomb- throwing group. It's very much a mainstream, yes, left of center, but pushing ideas broadly popular to reform state government and improve the business climate.

GIGOT: But if you want business to shut off funding, you try to make the group disreputable.

HENNINGER: Yes.

GIGOT: And you can do that if you claim that they are racist.

HENNINGER: I'm convinced, Paul, that this is mainly about what the left thinks is the worst thing to happen to it in modern political history, Citizens United, all right?

GIGOT: The Supreme Court case in 2010 that said that unions and corporations --

HENNINGER: Right.

GIGOT: -- could give to independent political groups.

HENNINGER: I mean, surely, we all recall how crazy they went when the Supreme Court handed down Citizens United.

GIGOT: But you could give to ALEC long before Citizens United.

(LAUGHTER)

HENNINGER: There's a group called Center for Democracy which has this web site called ALECexposed.com. And they describe ALEC as global corporations and state politicians voting behind closed doors to rewrite laws for corporations, and helping huge corporations. They hate corporations. They are the ones they're trying to push out of the political process.

GIGOT: But if the corporations don't, aren't able to give to groups like this and give to the Chamber of Commerces and the National Association of Manufacturers, who does it leave the field to? It leaves it to the trial lawyers and the environmentalists and labor unions. Don't we want free speech and --

(CROSSTALK)

GIGOT: -- need competition in political ideas?

FREEMAN: No, I think the goal here is unfair competition. It's to silence the voices that are saying, let's reform government and let's have open markets that can allow economic growth. And this is really going to be amazing. If you look at the Van Jones, who is, I think, by anyone's reasonable definition, a radical in political terms --

HENNINGER: The head of Color for Change.

FREEMAN: The head of Color for Change. It's able to run out of polite society, a group that's much closer to the mainstream of American political views, it's really an outstanding media achievement.

GIGOT: It's interesting that so many big businesses are blinking too. Coke, and they said, well, we supported ALEC when it was just supporting our issues but now when it's controversial, we're going to cut and run. And that's the sort of thing that will unlevel the political playing field.

HENNINGER: Well, Color of Change was playing the race card and a lot of the companies like Coke have big markets in the inner city and obviously they were going to get nervous about that.

GIGOT: They don't want the brand name associated with controversy.

HENNINGER: Right, and especially not racial controversy.

GIGOT: When we come back, in a big test of their political muscle, the Tea Party take on a Senate giant. Can they defeat Indiana's Richard Lugar in the May primary and hold onto the seat in the fall? Our panel debates next.

(COMMERCIAL BREAK)

GIGOT: Well, he's one of the longest-serving members of the United States Senate and hasn't had a primary challenger since he first won election in 1976. But after six terms, Indiana Republican Richard Lugar is in the fight for his political life. With just over two weeks ago until the May 8th primary, polls show Mr. Lugar running neck and neck with his opponent, two-term State Treasurer Richard Mourdoch, who has the support of Tea Party groups and organizations like the Club for Growth and the National Rifle Association.

Allysia Finley is the assistant editor of the opinionjournal.com web site, and she's been covering the race for us.

So, Allysia, what's the case that Mourdoch and the Tea Party groups are making against Senator Lugar?

ALLYSIA FINLEY, ASSISTANT EDITOR, OPINIONJOURNAL.COM: They're saying that he's part of the establishment and been there too long. He's been there for 35 years and time to get him out.

GIGOT: OK, but what's -- what are the issues that they're citing that say, OK, this is why he's got to go?

FINLEY: Well, for instance, he voted against the earmark ban. He supports corn ethanol subsidies. He's helped to sponsor the Dream Act.

(CROSSTALK)

GIGOT: Which is the bill that would allow some kids who go to college, to go to college, even if their --

FINLEY: Citizenship.

GIGOT: -- for illegals.

FINLEY: He helped negotiations and START deal. He voted for TARP and bank bailouts. The list goes on and on.

GIGOT: OK, but he's not alone among Republican Senators --

FINLEY: No, of course not.

GIGOT: -- in voters for those --

(CROSSTALK)

FINLEY: There's numbers on the block.

GIGOT: And he did not vote for Obama-care. He did not support Cap and Trade. I mean, he's a generally a conservative guy. Is it -- is it really a function of agent energy or he works too closely with people across the aisle?

FINLEY: I think that's it. He gives kind of a bipartisan sheen to a lot of President Obama's priorities.

GIGOT: Particularly on foreign policy.

FINLEY: Foreign policy, exactly.

GIGOT: How is Lugar fight back?

FINLEY: Well, he's saying that all of these outside groups, national outside groups are pouring in?

GIGOT: No part of Indiana.

FINLEY: Exactly. Club for Growth, the NRA, Freedom Works.

GIGOT: Does he have any issues against Mourdoch?

FINLEY: No, he really isn't not pounding on the issues, substantive issues. It's just these outside groups.

GIGOT: Now, Governor Mitch Daniels, popular Republican governor, two terms in Indiana, he's backing Lugar.

FINLEY: Yes. Mr. Daniels worked in Dick Lugar's office for a number of years. But Mr. Daniels also feels that the Senator is one of the best or can reach across the aisle and he's that important nowadays.

GIGOT: OK, so what does it tell us, Dan, about the culture of the modern Republican Party, the state or the condition of party, the debate inside the party?

HENNINGER: It's the famous battle now between the insurgents and the so-called establishment. We saw this all through the presidential primary. There are groups like Freedom Works who think that the Republican Party ought to be more clearly conservative than it is. And I think that's a perfectly legitimate decision. I'm for political competition. And the Lugar-Mourdoch fight is that. And they've targeted Richard Lugar and Orrin Hatch, in Utah, this time, as they did Robert Bennett in 2010, and did defeat Bert Bennett in Utah.

GIGOT: Allysia, the irony, Lugar is still popular in Indiana. It's not that people dislike him. He's a legal in state politics. This is kind of a case against -- of his popularity against the sort of insurgent energy, the people who more -- a little different edge for the Republican Party to fight harder on -- for ideas.

FINLEY: I think that's right. And that's really what Mourdoch is coming up against. It's really hard to beat up on grandpa.

(CROSSTALK)

FINLEY: He needs the --

(LAUGHTER)

GIGOT: As he puts it, right?

(LAUGHTER)

FINLEY: He's a beloved figure. That's how he puts it. He's a beloved figure. There -- he risks a backlash by beating up on him.

GIGOT: James, what do you think about the prospects for Lugar?

FREEMAN: I don't know, because a lot of Democrats certainly, but also establishment Republicans are watching and they're hoping that 2012 isn't just like 2010.

GIGOT: A repeat of 2010.

FREEMAN: But what we saw in 2010 is an angry electorate that wants smaller government now, and they want change agents.

GIGOT: But some of the change agents that the Tea Party picked, Sheryl Angel in Nevada, Christine O'Donnell in Delaware, went on to lose in the general election, is Lugar making the argument that the seat will be harder to old if Mourdoch wins the primary?

FINLEY: I think a lot of the backers are, because -- because of what happened in Nevada and in Colorado, a number of states.

GIGOT: That's right. But if they're making that case, it's credible here. Because Mourdoch -- what kind after candidate is he? He's he a state treasurer so he's got substance there.

FINLEY: He's not a light weight. He's competent and capable and conservative, as he says. He's not a rock star like Marco Rubio.

(LAUGHTER)

GIGOT: You mean charismatic.

FINLEY: Yes. No, he doesn't have that. But he could do a good job.

GIGOT: Could he keep his seat in November?

FINLEY: I think so. Given the Republican party strength in 2010, winning a couple of congressional seats and the House.

GIGOT: And the Senate, too.

FINLEY: Yes.

GIGOT: OK. All right, thanks, Allysia.

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

(COMMERCIAL BREAK)

GIGOT: Time now for "Hits and Misses" of the week -- Dorothy?

RABINOWITZ: Yes, a miss to Davan Maharaj, the editor of the Los Angeles Times, for having published the pictures of the U.S. soldier standing before the mutilated corpses of the suicide bombers, despite pleas by the State Department they not to do so. He wanted to save them all from further danger. Yes, if American soldiers are killed because of the photographs, we can thank Mr. Maharaj for publishing them, and along with his conspicuously revolting explanation.

GIGOT: All right, Dorothy.

James?

FREEMAN: This is a miss to Goldman Sachs for putting up for re-election to its board of directors, long-time Fannie Mae CEO, Jim Johnson, one of the architects of the financial crisis. And also, Paul, where were all of these corporate governance experts on this case if the architect of the financial crisis is being reappointed now to a Goldman board?

GIGOT: All right.

Dan?

HENNINGER: Dick Clark -- a hit, needless to say, for a guy who never looked over a day of 45, and never thought he would die. He founded "American Bandstand" in 1957, the time Elvis was there. Dick Clark, incredibly, was older than Elvis.

(LAUGHTER)

And through all of those years, he remained the same cheerful soul. He was a welcome constant in often turbulent times.

GIGOT: Yes, terrific.

Remember, if you have your own "Hit or Miss, please send it to us at jer@foxnews.com. And visit us on the web at FOXnews.com/journal.

That's it for this week's edition of the "Journal Editorial Report." Thanks to my panel and to all of you for watching. I'm Paul Gigot. We hope to see you right here next week.

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