Watch Video | Listen to the Audio

JUDY WOODRUFF: Now: why some Republican governors who have been vocally opposed to Obamacare are having second thoughts about walking away from an expansion of Medicaid.

Hari Sreenivasan is back with that story.

HARI SREENIVASAN: Medicaid is a crucial piece of the health reform law and its goal of providing new coverage to 30 million Americans.

Roughly 13 million of them are expected to receive coverage by expanding eligibility to the program, which provides health care to the poor. But the calculus changed after the Supreme Court decided states could opt out, even though the federal government would pick up 100 percent of the new costs for the first three years.

So far, 23 states, mostly led by Democratic governors and the District of Columbia, have said they plan to expand eligibility starting next year. Eighteen others with Republican governors are opposed. Those states could be passing on billions of dollars. Now some Republican governors who have been opposed to the health care law are pushing to expand Medicaid. That includes Florida, Michigan, Ohio, and Arizona, where Governor Jan Brewer signed a bill to do so today.

We look at what's behind these changes in two of these states.

Mary K. Reinhart is with The Arizona Republic. And Karen Kasler is with Ohio Public Radio.

So, Mary K. Reinhart, let me start with you. What did Gov. Brewer have to do, and why did she do it now?

MARY K. REINHART, The Arizona Republic: Well, she had to get a bipartisan coalition of her Republican-led legislature to go along with what she's announced at the beginning of the legislative session in January that was a top priority. And that was expanding Medicaid.

It was a surprise, stunned observers, because she had -- we were one of the states to sue to stop Obamacare, and the governor needed to get this coalition behind her. She put these folks together. When negotiations stalled, the governor called a surprise special session. And in just 48 hours, this bipartisan coalition in the House and Senate pushed through Medicaid expansion, and got her to where she is today, signing that bill.

HARI SREENIVASAN: And she still doesn't admit that this is in support of Obamacare, right?

MARY K. REINHART: She admits that this tiny little piece, she supports. She says it's the law of the land. The election certainly was conclusive, with the reelection of President Obama. The Supreme Court made its decision.

And she is trying -- was trying to convince for the last five months opponents in the legislature, both the leaders in the House and Senate, that this was -- this was a done deal, and what Arizona needed to do was go along, do the math, look at the calculus, as you say, and realize that we're talking about insuring an additional 350,000 people, bringing in about $1.6 billion dollars in the first year alone, and upholding the will of the voters here in Arizona, who in 2000 said they wanted to expand our Medicaid program to insure people under the poverty level.

So, we had already had -- we had already been an expansion state. The governor said it was just a folly to not go ahead and expand Medicaid.

HARI SREENIVASAN: All right, Karen Kasler, I want to ask you, what is the state of play in Ohio? Where is Gov. John Kasich now?

KAREN KASLER, Capitol Bureau Chief, Ohio Public Radio: Well, Gov. John Kasich, like in Arizona, surprised a lot of people when he supported the expansion of Medicaid.

He has been an opponent of what he calls Obamacare, but he said in his budget he took the avenue of, this was a way to capture 13 billion federal dollars over several year and a way to help Ohio's 1.5 million uninsured Ohioans, many whom are very poor and can't afford health insurance.

And so he spent a lot of his personal capital trying to get this passed. His proposal, though, went over very, very poorly in the state legislature, which is dominated by Republicans. You have a lot of Republicans in Ohio who are very suspicious of the expansion of Medicaid.

And so it was stripped out of both the House version and the Senate version of the state budget. Our House speaker had said that, of his 60-member caucus, 20 members -- and this is quote from him -- "would rather shoot themselves in the head than vote for Medicaid expansion."

So, right now, what's happening is that's out of the state budget, and it's being considered in a different way. We have a Medicaid expansion bill that has only one backer. But now there's a bill that dropped late last week that has lot of bipartisan support, which would reform Medicaid in Ohio by trying to contain costs and integrate work force development and measure health outcomes. And that appears to be the way that Ohio is going to go, Medicaid reform, rather than Medicaid expansion.

HARI SREENIVASAN: So, how does this affect his relationship with the legislature, especially with those 20 who would rather do something else?

KAREN KASLER: Well, it's certainly been an interesting thing to watch, because Gov. Kasich got a lot of what he wanted in his first budget cycle.

And Ohio is almost completely run by Republicans. There's a supermajority in the House and Senate. And Gov. Kasich is a Republican as well. And so there's been a real push on his part to try to get Medicaid expansion, but there's been a real resistance on the part of lawmakers to do it.

And so this is kind of seen as maybe a halfway point. The lawmakers who are putting this Medicaid reform bill together are saying that they want to improve the system before we start talking about adding more people to it. And so they are still leaving that door open slightly, but right now the path appears to be toward reform, rather than expansion.

HARI SREENIVASAN: Mary K. Reinhart, I want to come back to you and ask, how does the hospital industry see this and what kind of influence are they having in the conversation?

MARY K. REINHART: Well, like in other states, I think the hospital industry, the Chamber of Commerce, have been very involved in trying to push Medicaid expansion.

And they were right on board early on in Arizona. They have been carrying for a growing number of uninsured who are coming through the emergency rooms. We have had couple of Chapter 11 bankruptcies in Arizona. So, today, at the signing ceremony, one state lawmaker, a Republican, said, you have saved rural Arizona, you have saved our hospitals.

So, clearly, they were on board. They are also going to be paying -- they're going to be taxing themselves essentially to help pay Arizona's additional share of Medicaid expansion. So they're in all the way with an additional provider assessment to help pay our share of expansion.

HARI SREENIVASAN: Karen Kasler, I want to ask, how much money is at stake here? Quite a few members of the GOP in different states have said this first three years, free stuff is great, but that 10 percent is still a lot of money to us later on.

KAREN KASLER: And Gov. Kasich has said it's about $13 billion dollars over seven years. But that money issue is really critical to a lot of Republicans, who have been on the fence or even opposed to this.

They feel like expanding Medicaid, and then if there's a chance that the federal government wouldn't somehow follow through, that would be a difficult benefit to take away. And so that's been a lot of the concern from conservatives. And there have been some conservative think tanks that have actually put out reports saying that they're very concerned about the long-term stability of the system.

And so that has been a real issue here, is, will this money be there when Ohioans need it over time? But the hospital issue is really critical here in Ohio, too. We have a lot of rural hospitals. And we have a lot of urban hospitals. And they're very concerned about their long-term financial stability if Medicaid is not expanded.

HARI SREENIVASAN: So, Ms. Kasler, I want to ask, what is the timeline here? If the legislation that is making it so far doesn't include the expansion, what is next for it?

KAREN KASLER: Well, the budget needs to be signed by the end of the month. And that is not going to happen.

And there's been a concern that if indeed Medicaid expansion wasn't started by June 30, there wouldn't be time to capture all those federal dollars. But I'm told by lawmakers who are behind this Medicaid reform bill that they still think there's a possibility to go back and get some of that money, that there's no rush, that we need to improve the system before we add beneficiaries to it.

But, certainly, time is of the essence, because the clock is ticking here, and so there's a concern to get it done as quickly as possible. With the budget out of the way, maybe that would move forward. The first hearing for these reform bills is tomorrow. And so there's a chance it will move forward.

HARI SREENIVASAN: All right, Mary K. Reinhart, quickly to you, too. This isn't the end here. People are proposing ballot measures.

MARY K. REINHART: Right.

There's a group of two former conservative GOP senators and some GOP activists. Really, the grassroots that's been opposed to this all along are going to be officially kicking off a referendum drive on Saturday. They're taking out petitions with the secretary of state's office. They have got 90 days to collect about 86,000 signatures.

If they're successful, our Medicaid expansion bill goes on hold until the next general election. Then there’s lawsuits that are soon to follow. It's not over yet.

HARI SREENIVASAN: All right, Mary K. Reinhart from The Arizona Republic and Karen Kasler from Ohio Public Radio and TV, thanks so much.

KAREN KASLER: Thank you. 

Watch Video | Listen to the Audio

JUDY WOODRUFF: Finally tonight, we come back to the surveillance story. Just how much information do we routinely disclose about ourselves online? And how do we feel about that?

Jeffrey Brown has our conversation.

JEFFREY BROWN: And for that, we're joined by Viktor Mayer-Schonberger. He is co-author of the new book "Big Data: A Revolution That Will Transform How We Live, Work, and Think." Kashmir Hill is a senior online editor and writes the technology and privacy column "Not-So Private Parts" at Forbes.com. And Jules Polonetsky is director of the Future of Privacy Forum, a think tank that promotes responsible data practices.

Well, Viktor Mayer-Schonberger, I want to start with you. Before we get to the NSA explicitly, I would like you to describe briefly the world of big data that you have been writing about. What does it mean? How and where does it affect all of us?

VIKTOR MAYER-SCHONBERGER, Co-Author, "Big Data: A Revolution That Will Transform How We Live, Work, and Think": Well, big data is our ability to really see at a large scale what we couldn't see at a small scale.

And big data is all around us. If we search online with Google, that's big data. If we ask Siri on our iPhone, that's big data. The book recommendations on Amazon, the video recommendations on Netflix, that's big data. If Bing Travel tells us whether or not a ticket price goes up or down most likely over the next couple of days, that's big data.

But it goes beyond the Internet companies. We see it when airlines that make predictive repair and maintenance on their jet engines or when inflation rates are being announced almost in real time, not by government officials, but by a startup company out of Boston that monitors online price data points. So, big data is really everywhere.

JEFFREY BROWN: So, Kashmir Hill, we have talked on this show at different times about this issue, privacy issue, in the context of Facebook, Google various -- various times. How much do you think people are aware of this big data world that we're talking about?

KASHMIR HILL, Senior Online Editor, Forbes.com: I think people are thinking about this a lot these days, and privacy has become something very interesting to people, in part I think because they're on Facebook and they're sharing so much information.

And everyone has a smartphone and they're downloading apps that are sharing a lot of information about them, from where they are, their location information, to who their contacts are. So I think people are thinking about it a lot. But a lot of people are also aware of the benefits of big data.

So I think people are often giving up that information knowing that they're going to get something in return. So there's a lot to think about right now in terms of if the trade-offs are worth it and when it's too privacy-invasive for people.

JEFFREY BROWN: Well, Jules Polonetsky, pick up on that. Continue, because there are pluses, there are minuses. Have you seen an evolution in how much people are even aware and responding to what's around them?

JULES POLONETSKY, Director, Future of Privacy Forum: People are clearly aware, but they don't always think about in the terms of data or privacy.

All they know is Amazon recommended a book and it turns out it seems to be based on what other people are buying, and they kind of like that. They like that Netflix can recommend and make their queue easier and smarter.

But when you sit back and you say, well, do you like it that everybody knows everything about you, well, then that sounds a bit scary. And so I think the challenge is, how do we get the benefits? How do we solve diseases because we're better able to analyze lots of health data? How do we figure out what schools are really working by analyzing what actually works for particular students?

All of those things are going to perhaps make our planet smarter, the way IBM sometimes argues smarter planet. But every one of those ...

JEFFREY BROWN: In the best of all worlds.

JULES POLONETSKY: In the best.

But each of those things can also come with a big negative. Will people profile you, discriminate against you? Will the government predict that you're going to be a criminal in a way that frightens people? So we have to get this balance between big data and big risk right, or we're in for a lot of debates for the next couple of years.

JEFFREY BROWN: Well, Viktor Mayer-Schonberger, just so -- so now to bring in the NSA revelations, we see these -- this polling data right afterward that at least suggests that a majority of Americans are relatively comfortable with what's going on. How do you fit that into the kinds of concerns we're talking about?

VIKTOR MAYER-SCHONBERGER: Well, I think we don't know all the facts yet.

And I think the American public is just making up its mind right now. A significant portion may be comfortable now, but as more information becomes available, that might shift. The situation is still fluid. And I have seen a survey that said that about 40 percent of the people in the United States are uncomfortable.

What really this points towards is that this is early days and what we need to have is a public debate about the pros and cons, as Jules said, and that public debate could be the positive outcome of that NSA situation.

JEFFREY BROWN: Just to stay with you for a moment, you have been looking at this for many years. Are you sanguine? Are you concerned? Are you coming out on one side or the other?

VIKTOR MAYER-SCHONBERGER: I am quite concerned, but I'm not so much concerned about the surveillance aspect than about how big data can be abused for predictions, predictions about future behavior.

And if we use these predictions to then punish people, to penalize them, not for what they have done, but what they're only predicted to do, then we are on a slippery slope towards "Minority Report," and that keeps me up at night.

JEFFREY BROWN: "Minority Report" meaning the old movie that showed data coming into our lives, right?

Kashmir, let me ask you, how much of this do you think is generational? Because it's often talked about younger people who are coming up in a world where they just live online and they're very comfortable giving out a lot of data.

KASHMIR HILL: One thing that's been interesting to see as this plays out -- there's always will be all these different polls, and some say that young people care less about privacy and others say that they care more.

But what's been interesting about what we're learning about the NSA is some people are shocked by it, but some people have been told for so long that everything we do is tracked, we're giving out all of this information in the way that we live today when we walk around with a smartphone that is tracking us all the time, and we create these dossiers about ourselves on Facebook, that it seems that some people are just used to this and aren't as surprised because they thought it was happening already.

So it's interesting kind of what happens in terms of expectation of privacy, as you tell people over and over again they have no privacy and then when it's confirmed, they're not -- they're not surprised by it.

JEFFREY BROWN: Well, that's an interesting way of thinking about it, Jules Polonetsky.

Is there a difference when it's national security, as opposed to Amazon telling me what book I might want?

JULES POLONETSKY: The same solution, frankly, is needed in both these areas. And that's transparency.

The companies say, trust us, we just want to sell you stuff, you have nothing to worry about. The government says, trust us, we're just trying to catch terrorists. But you know what? This is too important to just trust. And we might trust today's government, and who knows what happens tomorrow? So we need transparency.

We need to know that someone is watching the watchers. Finally, the civil liberties board has been appointed and they're going to be taking a look into this. The Obama administration has a bunch of open chief privacy officer roles that need to be filled at the Department of Justice, at Homeland Security.

We need to know that if data is being collected for terrorism or if it's being collected to invent the next great new product that there are people scrutinizing, humans, not just predicting who the next criminal is, but scrutinizing and making sure that the risks are being minimized and avoided.

JEFFREY BROWN: Do you see, briefly, that -- any signs that the public is where things are going, public pushing back against privacy concerns or getting more comfortable?

JULES POLONETSKY: I think we have been seeing -- you know, this is obviously a great explosion, but we have seen pushback when Facebook has made moves that the public didn't like, when Amazon has made moves, when Apple's made moves.

We haven't seen this giant uprising of people debating and calling Congress. But I think consumers in this day and age have the tools to make quick decisions, and, if companies aren't careful, they will be making them.

JEFFREY BROWN: And just very briefly from you, Victor Mayer-Schonberger, same question. Do you see any beginnings of a pushback or are people getting more comfortable?

VIKTOR MAYER-SCHONBERGER: Well, just the sheer fact that Google and Facebook and Microsoft were so quickly reacting to this situation by announcing that they want the federal government to permit them to make public the numbers -- the number of times they had given access to government agencies shows that these companies really care about consumer trust and they care about losing that.

They're afraid of losing that. And that shows to me that trust is brittle. And if it is not maintained, if it is not cared for, it may erode very quickly.

JEFFREY BROWN: All right, Viktor Mayer-Schonberger, Jules Polonetsky and Kashmir Hill, thank you, all three.

Watch Video | Listen to the Audio

JUDY WOODRUFF: For the first time, the man running the National Security Agency spoke publicly today about extensive surveillance of phone calls and online communications. He defended the efforts and said, "We're trying to protect Americans."

Ray Suarez begins our coverage.

RAY SUAREZ: Army Gen. Keith Alexander came to a Senate hearing to discuss cyber-security in general. But the questions quickly turned to surveillance.

Vermont Democrat Patrick Leahy pressed him to tell what the NSA has to show for its efforts.

SEN. PATRICK LEAHY, D-Vt.: Has the intelligence community kept track of how many times phone records obtained through Section 215 of the Patriot Act were critical to the discovery and disruption of terrorist threats?

GEN. KEITH ALEXANDER, Director, National Security Agency: If I gave an approximate number to them in a classified ...

PATRICK LEAHY: OK.

KEITH ALEXANDER: ... classified, but it's dozens of terrorist events that these have helped prevent.

RAY SUAREZ: Others, including Oregon Democrat Jeff Merkley, wanted to

know more.

SEN. JEFF MERKLEY, D-Ore.: So, here, I have my Verizon phone. My cell phone. What authorized investigation gave you the grounds for acquiring my cell phone data?

KEITH ALEXANDER: You know, I think on the legal standards and stuff, on this part here, I think we need to get Department of Justice and others, because it is a complex area. I think what we're doing to protect American citizens here is the right thing. Our agency takes great pride in protecting this nation and our civil liberties and privacy.

RAY SUAREZ: Alexander said he's bothered by how Edward Snowden, an intelligence contractor at NSA, could learn of the surveillance programs, and then leak them. Snowden's last known whereabouts were Hong Kong.

Today, he was heard from again. In an interview with The South China Morning Post, he declared: "I am neither traitor nor hero. I'm an American." He insisted he wouldn't flee. Instead, he said, "My intention is to ask the courts and people of Hong Kong to decide my fate."

Many in Congress have condemned Snowden and defended the NSA's activities, which key committees monitored all along. Others voiced new concern yesterday as they emerged from closed-door meetings with intelligence officials.

Democratic Congressman Brad Sherman of California said he was surprised by the scope of the monitoring under the secret FISA court.

REP. BRAD SHERMAN, D-Calif.: I didn't know a billion records a day were coming under the control of the federal executive branch.

RAY SUAREZ: Maryland Democrat Dutch Ruppersberger said it's high time for a full-scale airing of the privacy-vs.-security issue.

REP. DUTCH RUPPERSBERGER, D-Md.: Congress needs to debate this issue and determine what tools we give to our intelligence community to protect us from terrorist attacks.

RAY SUAREZ: Lawmakers will get to ask more questions tomorrow, behind closed doors, when the House and Senate receive separate briefings on the NSA's surveillance. 

Watch Video | Listen to the Audio

JUDY WOODRUFF: And we return to the surveillance programs and the questions surrounding them. Beyond the government itself, there are many concerns about the role of companies like Google, Facebook, and Yahoo!

Today, Google sent a letter to the Department of Justice and the FBI, saying it wants to be allowed to be more transparent about the government's requests for data -- quote -- "in terms of both the number we receive and their scope."

Within hours, Facebook and Microsoft issued similar statements and requests of the government as well.

Jeffrey Brown spoke with Google's chief legal officer, David Drummond, from Amsterdam this afternoon. It was Google's first U.S. broadcast interview since the news broke.

JEFFREY BROWN: David Drummond, welcome.

In your letter to the attorney general, you appear to acknowledge that Google does comply with government requests for user data, so that is in fact the case?

DAVID DRUMMOND, Chief Legal Officer, Google: Yes, yes, that's the case.

We sent that letter because there's been a serious misimpression that's been created in the wake of the stories that came out in the last few days, stories that we were as shocked by as everyone else. And the misimpression is that we're doing some kind of large-scale -- or participating in a program that does large-scale surveillance on our users.

And that's just not the case. And we want to be able to be more transparent about what we do do, which is occasionally comply with national security orders, as we're required to do. What we would like the government to do is to allow us to say more.

JEFFREY BROWN: There seems to be a distinction between direct and indirect access to data. What exactly is the government allowed to look at?

DAVID DRUMMOND: Let me be very clear about this. We do not participate in any kind of a program that gives the government any access to access to our servers, direct or otherwise, nor do we allow the government to place any kind of equipment on our systems.

What we do do and what we have been transparent about as much as we can is that we comply from time to time with these government orders. We take them very seriously. We review them very carefully. We push back if they are overbroad.

And here's the important thing. We serve hundreds of millions of users. The -- only a tiny, very tiny fraction of our users have ever been subject to one of these requests, national security requests. So this idea that we are sort of participating in a broad program here is simply false. And we want to make that clear and we want to make that categorically clear.

JEFFREY BROWN: Well, how exactly do these requests work? Do you get a court order? Do you have to have one? Who sees it on your end, and who approves it?

DAVID DRUMMOND: Yes, these are the FISA court orders that you have heard about. And we have a team that handle these directly.

And we have experience with those. As I said, we review them very, very carefully. And when we determine that we need to comply, then we deliver the information to the government. And it's very clear. We deliver it to them. We push it out to them. They don't come access it through any machines at Google.

JEFFREY BROWN: Are there specific cases where Google has said no to a request for access?

DAVID DRUMMOND: Well, we're on record in other contacts of having pushed back. And so we are willing to push back if something is overly broad.

JEFFREY BROWN: So people who are wondering where are the limits when you do comply, is that a broad brush for data or very targeted and specific with what the government is looking for?

DAVID DRUMMOND: Look, one of the things we're asking here, what we wrote in the letter is that we would like to be able to say more about the number of these requests that we get, what they cover, and be more transparent about it.

We have pioneered this concept of being transparent about the government requests that we get. We think it's really important as a check on our behavior, as a check on the government's behavior. And we would like -- we are asking the attorney general and the FBI director to allow us to provide more of that information.

But what I can tell you is that these are targeted requests, as I said, of the hundreds and hundreds of millions of users. We're talking about a tiny fraction that's affected. And we would like to say more about that.

JEFFREY BROWN: And what about sharing with other governments? We're talking about the U.S. government here. Do you get these kinds of requests from other governments, the U.K. or others?

DAVID DRUMMOND: Well, we have received requests from other governments from time to time. I think it's important to understand that Google is a U.S. company. The data is based here in the U.S. We typically ask those countries to go through the treaty-based process, law enforcement, to get access to that material.

JEFFREY BROWN: You sound very frustrated, just listening to you talk about what you can and cannot say and about what you see as misperceptions about how this works.

DAVID DRUMMOND: Well, yes, it's a little bit frustrating. But that's why we want to say more, because we want it to be clear that what the actual facts are. And there have been a lot of things being said about our participation in the program that just aren't true.

And so we really would like to set the record straight. As I said, we were surprised, one, by the Verizon national security order involving phone records. We have never received anything so broad. We were surprised by the allegations made about this so-called PRISM program. And I said we don't participate in anything that's described there.

So we really wanted to get the record straight and we wanted to make the request of the government to help us make -- set the record straight by allowing us to provide more detail in our transparency report about these kinds of national security orders.

JEFFREY BROWN: David Drummond of Google, thanks for joining us.

DAVID DRUMMOND: Thank you for having me.

GWEN IFILL: You can read Google's full letter to the Department of Justice on our website. 

Watch Video | Listen to the Audio

GWEN IFILL: Snowden's revelations have some wondering that if a 29-year-old got access to classified documents, who else outside government does?

To help us find answers, I'm joined by Washington Post investigative reporter Dana Priest, author of "Top Secret America The Rise of the New American Security State," and Irving Lachow, director of the Program on Technology and U.S. National Security at the Center for a New American Security.

Dana Priest, you worked on an investigation of this kind of top secret activity for two years. How extensive would you say it is?

DANA PRIEST, The Washington Post: Well, after 9/11, the government decided to vastly increase what it could do and the size of its intelligence agencies without hiring more federal employees. And the only way that it could do that was to hire more contractors.

And we reported and then the government followed up and reported that there were nearly 400,000 contractors with top secret clearance, three times that many with secret clearance. So we're talking about an increased pool of people who do swear an oath, who understand that they are not allowed to share classified information, who go through at the top secret level pretty intrusive background checks.

But, nonetheless, you open up yourself to more risk when you bring on people, especially in a quick manner that happened after 9/11, when people wanted to increase the capabilities that the government had, and they hired people quickly. And then they got a bottleneck of those -- in those reviews of their background, and the GAO, the government agency that looks at how the government works, did find that there were some shortcuts in the way that security clearances were documented and given out.

So I think that, you know, this is an increased risk when you hire contractors. On the other hand, I think really what it shows is that the government still is coming to grips with its own computer systems. One of the largest number of contractors are in the field that Mr. Snowden says that he was in, which is the I.T. field.

GWEN IFILL: Well, let me ask Irving Lachow about people like Edward Snowden and even Bradley Manning, the -- how do they get access to these documents? How do you get a secret security clearance so high that you can do this much damage?

IRVING LACHOW, Director, Program on Technology and U.S. National Security, Center for a New American Security: Well, so, they go through a process, a background investigation.

And if they are vetted successfully, then they are granted access to a given level of information. And once you have access to that information, there are computer networks that are available that have a lot of information at that level of classification, where you can just go and do a search and find much of that information.

And so if you are Bradley Manning, you can do a search and find all this kind of information, in his case, download it to a disk and potentially walk out the door with it.

GWEN IFILL: Are protections sufficient?

For instance, we heard early on in this that even before Edward Snowden's story had come out, the leaks had actually been published, that the government was onto him. Is that always what happens? Or do we know that there are moles working in the government who we never find?

IRVING LACHOW: Well, so the government is aware that there are people who are going to be trying to do this kind of thing.

And so there are a lot of controls in place, and there's a lot of activity in place to try to catch these kind of activities, but it can be very difficult. As Dana pointed out, there are tens of thousands, if not hundreds of thousands of people who have access to the highest, the most sensitive information that our country has.

And it can be very difficult to control who should have access to what information at what time, because everyone is working on different projects, different programs. They might be doing research, and so it can become very difficult to try to understand who is doing something legitimate and who is doing something they shouldn't be doing.

GWEN IFILL: So, Dana Priest, how do they manage this? How do they -- what kind of controls can they impose?

DANA PRIEST: Well, there are two things right off the bat.

One is that people are regularly polygraphed, maybe once a year, to make sure that they still pass, that nothing has changed in their background that would indicate a risk. The other thing really is that they do rely on other employees to notice differences and to report them. And they do have counterintelligence people who are employed to do just that, to follow people into the watering holes that they frequent, and into the social settings that they frequent, especially if there is a suspicion about somebody, because they are trying to catch something like this before it happens.

But, in the Manning case, for example, even though he technically had access to what he downloaded, in the after-action review that they did, he shouldn't have. The State Department's computer system shouldn't have allowed, they determined later, someone who was studying one particular type of terrorist to have access to State Department cables from around the world. So they're still really trying to adjust their computer systems to give access to people who have a need to know about particular programs.

GWEN IFILL: Last night, we had the former Director of Intelligence Dennis Blair on this program. And he actually in an interesting interview with Dana for her series said, you know, sure we have expanded. Sure, we're doing more. But it's worth overdoing.

Is it worth overdoing, in your opinion?

DANA PRIEST: I think that is what this ...

GWEN IFILL: I was going to ask Irving that, and then I will come back to you, Dana.

DANA PRIEST: OK.

IRVING LACHOW: Well, I think it depends.

So, there are always trade-offs. There are trade-offs between security and liberty. There are trade-offs with relying on contractors. So the benefit of using contractors is, they're easy to hire and fire, or at least much easier than government personnel. So it gives you a lot more flexibility to bring people in with special expertise, people that are hard to bring into the government on a regular basis.

But there are risks. You are relying on people. There needs to be oversight. And oftentimes, the government personnel who are overseeing the contractors may not understand, especially on some technical issues. They may not have the knowledge that the contractors do. And so maybe they don't have a detailed understanding of what is going on underneath them.

And so there are some risks that you potentially introduce into the system.

GWEN IFILL: Dana, you were going to say?

DANA PRIEST: Well, you can see from the reactions that have followed this that some people think it's worth overdoing and some people don't. And other people would just like more information.

The Senate Intelligence Committee, for example, today got briefed by government officials on the program again, and immediately came out and said they would like some of it declassified. The same sort of information that's now being touted as treasonous, they would like to declassify so that we could learn more about it.

And so obviously there are people that think some of that information doesn't damage national security. It probably belies some of the myths that are growing up now as we speak around these programs. So the debate is what Mr. Snowden says he was all about, and obviously has some concerns about the program. I don't see how anybody can really make a decision on whether it's too much without knowing what it is.

GWEN IFILL: Irving Lachow, are we -- is it possible that we as citizens are giving away as much information as they are getting from us when we talk about especially these social media sites?

IRVING LACHOW: Absolutely.

So I think, without -- without knowing it, we all, as we do our daily business, use social media, go on the Internet, we are giving away so much information. I think most Americans don't have any idea how much -- what companies do just by tracking our behavior. They don't need to see the content of what we do, but just by being able to track where we go, what we do, our geolocation, they can put together a picture of who we are, how old we are, how much money we make, who our friends are.

It's remarkable what you can do with that kind of metadata, which is exactly the kind of information that was being collected from these phone records. And so I think, without knowing it, many of us are giving away a tremendous amount of information.

GWEN IFILL: Is there a difference, Dana, between giving it away to the government and giving it away to private industry?

DANA PRIEST: Oh, absolutely, because what privacy advocates are most worried about is the storage of this data. So I may not be under suspicion right now; 10 years from now, you know, they're looking at three parts -- three different sets of my digital exhaust, and they may decide something is suspicious.

And so they can go back and mine the data that they have from 10 years ago. And that's what causes privacy advocates most concern, is that you are going to have this giant database of information about Americans in the Verizon phone records instance.

GWEN IFILL: Dana Priest of The Washington Post, Irving Lachow of the Center for a New American Security, thank you both very much.

DANA PRIEST: Thanks, Gwen.

IRVING LACHOW: Thank you. 

Watch Video | Listen to the Audio

GWEN IFILL: Defenders of expansive surveillance by the government stepped up demands today to go after an intelligence contractor who exposed the secret programs. The target of their ire remained out of sight, as investigations of the leak gained momentum.

REP. JOHN BOEHNER, R-Ohio: He's a traitor.

GWEN IFILL: House Speaker John Boehner's strong words this morning were targeted at elusive former CIA employee Edward Snowden.

JOHN BOEHNER: The disclosure of this information puts Americans at risk. It shows our adversaries what our capabilities are. And it is a giant violation of the law.

GWEN IFILL: Boehner's Senate counterpart, Minority Leader Mitch McConnell, went even further.

SEN. MITCH MCCONNELL, R-Ky.: What's difficult to understand is the motivation of someone who would intentionally seek to warn our nation's enemies of the lawful programs created to protect the American people. And I hope that he is prosecuted to the full extent of the law.

GWEN IFILL: Snowden briefly worked as a contractor at the National Security Agency, where he learned of sweeping efforts to mine phone data and monitor e-mails and other digital records.

Today, his employer, defense consultant Booz Allen Hamilton, announced that after three months on a job for which he was paid $122,000 dollars a year, he's been fired for ethics violations.

Snowden's last known location was Hong Kong. But he checked out of his hotel there yesterday. He could face criminal charges in the U.S. once the Justice Department finishes its investigation.

At the White House today, Press Secretary Jay Carney said one thing is clear.

JAY CARNEY, White House Press Secretary: It is important to note that, when it comes to contractors, they swear an oath to protect classified secrets, just as government workers do. And that is important to remember.

GWEN IFILL: Carney also confirmed the NSA is doing a damage assessment of any harm done by the disclosures.

But not every member of Congress sees Snowden as the problem. Democratic senator Ron Wyden of Oregon wants hearings on the NSA's activities. He suggested that Director of National Intelligence James Clapper didn't tell the truth last March when he denied massive monitoring was taking place.

Lawmakers were briefed by NSA officials on Capitol Hill today. Many still appear to support the agency. Senate Majority Leader Harry Reid says congressional oversight has been robust.

SEN. HARRY REID, D-Nev.: That's why the American people in polls -- two polls I saw today support what is happening with trying to stop terrorists from doing bad things to us.

GWEN IFILL: Adding to the debate, the American Civil Liberties Union announced it has filed suit, charging that the phone data collection violates the right to free speech and privacy.

But the uproar also extends overseas. In Brussels today, the European Union Parliament met in emergency session to discuss whether the U.S. surveillance has violated the civil liberties of Europeans. 

Chief legal officer David Drummond defends Google's response to the government's national security requests for information.

In his first U.S. television interview since the latest news broke of the government's surveillance program, Google's chief legal officer David Drummond told PBS NewsHour senior correspondent Jeffrey Brown on Tuesday that the company has given the U.S. government information on only a "tiny fraction" of its hundreds of millions of users.

The interview airs on Tuesday's NewsHour broadcast.

The Washington Post reported Thursday that the National Security Agency and FBI were accessing user content and connection logs at nine U.S. Internet companies, including Google and Facebook, in a program that was code-named PRISM.

Google and Facebook have denied the government had "direct access" to their servers.

In his interview with the NewsHour, Drummond insisted that Google "never received anything as broad" a request from the U.S. government as was suggested in earlier published reports.

Drummond told Brown that the reporting on the issue has left the "serious misimpression" that Google is allowing the government unfettered access to its servers and even attaching equipment to extract information.

In reality, he said, Google hands over information in response to the Foreign Intelligence Surveillance Act court-ordered requests after its legal team thoroughly reviews them.

On Tuesday, Google sent a letter to U.S. Attorney General Eric Holder and FBI Director Robert Mueller asking permission to publish in its transparency reports the number of times it has been requested to hand over information to the government and the scope of its compliance. The company wrote:

"Google's numbers would clearly show that our compliance with these requests falls far short of the claims being made. Google has nothing to hide."

When asked if Google ever turns down the requests, Drummond said: "We are willing to push back if something is overly broad."

Drummond also said Google has complied in the past with requests for data from governments in others countries, but only under the terms of protocols established by international treaties and laws.

Related Coverage

June 10: What Should Be Up for Public Debate When It Comes to Secret Surveillance?

June 10: NSA Contractor Edward Snowden Is Source of Leak on U.S. Surveillance Programs

June 7: Mass Collection of Communication Data Speeds Inquiries, Prompts Privacy Debate

Support Your Local PBS Station

Watch Video | Listen to the Audio

GWEN IFILL: We return now to the story of Edward Snowden, the 29- year-old former CIA employee and intelligence contractor who's admitted leaking government secrets. Is he a criminal who put Americans at risk, or is he a hero who told Americans what they need to know about how closely their government is watching them?

We have two points of view on that from Jane Harman, a former nine-term member of Congress who was the top Democrat on the House Intelligence Committee. She's now president of the Woodrow Wilson International Center. And author and journalist James Bamford, who has written extensively about the NSA and other intelligence agencies.

Welcome to you both.

JAMES BAMFORD, Author, "The Shadow Factory: The Ultra-Secret NSA From 9/11 to the Eavesdropping on America": Thank you.

GWEN IFILL: So, James Bamford, is Edward Snowden a leaker or a whistleblower?

JAMES BAMFORD: Well, he's definitely a whistleblower. He's not profiting from this in any way. He's going to be harmed very severely because of this.

He's doing this because he thinks it's right, because he thinks that the public should know that the government was picking up and storing billions of their telephone records. You know, they had a debate about this in England in the last few weeks. But it was public. It was about a bill going through congress to do a similar thing.

Over here, we don't do that. We just secretly do all these things. The public has a right to know what's being done with their telephone records.

GWEN IFILL: Jane Harman?

JANE HARMAN, Former U.S. Congresswoman: He's a leaker. And what he did was inappropriate.

I do think we should have a public debate. We actually had a public debate around the 2008 amendment to FISA, the Foreign Intelligence Surveillance Act. This law has been on the books since 1978. It was passed in response to the abuses in the Nixon administration, and pursuant to the Church Commission, which investigated a lot of intelligence abuses in the mid-'70s. It was passed by overwhelming bipartisan margins, and it set up the Senate Intelligence and House Intelligence Committees, in addition to the FISA court, to review individual actions against U.S. persons.

And it continued that way through 2011, when it was clear the authorities were outdated. And then we amended it after a public debate in the United States Congress. And it works well.

GWEN IFILL: Sen. Udall, we just heard, talked about the scale of this program. Is it possible to share this kind of information, as Edward Snowden did, and not share it at such a scale? Is that the problem, really?

JAMES BAMFORD: Have him share the information about what he picked up?

GWEN IFILL: So much of it.

JAMES BAMFORD: Well, we have yet to see what else he has out there. Right now, he released basically two big programs, the one about the telephones and the one about PRISM, which is intercepting the Internet traffic.

I don't think that was a big release. I mean, people should know this is going on with their communications. What's the big secret? The terrorists obviously assume -- they have assumed all along that we're doing this. So, why keep it a secret from the American public?

GWEN IFILL: Both The Washington Post and The Guardian have reported that he's made available to them PowerPoint slides, of which they only published four of them, because they thought there were things he was giving them that were too secret.

JAMES BAMFORD: Well, I haven't seen those. I can't make any judgment about those.

What I'm making a judgment on is what we have seen. And what we have seen is the government access without any knowledge of any public about access to billions of telephone records every day. Every day, somebody picks up the telephone, makes a phone call, a record of that phone call is being kept by NSA. People should know that, the same thing with the Internet.

GWEN IFILL: Jane Harman, let me read to you something that James Bamford has written about the NSA.

He wrote that: "There is no doubt that it has transformed itself into the largest, most covert and potentially most intrusive intelligence agency ever created."

JANE HARMAN: Well, it's large. I agree with that, but the programs we're talking about were developed in Congress pursuant to debate.

They are subject to oversight by Congress. There is a federal court -- that's what the FISA court is. It's a rotating court that includes 11 federal judges, at least three of whom have to live near Washington so they can personally review any individualized requests to read content or listen to -- and, in fact, the phone records are records, but to listen to somebody, it's prospective. It's not retroactive.

No one is listening to our phone calls right now, unless there's an individualized record for an American. But, at any rate, Congress passed these laws. And they are -- and my experience, having worked there and having been involved in the 2008 amendments to FISA, having been very distressed that the early Bush administration wasn't following FISA right after 9/11 -- but, at any rate, these laws work well.

And the oversight is robust by the senators and House members who do it, mostly on the Intelligence Committee.

GWEN IFILL: There are laws. There are courts. What's wrong with that, if it's legal? Or is that what's wrong with it?

JAMES BAMFORD: Well, Congress. Please.

Where were they when the Bush administration was doing their warrantless eavesdropping?

JANE HARMAN: I will answer that.

JAMES BAMFORD: Well, let me finish.

You know, the Congress Intelligence -- the Senate Intelligence Committee, when it started out under Frank Church, it started out as an organization to protect the public from the intelligence agencies. Now it's simply become a cheering gallery for the intelligence agencies. They want to give it more money. They want to give it more power. And you can see what happens during the Bush administration.

JANE HARMAN: I have -- I served there for eight years. And I don't think I was a cheering gallery for the Bush practices.

First of all, I objected, once I understood it, that the Bush Terrorist Surveillance Program, TSP, was being conducted outside of FISA. That wasn't information I had. I was in the so-called “Gang of Eight,” let into this very, very secret program. I was told every time it strictly complied with law.

What I wasn't told is these were Bush laws made in the Justice Department. And when that was clear, I and many others in Congress spent a lot of time making sure that this program, which was known to the public -- I mean, first of all, it was leaked to The New York Times -- everybody was aware about the phone records collection program and what it was for -- was strictly covered by FISA, and that was the product of a public debate.

GWEN IFILL: Let me ask you both a question.

There have been at least two polls out today showing most Americans think it's fine, that they don't really have a problem with this. So, let me ask you this question, James Bamford. What has the gathering of this information, this effort that the NSA has spent to gather personal information, what has that hurt?

JAMES BAMFORD: What it hurts is a democracy.

A democracy, you're not supposed to do things like that. You're supposed to have open societies, where governments, if they want to do that, do what the British did. Bring a bill through Congress, say we want to do this. We want to have all your records every single day sent to the NSA. See how much of a vote you will get on that. They tried that in Britain, and they voted it down.

GWEN IFILL: And what has it risked? What really -- what has it thwarted?

JANE HARMAN: Again, this is metadata.

It's telephone numbers, not attached to people. And the only access you can get to this metadata, if a U.S. citizen or a U.S. legal resident is involved, is on an individual basis once you go through a federal court to get an individualized warrant, which is what the Fourth Amendment requires.

GWEN IFILL: When you were in Congress -- can I ask you, how often were you briefed on programs like this, especially PRISM and programs like that?

JANE HARMAN: Well, PRISM started after I left the Intelligence Committee.

GWEN IFILL: They're not secret anymore.

JANE HARMAN: But I was briefed regularly on programs.

Sure, did I want more information? Yes, I wanted the memos that the Office of Legal Counsel, the OLC, and the Justice Department was providing. We couldn't get those. And, yes, I wanted more robust briefings, and I think Congress should always push for that. And I'm not saying this is perfect. And I think we agree that there ought to be a robust public debate.

And, oh, by the way, I think we need a comprehensive -- a new comprehensive set of legal boundaries around our post-9/11 policy. We're in the second decade.

GWEN IFILL: Well, that's the line I want to -- where I want to end this. There has got to be a line somewhere between privacy and security. You agree on that. Where is the line?

JAMES BAMFORD: Well, the line -- you know, the line, I would put it, is if you're going to invade American privacy, you bring a bill through Congress and you do it publicly that way. You don't do it secretly, like they used to do in East Germany during the Cold War.

Look, we're talking about having a debate now. How would we have had this debate, how would we be sitting here talking about this if it wasn't for Edward Snowden?

GWEN IFILL: Good question.

JANE HARMAN: I -- well, I think -- I applaud what Mark Udall has done and Ron Wyden. They made clear they disagreed with some aspects of this. They pursued their disagreement inside the system.

And I think, ultimately, they would have caused the debate that we should be having.

JAMES BAMFORD: It didn't.

JANE HARMAN: Well, I'm sorry.

I think Americans want our country protected. I don't think it's a choice between security and liberty. I don't think it's a zero sum gain. It's a positive sum gain. You get more of both or less of both. We created a privacy and civil liberties commission when we reorganized the intelligence community in 2004.

You're rolling your eyes, but President Obama ...

JAMES BAMFORD: Because they just appointed the first person to it.

JANE HARMAN: Well, the Senate finally confirmed the person. But that commission can be very helpful here.

GWEN IFILL: We're not going to resolve this tonight, unfortunately.

Jane Harman, James Bamford, thank you both very much. We will talk about it some more.

JAMES BAMFORD: Thank you. My pleasure. 

Watch Video | Listen to the Audio

JUDY WOODRUFF: For more on all this, we turn to retired Adm. Dennis Blair, who was the director of national intelligence in 2009 and 2010. In that position, he oversaw the entire intelligence community, including the NSA.

Adm. Blair, welcome to the NewsHour.

Let me first ask you about this question. How could a 29-year-old technical assistant who says he didn't have a high school diploma, only worked for a few years for a private contractor, have access to this kind of information?

RET. ADM. DENNIS BLAIR, Former U.S. Director of National Intelligence: Well, I haven't read everything that this young man has talked about or put out, Judy.

But just listening to parts of it, he clearly didn't have the full picture of these programs that are run by the intelligence agencies. And so he reacted to the little piece that he knew, and he took a very dangerous action.

JUDY WOODRUFF: So, are you saying you believe he's embellishing what he knows?

DENNIS BLAIR: Yes. I think he -- it sounds like he has an overinflated idea of the power that he had as a low-level employee. He didn't understand all the checks and balances or the intent of the program.

And he is making some pretty wild, wild statements. And, by the way, they are -- it's -- he's violating laws to talk about these programs. So I don't think he's a terribly credible -- terribly credible witness here.

JUDY WOODRUFF: Well, if he didn't see that much, then how much damage is done by his releasing, revealing these?

DENNIS BLAIR: I think the single point in all of this that I agree with, Judy, is that the -- we need to take some of the mystery, but not the secrecy, out of the intelligence programs that we use to protect Americans.

Our whole system is set up on foreign intelligence agencies, gather information from foreigners, not from Americans, overseas. Our domestic security agencies, the FBI, state and local police, all work in the United States on threats to Americans.

The problem is the terrorist groups don't recognize this fine distinction. And they send communications back and forth to Americans, to people in the United States. And so the whole elaborate procedure that we have set up is to keep the foreign intelligence agencies on the side of gathering information against foreigners, and only gather information about Americans under a court order, the equivalent of a warrant that was talked about earlier.

And it's this back-and-forth of trying to protect the rights of Americans while yet making information available to the domestic law enforcement services that will help them to protect Americans that all of these systems are set up.

JUDY WOODRUFF: But it sounds like, in so doing, what the intelligence agencies have is access to millions, if not billions of telephone/Internet communications from people who are -- who have nothing to do with terrorism.

DENNIS BLAIR: No, I think that's a misconception, Judy. They don't.

They have access only to information which they have convinced a court, the Foreign Intelligence Surveillance Court, that has probable value. It's a probable cause sort of a justification. At that point -- and let's take an example.

A foreign terrorist suspect makes a phone call to a number in the United States, and the National Security Agency happens to pick up the foreign end of that conversation. In order to know who that call was made to, when it was taking place, the location, the National Security Agency has to go to the Foreign Intelligence Surveillance Court, get permission to search the databases of -- that are collected by the communications companies for that number, find out the number, find out who owns that number.

It is then at that point turned over to the FBI for them to investigate. So the only numbers that the NSA -- the only numbers of Americans that the NSA actually gains information about are those which are linked to suspicious activity gathered overseas and under court order.

JUDY WOODRUFF: We heard Sen. Rand Paul say that this is unconstitutional, what's going on. He said he doesn't know of any law that authorizes all this data collection.

DENNIS BLAIR: Well, with due respect to the senator, I think he's just flat wrong on that.

This is under a law that was passed by the Congress in its current form about 2007-2008. It goes through several branches of government. In addition to the intelligence agencies, the Department of Justice oversees it. The requests are then made to the Foreign Intelligence Surveillance Court. There's then follow-up, and there are reports to Congress routinely on this activity.

So I think it's very constitutional. It involves all branches of the federal government. It's designed to protect Americans, while protecting their civil liberties. So, I think it's an extremely well-run and constitutional program.

JUDY WOODRUFF: Adm. Blair, what about another criticism we heard from Sen. Mark Udall, who said he doesn't -- that he has seen nothing that proves that this system works, that there's nothing proven that it has actually disrupted a terrorist plot?

DENNIS BLAIR: Again, with due respect to the senator, that's also flat -- flat wrong.

There are several plots which were thwarted by the use of this -- and I'm going to say this type of program. I don't want to discuss individual -- individual programs. But this system of overseas intelligence linked to an American phone number being turned over under court order to American law enforcement companies have thwarted multiple, multiple attacks. And I will just -- I will just leave it at that.

JUDY WOODRUFF: Let me come back to a question I asked you earlier, because I'm not sure I understood your answer.

If -- if Edward Snowden doesn't have access to as much information as it appears he may, then what is the damage that's been done by this?

DENNIS BLAIR: Well, the damage in all of this is that, in discussing the general concepts of the programs, which, as I say, are fully authorized and supervised, if it's done in an uncoordinated and in a freelance manner, individual pieces of how the programs are actually set up can be released, which then, of course, make it easier for our enemies to evade them and to mount their threats to Americans in different ways.

So I'm all for talking about the general principles of these programs. I'm all for examples which illustrate how they work. But when those who have been inside the programs talk about specific parts of them, it poses a danger, because it -- the -- our enemies use them to learn, and then come at us in new ways. And it costs us a lot more time, effort, trouble, and there are periods of danger until we can get back on top of it.

JUDY WOODRUFF: Adm. Dennis Blair, the former director of national intelligence, we thank you very much for talking with us.

DENNIS BLAIR: You're welcome, Judy. 

Watch Video | Listen to the Audio

JUDY WOODRUFF: The uproar over sweeping government surveillance has now expanded to the source of the revelations. He's defending his actions, saying the public is owed an explanation about what's been going on.

EDWARD SNOWDEN, Leaked Details of U.S. Surveillance: Even if you're doing nothing wrong, you're being watched and recorded.

JUDY WOODRUFF: That's Edward Snowden, the man who leaked that the U.S. National Security Agency is collecting data on millions of phone calls and Internet communications.

The Guardian newspaper in London and The Washington Post broke the stories last week. On Sunday, Snowden permitted them to make his identity public. He also made a lengthy video statement for The Guardian, produced by documentary filmmaker Laura Poitras and journalist Glenn Greenwald.

EDWARD SNOWDEN: I, sitting at my desk, certainly had the authorities to wiretap anyone, from you or your accountant, to a federal judge, to even the president if I had a personal e-mail.

It's getting to the point you don't have to have done anything wrong. You simply have to eventually fall under suspicion from somebody, even by a wrong call, and then they can use the system to go back in time and scrutinize every decision you have ever made.

JUDY WOODRUFF: Snowden is 29. He briefly worked as a contractor for the NSA, employed by the private defense consulting firm Booz Allen Hamilton. He says he felt compelled to speak out about what he calls wrongdoing.

EDWARD SNOWDEN: The more you talk about it, the more you are ignored, the more you're told it's not a problem, until eventually you realize that these things need to be determined by the public, not by somebody who was simply hired by the government.

JUDY WOODRUFF: Snowden was interviewed by The Guardian in Hong Kong, where he said he's seeking asylum. The former contractor indicated that he expects U.S. authorities to prosecute him.

EDWARD SNOWDEN: You can't come forward against the world's most powerful intelligence agencies and be completely free from risk, because they're such powerful adversaries that no one can meaningful oppose them. If they want to get you, they will get you in time.

JUDY WOODRUFF: At the White House today, spokesman Jay Carney wouldn't discuss Snowden or the case.

Other top officials did speak out over the weekend, before learning of Snowden's identity.

RET. LT. GEN. JAMES CLAPPER, National Intelligence Director: For me, it is literally -- not figuratively -- literally gun-wrenching.

JUDY WOODRUFF: On Saturday, the director of national intelligence, James Clapper, told NBC News that the leaks put the nation in danger.

JAMES CLAPPER: This is a key tool for preserving, protecting the nation's safety and security.

JUDY WOODRUFF: On the Sunday talk shows, the issue made strange bedfellows of lawmakers across the political spectrum. Republican Congressman Mike Rogers of Michigan chairs the House Intelligence Committee.

REP. MIKE ROGERS, R-Mich.: These programs that are authorized by the court, by the way, only focus on non-United States persons overseas. That gets lost in this debate -- is -- are pieces of the puzzle. And you have to have all the pieces of the puzzle to try to put it together. That's what we found went wrong in 9/11.

JUDY WOODRUFF: California Democrat Dianne Feinstein chairs the Senate Intelligence Committee.

SEN. DIANNE FEINSTEIN, D-Calif.: Here's the rub. The instances where this has produced good -- has disrupted plots, prevented terrorist attacks is all classified. That's what's so hard about this.

JUDY WOODRUFF: Another Democratic senator, Mark Udall of Colorado, argued the programs have gone too far.

SEN. MARK UDALL, D-Colo.: My concern is, this is vast. We haven't -- it hasn't been proven that it works. Uniquely valuable intelligence hasn't been proven to have disrupted plots. Yet it's the scale of this that really concerns me and the fact that the American public doesn't know about it.

JUDY WOODRUFF: And Republican Rand Paul of Kentucky insisted the programs are a violation of Americans' fundamental rights.

SEN. RAND PAUL, R-Ky.: Get a warrant. Go after a terrorist or a murderer or a rapist. But don't troll through a billion phone records every day. That is unconstitutional. It invades our privacy. And I'm going to be seeing if I can challenge this at the Supreme Court level.

JUDY WOODRUFF: Snowden is believed to be still in Hong Kong. It's unclear how the semi-autonomous Chinese territory will handle his case. Hong Kong has offered asylum to others in the past, but also holds an extradition treaty with the United States. 

JEFFREY BROWN: And for more on what is known about these programs, we turn to two reporters who've been covering this story, Siobhan Gorman of The Wall Street Journal and Charlie Savage of The New York Times.

So, Charlie, tell us first more about the collection of data on the Internet. What do we know about how extensive it is and how it works?

CHARLIE SAVAGE, The New York Times: Well, people who pay attention to this world may remember that, in 2008, Congress passed a law called the FISA Amendments Act, which retroactively or going forward legalized a form of the warrantless surveillance that President Bush had been conducting outside of statutory authority.

And an element of that was that surveillance aims at foreigners overseas didn't need to have individualized warrants, even if that collection was taking place on U.S. soil. You could get a basket surveillance order that would be up -- good for up to a year aimed at, say, surveilling suspected al-Qaida targets in Pakistan.

And that would include e-mails to and from those people, even if they were communicating with people inside the United States. And so what PRISM seems to be is the manifestation of that program that's called “702 orders” in the world -- this -- this universe, going to Internet companies, at least nine of them, who are participating in the program by, when being presented with these orders and then requests under them, turning over information about e-mails and other electronic traffic that they have about the overseas targets and the people they're communicating with.

JEFFREY BROWN: And, Siobhan, we also learned today that the data collection program on the phone calls, which was -- first came out yesterday, goes beyond Verizon.

SIOBHAN GORMAN, The Wall Street Journal: Yes, we were told that it's the three major carriers, so it's Verizon, AT&T and Sprint Nextel. They all have the same standing orders from the FISA court, the secret surveillance court.

JEFFREY BROWN: And today you reported on the cataloging of credit card transactions. That was new today. Tell us what you can about that. What do we know?

SIOBHAN GORMAN: Well, my understanding is that it's -- there have basically been a whole host of transactions that have been swept up in the wake of the Sept. 11 attacks. And this has been sort of an evolution.

And so one of the sets of transactions that has been funneled through these databases is credit card transactions. I do want to be careful. What I was told was, it's not clear that there are standing orders for credit card transactions, but there are certainly -- that data has been incorporated into these database -- these database vetting search types of investigations as well, as have lots of different types of information from data brokers, which you can -- one can buy. You can buy it for direct marketing purposes.

But, in this case, it's just being used to collect as much information as possible to balance it against leads and things like that that intelligence officials pick up in the course of their terrorism investigations.

JEFFREY BROWN: You're saying, though, that it's not clear whether that program continues, whether that's -- whether that's ongoing.

SIOBHAN GORMAN: Right.

I mean, it may be the kind of thing that -- something that they do periodically for different purposes.

JEFFREY BROWN: Now, Charlie, we heard the president say no one is listening to your calls.

So, flesh this out a bit. Explain what -- what is going on in the search for data.

CHARLIE SAVAGE: Well, so he's referring specifically to the first of these now three major intelligence disclosures over the last three days. And that involved the calling log data that Siobhan was just referring to from Sprint and Verizon and AT&T. What this appears to be doing is assembling a giant library of calls made inside the United States and calls made between the United States and abroad, not the content of those calls, but this number called that number at such and such a date from such and such a location.

And when you have -- but all of them. Ordinary people's calls are being logged in here. But that doesn't mean that what they're saying to people is being eavesdropped upon. It appears that this database is being used so that, when they learn that someone is suspicious, they want to quickly see who that person was talking to and who was talking to those people, without having to go back to the phone companies and present individual orders, and that would slow down the process, and/or maybe the phone companies would have disposed of the data after some time for their own business purposes.

However, one question that's arisen around this program is whether it's really necessary for the privacy cost that's incurred, especially now that we all know every time you call someone, now there is apparently going to be a permanent record in the government that you did so. Could the government not just take that extra step of getting those subpoenas when they need them about a specific person in the community of interest surrounding them?

Does this really need to be stored forever for everybody's phone call records? That will be one of the conversations that's unfolding in the days to come.

JEFFREY BROWN: Well, what do -- Siobhan, let me start with you on this. What do we know about how the data has been used so far? We have now had several members of Congress, I think, refer to the program actually helping to stop terrorists. Do we know any details? Do we know how all this has been used?

SIOBHAN GORMAN: Well, yes, lawmakers have said that there was at least one significant terrorist plot that was thwarted several years ago. We have still been waiting to get details, which apparently they're working to try to get declassified, but it sounds like that won't happen today.

I was told that one of the primary values that intelligence officials see in this program is that it allows you to sort of rule in and rule out different individuals and locations. So, if you get a lead on a particular individual, you can do this so-called link analysis to try to see who they're connected to, and you can see, well, if this -- do they have -- is this an overseas person who has some sort of significant connection in the United States? If so, then what other investigative actions can they take?

And what officials have taken pains to describe in recent days is that there are very specific standards that the investigators have to adhere to when they were going through this database. One official who I spoke with yesterday said that a fraction of one percent of the data has actually been viewed in the course of these searches.

JEFFREY BROWN: And, Charlie, one more in -- just in our last minute here. There's been talk about when this information -- when investigators go to the courts. There's been talk about how much Congress has been notified about these programs. What can you tell us so far?

CHARLIE SAVAGE: Well, what appears to be clear is that a lot of people in Congress knew about this, were well-briefed about it, and that, notwithstanding some voices like Sen. Wyden in particular and Mark Udall, who have been warning about what this section of the Patriot Act that is underlying this phone record collection, they have been raising alarms about that sort of opaquely for years, their colleagues who knew about this thought it was OK, because they kept reauthorizing the law that this is based upon.

And so President Obama's defense today is, this is not illegal, all three branches of government are on board for it, the courts are overseeing it, Congress authorized it and oversees it, and so therefore there are no rule of law concerns.

Obviously, civil libertarians might beg to differ on constitutional grounds, but certainly it will be an uphill climb to make that case with three branches of government behind it.

JEFFREY BROWN: OK, Charlie Savage, Siobhan Gorman, thank you both very much.

CHARLIE SAVAGE: Thank you.

SIOBHAN GORMAN: Thank you. 

Watch Video | Listen to the Audio

JEFFREY BROWN: Revelations that the government is checking up on phone calls, Web traffic and credit card sales prompted the president to speak out today. He said intelligence officials are trying to keep the country safe from terrorism, and they're doing it under close supervision.

It's now known the National Security Agency is running three highly classified surveillance programs. The first to be publicized collects phone call data from millions of Verizon, AT&T and Sprint customers.

Last night, Director of National Intelligence James Clapper also confirmed the existence of PRISM, targeting the Internet. It taps into the central servers of nine major U.S. companies, including Google, Apple, Yahoo!, and Facebook, to access e-mails and other files.

Today, The Wall Street Journal reported the NSA also catalogues credit card transactions.

Hours later, President Obama defended the NSA's activities at a stop in San Jose, Calif.

PRESIDENT BARACK OBAMA: Nobody is listening to your telephone calls. That's not what this program's about. They are not looking at people's names, and they're not looking at content.

But, by sifting through this so-called metadata, they may identify potential leads with respect to folks who might engage in terrorism. Now, with respect to the Internet and e-mails, this doesn't apply to U.S. citizens, and it doesn't apply to people living in the United States.

JEFFREY BROWN: The programs began in 2006, and the president said they have been monitored by Congress and the courts all along.

PRESIDENT OBAMA: Bipartisan majorities have approved them. Congress is continually briefed on how these are conducted. There are a whole range of safeguards involved. And federal judges are overseeing the entire program throughout.

JEFFREY BROWN: Many in Congress support the surveillance, while other lawmakers, along with civil libertarians, have voiced alarm.

President Obama said, that's all to the good.

PRESIDENT OBAMA: One of the things that we're going to have to discuss and debate is how were we striking this balance between the need to keep the American people safe and our concerns about privacy? Because there are some tradeoffs involved. And I welcome this debate.

JEFFREY BROWN: At the same time, the president denounced the leaks that triggered the debate.

PRESIDENT OBAMA: I think that there is a suggestion that somehow any classified program is a -- quote, unquote -- "secret program," which means it's somehow suspicious.

If every step that we're taking to try to prevent a terrorist act is on the front page of the newspapers or on television, then, presumably, the people who are trying to do us harm are going to be able to get around our preventive measures.

JEFFREY BROWN: The president said he plans to address the issue further in coming days. 

Watch Video | Listen to the Audio

JUDY WOODRUFF: Now the debate over cutting food stamps.

The Senate agreed today to move forward with a vote next Monday on a wide-ranging farm bill. More than three-quarters of the money for it, or about $760 billion over 10 years, would go toward food stamps, now called the Supplemental Nutrition Assistance Program, or SNAP. SNAP has grown in the wake of the recession. Roughly 47 million Americans, or about 15 percent of the population, receive assistance from it.

But now there's a push to cut back. The Senate bill would trim it slightly by $4 billion over 10 years. A version moving through the House would cut at least $20 billion, possibly more.

We look at all this now with Lori Silverbush. She's a filmmaker who produced the documentary, "A Place at the Table," which explores hunger in the United States. And Chris Edwards, he's director of tax policy studies at the Cato Institute and he's editor of its downsizinggovernment.org website.

Welcome to you both.

Chris Edwards, to you first.

With millions of Americans still unemployed, many of them still not earning, those who are employed, as much as they were earning before, why is now the time to cut food stamps?

CHRIS EDWARDS, director, Tax Policy Studies, Cato Institute: Well, I think we need to look at not just the food stamps, but farm subsidies to cut. So I just wouldn't zero in on food stamps.

There's a lot of cutting I think we need to do in this farm bill in general.

JUDY WOODRUFF: But the food stamps are the bulk of the farm bill in terms of...

CHRIS EDWARDS: No, that's absolutely right.

If you look at the big picture, the cost of the food stamp program has roughly quadrupled over the last decade, from about $20 billion to about $80 billion today.

And the House Republicans are thinking about cutting about $2 billion of that, just a couple of a percent. After you have quadrupled the size of a program, I think that's reasonable, a cut that small.

JUDY WOODRUFF: Lori Silverbush, what about this point that the program has grown so much that why isn't it reasonable to begin to make some cuts now?

LORI SILVERBUSH, co-director, "A Place at the Table": Well, I think it's interesting that you say that, Chris.

I mean, it's grown so much because demand has grown so much. It isn't growing because it's bloated or not being administered well. There's that many people hungry who are availing themselves of it. So the word “reasonable” is a funny word.

What's a reasonable amount of hunger for your kids, for example? How many meals would you want your children not to eat in order to balance the budget? I think that's -- the word reasonable is deceptive.

CHRIS EDWARDS: You know, the thing is, it's true that the recession and the economic slowdown has caused food stamp costs to increase.

But the cost of the program roughly doubled under President Bush, even before President Obama came to office, just because Congress and President Bush expanded the eligibility so much. So that's part of the problem.

And even now, the unemployment rate now is lower than President -- when President Obama first came to office, and yet there's millions more on food stamps.

So the Congress and the states have continued to loosen eligibility. So the food stamp program now is not just for the lowest-income people. It's moving up into the middle class.

JUDY WOODRUFF: How do you respond to that?

LORI SILVERBUSH: Well, sure, Chris. I mean, Chris, you're making a very good point. Members of the middle class are now going hungry.

And, as a consequence, they're signing up for food stamps. I mean, I think it makes sense that there would be a bit of a lag between the time in which food stamps -- the food stamp -- people avail themselves of a program after being unemployed.

I'm not an economist. I'm a filmmaker. I went around the country with my partner, Kristi Jacobson, and we -- we met the people that you're talking about, these middle-class people that I think you're trying to imply are somehow gaming the system.

But I saw people, we met people just trying to put food on the table and struggling, or out of work, or cobbling together part-time jobs without benefits, and not paying their rent so that they could buy food, or not -- you know, going without medical care so they could buy food.

So, I think all of the things you're saying are factual, sure, but you're not saying, well, the reason food stamp enrollment went up so much under President Bush was because need went up so much.

LORI SILVERBUSH: This is a program with very, very low rates of fraud. It's not being -- I don't think people are gaming the system at all, and we sure didn't find that.

JUDY WOODRUFF: How do you respond to that?

CHRIS EDWARDS: Well, one of the things that's happened, for example, is there used to be strict income and asset tests on the program. In other words, if your income was too high or you had a lot of money in the bank, you didn't get food stamps.

Those sorts of limits have been basically eliminated in most of the states now for this complicated reason called categorical eligibility.

But, basically, the Republicans have been trying to re-establish some income and asset tests, so that you can't have too much money or too much money in the bank and still get food stamps.

And there has been plenty of anecdotal evidence, for example -- for example, groups of people, college students now often get food stamps, and they never used to. So there's a growing sort of dependence here.

And, you know, a lot of people who didn't used to even want to get food stamps are now being dependent on the government.

JUDY WOODRUFF: Lori Silverbush, what about this argument that the eligibility requirements have now grown looser, so that they are now possibly scooping in people who -- who may not need food stamps?

LORI SILVERBUSH: Well, let's be really clear.

Those eligibility requirements are still incredibly -- the bar is very, very high to entrance to food stamps. As family of four -- I think it's something like a total income of $28,000 a year for a family of four. That is not people who are living high on the hog. And the food stamp benefit itself comes down to approximately $1 a meal. It's not a lot of money.

So I would -- my experience meeting the people who are for the first time availing themselves of food stamps is that they're doing it because of straight-up need. We didn't find that people were happy to collect food stamps. They were devastated and humiliated.

JUDY WOODRUFF: Let me ask you about this, this question of changing the eligibility. What's an example of what -- of a requirement that could change that you believe would be fair?

CHRIS EDWARDS: Right.

Well, I will give you an example. It used to be people who are non-citizens did not -- were not eligible for food stamps. That's changed in the 2002 farm bill under President Bush. He made is so that non-citizens, as soon as they come into the United States, they can get food stamps now. So that's type of expansion in eligibility that has gone on.

JUDY WOODRUFF: So you're talking about legal immigrants?

CHRIS EDWARDS: Yes, legal immigrants didn't used to be eligible. Now they are.

JUDY WOODRUFF: And so you're saying they should be taken off the food stamps?

CHRIS EDWARDS: I'm saying we need to reduce the costs in a lot of different ways, as well as reducing the costs of farm subsidies, which are welfare for higher-income people and -- right.

JUDY WOODRUFF: And, Lori Silverbush, I believe...

LORI SILVERBUSH: Chris, I think you kind of dodged that a bit, because she said, does that mean you think people should be taken off the program?

And, yes, we should reduce costs across the board. We have ag subsidies that are not even on the table that people are collecting, millionaire farmers. Industrial farms that have had record years of farm income are still collecting food subsidies. We're willing to add tens of billions of dollars to our deficit. This is not even in discussion.

And yet we're always somehow at a point of -- at a moment when our nation feels budget anxiety, we always go right back to illegal immigrants and poor people who are fraudulent, when all of these things are myths.

And, frankly, if an undocumented person is feeding their children with food stamps so that they have a shot at succeeding in school, I'm OK with that.

CHRIS EDWARDS: I mean, Lori, come on. The -- when President Bush came to office, there was only about 18 million people on food stamps.

Today, as your program mentioned, 47 million. So this is not just more low-income people getting the benefits here. The benefits have just exploded.

JUDY WOODRUFF: And, quickly, what about her other point, that there is very little fraud, she said, in the food stamp program?

CHRIS EDWARDS: I don't think that is correct. The official numbers by the USDA, the Department of Agriculture, say that.

I don't think it's correct. For example, there's 200,000 retailers in the United States who take these electronic cards to redeem food stamps. There's a lot of fraud at these retailers. And -- yes.

JUDY WOODRUFF: Very quick response.

LORI SILVERBUSH: Well, honestly, they're not -- we're not seeing that. The data is not supporting that.

If anything, the error rates are high because fewer people are participating than are actually eligible. And, frankly, they're participating less because of the stigma of calling it a fraudulent -- a fraudulent handout, which it isn't. It's an investment. If we're feeding people, they can stay productive. They can stay in the work force.

They can actually put their energy into their jobs, into studying, into raising their kids. Those kids can stay in school if they're eating. So, I think it's an investment. I think it's an important investment in our future.

JUDY WOODRUFF: The Senate moves to a vote on Monday.

We thank the both of you, Lori Silverbush, Chris Edwards.

CHRIS EDWARDS: Thank you, Judy.

LORI SILVERBUSH: Thank you, Judy. 

Watch Video | Listen to the Audio

KWAME HOLMAN: A top official at the IRS apologized today for a 2010 conference that cost more than four million dollars. Faris Fink told a House hearing his division followed rules in place at the time, but he acknowledged, nonetheless, the spending was excessive. Some of it paid for videos shown at today's hearing. One was a "Star Trek" parody, which drew this from New York Democrat Carolyn Maloney.

REP. CAROLYN MALONEY, D-N.Y.: Not only was it a monumental waste of well over $50,000 dollars of taxpayers' money, but I would say it is an insult to the memory of "Star Trek."

I could do a better Captain Kirk.

But I think I recognized one of the panelists in the video.

Mr. Fink, were you Mr. Spock in that video?

FARIS FINK, IRS Deputy Commissioner: Yes, that is correct.

KWAME HOLMAN: An inspector general's report found the IRS spent nearly $50 million dollars on 225 conferences over two years. Fink said today new rules now put much lower limits on training and travel expenses.

Senate Democrats and Republicans blocked each other's proposals today to keep student loan interest rates from doubling. Republicans wanted to tie rates on federally subsidized Stafford loans to 10-year Treasury notes, meaning they would rise as the economy gains. Democrats sought to extend the current 3.4 percent rate for the next two years. Barring congressional action, the rate goes to 6.8 percent on July 1st.

New Jersey Gov. Chris Christie has named his state attorney general, Jeff Chiesa, as interim U.S. senator. He succeeds long-serving Democrat Frank Lautenberg, who died earlier this week. Christie said today the new senator will serve just four months and will not be a candidate in an October special election.

GOV. CHRIS CHRISTIE, R-N.J.: I made him the offer. As I told you, he texted me the next morning and said, I'm in. I called him and I said, great. I said, now, are you going to run for it or you just want to serve on the interim basis? And he said, I have no interest in being a political candidate, Governor. I would rather not run. And I said, fine. It's fine with me, Jeff. If you don't want to run, that's fine.

KWAME HOLMAN: Chiesa will be the first Republican to represent New Jersey in the Senate since 1982.

The first system to reach storm strength and earn a name this Atlantic hurricane season pushed onto Florida's Gulf Coast today. Tropical Storm Andrea took aim at the state's Big Bend region, with heavy rain and winds of 60 miles an hour. It was headed for Georgia and the Carolinas. The storm is not expected to strengthen into a hurricane.

Rescue crews in Philadelphia finished searching a collapsed building today, as an investigation began into how it happened. Six people died yesterday when the four-story structure fell as it was being demolished.

Mayor Michael Nutter faced questions today about problems at the site and the contractor's history of legal and financial trouble.

MAYOR MICHAEL NUTTER, D-Philadelphia: Something obviously went wrong here yesterday and possibly in the days leading up to it. That's what the investigation is for. But the simply answer to your question is, we have demolitions all the time with active buildings next to them, and they're done very safely in this city all the time.

KWAME HOLMAN: The building fell onto a neighboring Salvation Army thrift store. In addition to those killed, at least 13 people were hurt.

In Turkey, protesters again defied Prime Minister Recep Tayyip Erdogan. Thousands marched in Istanbul, jeering and carrying signs demanding Erdogan's resignation. They vowed to keep up the demonstrations that began a week ago. Meanwhile, Erdogan winding up a trip to North Africa charged that terror groups are involved in the protests.

On Wall Street, stocks broke a two-day losing streak. The Dow Jones industrial average gained 80 points to close at 15,040. The Nasdaq rose 22 points to close at 3,424.

Swimming champion and movie star Esther Williams died today in Los Angeles. Williams won several races in the 1939 national swimming championships, and then moved to the movies in 1942. She starred in a number of aquatic musicals through the 1940s and '50s, and was a favorite pinup for G.I.s during World War II. At her death, Esther Williams was 91 years old.

Those are some of the day's major stories -- now back to Jeff.

Watch Video | Listen to the Audio

JEFFREY BROWN: It's highly secret and far-reaching, and it's been going on for years. It is an enormous database of calls amassed by the National Security Agency and made public today.

The revelation came first in the Guardian newspaper in London. It reported the Foreign Intelligence Surveillance Court has authorized the NSA to monitor millions of domestic and international calls by Verizon customers.

In Washington, Attorney General Eric Holder declined to go into detail at a Senate hearing.

ATTORNEY GENERAL ERIC HOLDER, United States: Without saying anything specific, I will say this, that with regard to -- that members of Congress have been fully briefed as these issues, matters have been under way.

JEFFREY BROWN: Later, a White House spokesman defended the program and he said the government is not allowed to listen in on the phone calls. Instead, under the court order, the NSA logs what's known as metadata, call location, duration, and numbers dialed, but not the subscribers' identities or the content of a call.

For the most part, lawmakers from both parties seemed untroubled today by the agency's activities.

Republican Sen. Lindsey Graham of South Carolina spoke at the Holder hearing.

SEN. LINDSEY GRAHAM, R-S.C.: I'm a Verizon customer. It doesn't bother me one bit for the national security administration to have my phone number, because what they're trying to do is find out what terrorist groups we know about and individuals and who the hell they're calling.

JEFFREY BROWN: Other senators confirmed the NSA has been building a massive database of calls to look for suspicious patterns since 2006, under the Patriot Act.

Democrat Dianne Feinstein, chairing the Senate Intelligence Committee, said the records are collected, but not reviewed unless there's a good reason.

SEN. DIANNE FEINSTEIN, D-Calif.: If through another way, information comes to the FBI that there is reasonable suspicion that a terrorist act, conspiracy, planning, carrying out is going on, they can access those records. The records are there to access.

JEFFREY BROWN: But at least one senator, Democrat Ron Wyden of Oregon, raised a concern in a statement, saying: "I believe that when law-abiding citizens call their friends, who they call, when they call and where they call from is private information.

It was first reported in 2006 that the Bush administration was wiretapping e-mails and phone calls worldwide in the hunt for terror suspects. At the time, then-Sen. Obama said it was a -- quote -- "slippery slope."

Today, House Speaker John Boehner said today it's now up to President Obama to explain how critical the program is.

REP. JOHN BOEHNER, R-Ohio: It's important for president to outline to the American people why the tools that he has available to him are critical to the threats that we may -- that we may have.

JEFFREY BROWN: For their part, Verizon and other major carriers declined to comment today.

And late today, The Washington Post reported the NSA and the FBI are tapping directly into servers for nine of the country's leading Internet companies, gathering audio, video, photographs, e-mails, and other personal information under a highly classified program.

And we pick up the debate now in all of this with Kate Martin, the director of the Center for National Security Studies, a civil liberties advocacy group. And Col. Cedric Leighton had a 26-year career in the Air Force and served as deputy training director for the National Security Agency in 2009 and 2010. He now has his own consulting firm.

Welcome to both of you.

COL. CEDRIC LEIGHTON, U.S. Air Force: Thank you.

JEFFREY BROWN: Kate Martin, let me start with you.

One reaction today we heard was, what's new? What's the big deal? This is a routine renewal of an order. You had a different reaction?

KATE MARTIN, Director, Center for National Security Studies: Well, I was astounded, first of all, to learn for the first time that the government thinks the law allows this, and even more astounded to learn that they were doing it.

We have engaged in debates in this country about changes to this law for the last 12 years. The civil liberties community has continually raised concerns about bulk collection, and basically been told that it's not a problem. And it turns out that the bulk collection that's going on appears to be beyond our wildest fears.

JEFFREY BROWN: All right, let me ask Cedric Leighton.

This bulk collection, metadata, explain it a little bit more and why you think it's OK and not an invasion of privacy.

CEDRIC LEIGHTON: It depends on how it's done, actually, Jeff.

But the basic idea about bulk collection is that you take all of the data that you can possibly gather and then look for the indicators that you are -- you need. So, for example, let's say you want to find somebody who is connected with somebody in Chechnya because of the Boston bombing. We will use that as an example.

So, you look at how their phone calls work. You look at how they talk to people, where they talk to them, when they talk to them, and which people they talk to. So, once you have that connection, let's say, to Chechnya, then you also determine how that person interfaces with people in the United States, and if people in the United States are part of a network, a terrorist network, or if they're just innocent people that are part of a friend's network that has no knowledge of any other efforts that are going on.

JEFFREY BROWN: Well, in fact, Kate Martin, the House Intelligence Committee chairman, Mike Rogers, today said that -- and I want to just quote -- that this NSA program helped stop a significant terror attack in the U.S. in the last few years.

Now, he didn't give any more information than that. That's all we know.

KATE MARTIN: Right. And I think that that's not the point at the moment.

The question, of course, is whether or not a lesser intrusive program would also stop terrorist attacks. We all want that to happen. And the first question is whether or not the government's going to come clean, first of all, about whether it thinks it has the legal power to do, and, second of all, what it's doing.

You know, so they have basically been keeping this a secret, and instead of, you know, saying, oh, gosh, maybe we need to have a public debate about the contours of the program, whether or not the program's really needed, et cetera, they have jumped to, oh, well the program's been useful.

But that's not the criteria. The criteria is whether or not the program's lawful. And it's lawful only, in my judgment, if the Congress and the American people have understood that the law allows it. And Congress, apparently, thinks that they understood it. They forgot to tell us.

JEFFREY BROWN: Well, let me – Col. Leighton, one of the questions here is sort of how clear the law is, right? I mean, in deciding when the collection of data is allowed, how well defined is this idea of relevancy to important security data? Is that clear?

CEDRIC LEIGHTON: Well, it's -- you know, when you look at how the law is written, it is not exactly explicitly clear.

So, for example, Kate and I can have a debate on the issue, on the merits of the law, but the issue for an intelligence agency is, how do I, as an intelligence agency, look at the data that is available to me and what kind of data should be made available to me?

So the intelligence agencies look to the executive leadership in the White House, and then the legislative leadership in Congress, and in these particular cases, Congress has been briefed on the program, on the nature of the program, and, to some degree, on the extent of the program.

JEFFREY BROWN: But they're looking to a judge, ultimately, who has to make the -- has the opinion that this is, in fact, relevant enough.

CEDRIC LEIGHTON: That's right. And the judge has to make the determination. In the case of the FISA courts, the Foreign Intelligence Surveillance courts, they are designed to work in a classified arena, and they take the arguments from NSA or another intelligence agency and say, OK, is this relevant to national security? Is there a clear and present danger to us right now that requires this kind of action?

If there is not, then they should reject the motion. If there is, then they accept it, and that's how they operate.

JEFFREY BROWN: Well, so, Kate, Kate Martin, respond to that. Where is the weak link, if you think there is one?

KATE MARTIN: Well, I think the first question that we don't know is, what is the government doing? Does it consider that it's relevant to collect not only all of our metadata on all of our phone calls and our Internet communications, but also other kinds of records, bank records, credit card records?

In the government's views, those aren't protected by the Fourth Amendment. So it has this giant database, which I vaguely heard today that maybe before they -- they have some more procedures, right, about how they use that database. That's all secret. So we don't know what it is that they're collecting, the breadth of what they're collecting, nor do we know what the rules are about using it.

And, you know, my view of the Constitution is that the basic purpose of the Fourth Amendment was to prevent general searches, which meant that the government goes into your house, takes everything, and looks through it to see if there's evidence of a crime or terrorism.

And I worry that what it seems like, but we need to know because we don't know, and we have been denied the information -- that what the government's approach at the moment is, well, we will construct this enormous database on all Americans' activities.

JEFFREY BROWN: Well, let me get -- let me ask Cedric Leighton to respond to that.

Is there a way for the government to be clearer about what it's collecting and still do its work?

CEDRIC LEIGHTON: I think so, and I think we have to be very careful with it.

I think Kate brought up an interesting point, an excellent point, in that they have not been clear about how they handled the data. And some of the issues surrounding it have to this point been classified. But there are -- think -- I think there are ways to say, OK, this is the data that we're collecting in general terms, and our way of handling that data is as follows.

For example, there are rules that govern how we deal with data from U.S. persons. The NSA has some very specific rules, many of which are classified. But the gist of them is that no one can gather data on U.S. persons without the express permission of a court. And that is part of that. That's the beginning of this approach where we have to be very careful with how we make this work.

JEFFREY BROWN: And just very briefly, now we get The Washington Post reports about the Internet. Would it surprise to you find that other phone companies may have been involved with this as well?

CEDRIC LEIGHTON: Oh, not at all. I think it's logical to say ...

JEFFREY BROWN: You're expecting that we will hear more?

CEDRIC LEIGHTON: Yes, I definitely do.

KATE MARTIN: And just to be clear, the express permission of a court is not equal to a Fourth Amendment warrant. There was no Fourth Amendment warrant-type order in this case.

JEFFREY BROWN: All right.

KATE MARTIN: And it's really disturbing that we have to learn about this through a leaked document, rather ...

JEFFREY BROWN: OK. We will continue to follow this.

Kate Martin and Cedric Leighton, thank you both very much.

KATE MARTIN: Thank you.

CEDRIC LEIGHTON: Thank you so much.

Watch Video | Listen to the Audio

JUDY WOODRUFF: For more on what today's announcements mean for President Obama's foreign policy, we get two views. Richard Haass was director of policy planning at the State Department during the George W. Bush administration. He's now president of the Council on Foreign Relations and author of "Foreign Policy Begins at Home." Anne-Marie Slaughter also directed the State Department's policy planning shop, but during the Obama administration. She's now professor of politics and international affairs at Princeton University.

And we welcome you both to the NewsHour.

Anne-Marie Slaughter, to you first. Let's talk about Susan Rice. To begin, we heard the president call her fearless and tough. How is she going to fit in with the foreign policy team?

ANNE-MARIE SLAUGHTER, Princeton University: Well, I think she's been a core member of the foreign policy team from the beginning.

I mean, really, as a U.N. ambassador, she's been in the White House, in and out of the White House the whole time. She's played a key role. This is not going to be that much of a transition, I think, for the White House in terms of policy.

JUDY WOODRUFF: But, Richard Haass, she's going to be just a few steps away from the president, down the hall in the West Wing. We also heard the president say it runs in her -- she knows how to throw an elbow, that it runs in her family. What does that say?

RICHARD HAASS, President, Council on Foreign Relations: Well, you know, that may well be true, but what we need is a national security adviser who really can wear two hats.

On one hand, in this case, she will have to be the principal honest broker, the person who makes sure the president is well-served by the process, he gets the advice he wants, that decisions are actually implemented faithfully and efficiently. And, second of all, she's going to have to be a counselor.

No one has ever done it better than Brent Scowcroft, though her predecessor, Tom Donilon, I thought also did an extraordinarily good job.

JUDY WOODRUFF: Honest broker, Anne-Marie Slaughter, is that how you see the role? And, if that is what it is, how will she do in that position?

ANNE-MARIE SLAUGHTER: That's not the only way to do the role.

I mean, she certainly does have to make sure all -- all views are heard, but some National Security Council advisers have been more of the counselor side, who have had more of a strong advisory role. And Susan will craft the role the way she is naturally fitted to it and really what the president wants.

The thing to know about Susan Rice, above all, she's a true professional. She is going to do what the president needs. And she already demonstrated that. She stepped down when she realized that continuing to be a candidate for secretary of state was hurting the president. She stepped down. She said, the last I think I want to do is hurt him. And she is going to do the job he wants her to do.

JUDY WOODRUFF: Richard Haass, there was a New York Times piece today that described her as someone in favor of liberal intervention. So, how much does it matter what her personal views are?

RICHARD HAASS: Well, she can make these views known to the president, as I expect she will, but the president doesn't have to, if you will, take her advice.

He will get advice from all quarters. So far, the administration, I think quite properly, has resisted many of the calls which I think are ill-advised for certain forms of intervention in, say -- in, say, Syria. You have got to look at the costs. You have got to look at the likely benefits. You have got to look at alternative uses for American power.

So she, as well as Samantha Power, may very well make these arguments to the president. But so far, at least, in part because of Tom Donilon, the administration has shown real strategic restraint. And I would hope it will continue to.

JUDY WOODRUFF: Anne-Marie Slaughter, do you see policies changing under Susan Rice, and specifically with regard to Syria?

ANNE-MARIE SLAUGHTER: Well, I agree with Richard that I think the president makes up his -- definitely has his own views on this.

I think he's getting lot of different advice. I disagree on the merits. I think he's making a real mistake. I think in the end, this -- what has been a war in Syria is going to turn into a conflagration across the Middle East.

The one thing Susan Rice brings there that's very important, she was in the Clinton White House under Rwanda, and she saw what happened when something that originally was a humanitarian call to intervene in a genocide went unaddressed, and the result is, we have a war across Central Africa where two million people have died and it is a continuing strategic problem.

So I think she and Samantha Power both understand the ways in which the humanitarian and the strategic are often actually intertwined.

JUDY WOODRUFF: So, Richard Haass, does that suggest that between the two of them, and particularly in the case of Rice, that there will be more -- there will be more people talking to the president about becoming more involved in Syria?

RICHARD HAASS: Quite possibly.

But the big strategic idea of this administration -- indeed, I think its historical idea -- was to place less emphasis on the Middle East, which has so dominated and I would argue distorted America's national security now for more than a decade, and instead to put greater attention on the Asia-Pacific, which is where the great powers of this year are colliding and where American instruments can actually accomplish great good.

So I would hope the administration will, if you will, stay the course there, as well as also do what I would argue, which is repair some of the foundations of our power here at home. There will be those arguing for intervention, but, again, I'm hoping the president, if you will, stays the course and continues to show real restraint.

JUDY WOODRUFF: What changes do you see coming?

ANNE-MARIE SLAUGHTER: I think, again, this is a team that agrees on the desirability of focusing on Asia. And Susan Rice has dealt with North Korea and she knows that portfolio.

I think, though, the world has a funny way of deflecting what you want to do, even on the best advice. And, again, I think both Susan Rice and Samantha Power are people who very much understand the complexity of development issues, terrorism issues, sectarian issues, humanitarian issues in a very complicated strategic calculus.

JUDY WOODRUFF: Richard Haass, pick up on that, and bring Samantha Power into this. She is going to be -- assuming she's confirmed by the Senate, she will be taking up the post at the U.N.

RICHARD HAASS: Sure.

She takes the post at a time where, quite honestly, the U.N. as a whole is not terribly central to what is going on in the world. That kind of multilateralism, for the most part, isn't working, in part because the major powers cannot agree.

Instead, what increasingly we're doing is taking end-runs around the U.N., finding partners to deal with this or that issue where we can, and my hunch is that will be -- that will be the future. But she has two hats, also, like a national security adviser. One is to represent the United Nations at the U.N. The other is to essentially be part of the president's national security team and advocate back in Washington.

And we will have to see what kind of -- what the president instructs her to do in terms of balancing those two roles.

JUDY WOODRUFF: How do you see Samantha Power in the position at the U.N., assuming she's confirmed?

ANNE-MARIE SLAUGHTER: Well, I actually think this administration has been very focused on the U.N., on North Korea, on Iran, on Syria, indeed, more focused than some people think they should be. They really have insisted on going multilaterally.

So I think Samantha Power is going to find herself, as Susan Rice did, often as a leading spear carrier for our diplomacy.

JUDY WOODRUFF: And just finally, to both of you.

Richard Haass, what do these appointments say about the president?

RICHARD HAASS: Well, I think what it says is that here he is in his second term, he doesn't face another election, that he essentially wants to have around him the people who he knows best, who he has worked with as a senator, as a campaigner, as president.

These are not outsiders, anything but. This is -- if anything, this is a narrowing or tightening of the national security team at the White House.

JUDY WOODRUFF: You worked in the Obama administration. How do you see that, this narrowing of the team?

ANNE-MARIE SLAUGHTER: Only a man can say this is the narrowing of the team. This is adding two important women to key positions in the White House in a way that I actually think is very important.

These are more diverse voices right there. And, actually, although they do all know each other, I think there's a broader range of views with Susan Rice and Samantha Power, with many of the other people who are in the White House. And I think we're going to see that make a difference.

JUDY WOODRUFF: Anne-Marie Slaughter, Richard Haass, we thank you both. 

Watch Video | Listen to the Audio

JUDY WOODRUFF: A new national security adviser is taking her place at the White House, after four years at the United Nations. Word of the realignment came today from the president.

PRESIDENT BARACK OBAMA: I am extraordinarily proud to announce my new national security adviser, our outstanding ambassador to the United Nations, Susan Rice.

JUDY WOODRUFF: The afternoon announcement in the White House Rose Garden confirmed a long-anticipated shift. Rice replaces Tom Donilon, who's stepping down after more than two-and-a-half years as national security adviser.

PRESIDENT OBAMA: Susan is the consummate public servant, a patriot who puts her country first. She is fearless. She is tough.

JUDY WOODRUFF: That was as close as the president came to mentioning the fierce Republican criticism aimed at Rice after the attack on a U.S. diplomatic post in Benghazi, Libya.

She initially relied on the administration's official version of events, depicting it as an act of Muslim outrage. Instead, it was a terrorist attack. Rice played no role in crafting the so-called talking points, but Republican Congressman Doug Lamborn of Colorado said today she shares some blame.

REP. DOUG LAMBORN, R-Colo.: And she went on the talk shows and just parroted the talking points that she was given. She showed no critical thinking. She showed no independent thought. And we need those qualities in a national security adviser. And she failed that test.

JUDY WOODRUFF: Last December, amid the furor, Rice withdrew from consideration to be secretary of state. Unlike that post, the job of national security adviser doesn't require Senate confirmation.

Today, a leading Senate critic of Rice, Republican John McCain, tweeted that he disagrees with the appointment, but will make every effort to work with her.

And Rice made clear she's ready to get to work.

SUSAN RICE, National Security Adviser Designee: As you have outlined, we have vital opportunities to seize and ongoing challenges to confront. We have much still to accomplish on behalf of the American people. And I look forward to continuing to serve on your national security team to keep our nation strong and safe.

JUDY WOODRUFF: In four years at the U.N., Rice has advocated using economic and trade restrictions to try to rein in nuclear programs, both in North Korea ...

SUSAN RICE: Taken together, these sanctions will bite and bite hard. They increase North Korea's isolation and raise the cost to North Korea's leaders of defying the international community.

JUDY WOODRUFF: ... and in Iran.

SUSAN RICE: Our aim remains to persuade Iran to halt its nuclear program and negotiate constructively and in earnest with the international community.

JUDY WOODRUFF: The ambassador also sharply criticized Chinese and Russian vetoes of U.N. resolutions aimed at the Syrian government.

To replace Rice at the U.N., the president today nominated Samantha Power. She is a human rights expert who wrote a Pulitzer Prize-winning book on genocide a decade ago and who served as a White House adviser until earlier this year. Power also worked on the president's 2008 campaign, but had to resign after making disparaging remarks about rival Democrat Hillary Clinton during the primaries. 

Watch Video | Listen to the Audio

KWAME HOLMAN: Conservative groups spoke out today about the abuse they say they endured at the hands of the IRS. It was their first appearance at a congressional hearing since the controversy broke.

MAN: Good morning.

KWAME HOLMAN: Republicans in charge of the tax-writing House Ways and Means Committee called six organizations scrutinized by the IRS when they applied for tax-exempt status.

Representatives of the groups told of waiting up to three years for their applications to be approved and having to answer questions about their political views.

Becky Gerritson leads a tea party group in Alabama.

BECKY GERRITSON, Wetumpka Tea Party: Government agents made invasive and excessive demands for information they were not entitled to. The individuals who sought to intimidate us were acting as they thought they should: in a government culture that has little respect for its citizens.

KWAME HOLMAN: And John Eastman said the IRS disclosed confidential information about supporters of his anti-gay marriage group, the National Organization for Marriage.

JOHN EASTMAN, National Organization for Marriage: The effort seems to have been designed to subject our donors to abuse, to intimidation and more significantly for our purposes to chill them from donating again so we can keep up the political fight that we're in the middle of.

KWAME HOLMAN: Democrats joined in criticizing the IRS' handling of the applications, but Washington State's Jim McDermott argued the groups were highly political, so some questions were justified.

REP. JIM MCDERMOTT, D-Wash.: None of your organizations were kept from organizing or silenced. We're talking about whether or not the American taxpayers will subsidize your work. We're talking about a tax break.

KWAME HOLMAN: The IRS also faced new criticism for spending. A Treasury Department inspector general reported some 200 employee conferences held by the agency between 2010 and 2012 cost $50 million dollars. That included one training video showing workers dancing and another parodying the 1960s TV show "Star Trek."

New Jersey Gov. Chris Christie moved today to fill a vacant U.S. Senate seat with a special election in October. The seat was held by veteran Democrat Frank Lautenberg. He died yesterday at the age of 89. Christie could have named a temporary replacement to serve through 2014 and finish out Lautenberg's term, but he said that wouldn't be fair to voters.

GOV. CHRIS CHRISTIE, R-N.J.: There are going to be a lot of consequential things that are going to be decided in the United -- or could be decided in the United States Senate in that 18 months. And I just thought it was too long a period of time for any person to have the sole authority to pick who represents us in the United States Senate.

I believe the people have the right to make that decision. They need to have a voice and a choice.

KWAME HOLMAN: Christie said he will appoint someone to serve as New Jersey senator until the October vote. The governor himself is up for reelection in this year's general election set for November.

A Colorado judge today accepted a plea of not guilty by reason of insanity in last summer's mass shooting at a movie theater. James Holmes appeared this morning to enter the plea. He's charged with killing 12 people and injuring 70 others. His action today sets the stage for a long mental evaluation before any trial.

The deputy prime minister of Turkey has issued a partial apology for a crackdown on anti-government protesters. He acknowledged today that police initially used excessive force in raiding a sit-in at a park. But he said thousands of others who battled police do not deserve an apology. Demonstrators were out in force again today in Ankara, but this time, riot police handed them flowers in the same colors as the Turkish flag.

There were new assertions today of chemical weapons use in Syria. A United Nations commission of inquiry reported it has reasonable grounds to believe at least four such attacks have taken place. The commission could not determine who used the weapons. But it did say both government and rebel forces have committed war crimes.

Commission Chair Paulo Pinheiro spoke in Geneva.

PAULO PINHEIRO, Chair, Independent International Commission of Inquiry for Syria: Crimes that shock the conscience have become a daily reality. Humanity has been the casualty of this war. Syria needs not a military surge. Syria needs a diplomatic surge.

KWAME HOLMAN: Separately, the French government said it has confirmed sarin nerve gas has been used multiple times in Syria, at least once by Assad regime forces.

In Egypt, a court sentenced 16 Americans to up to five years in prison for using foreign funds to foment unrest. All worked for nonprofit organizations, and all but one already had left the country. They were sentenced in absentia. The judge also ordered that the offices of several of the nonprofits be closed.

The death toll from floods in Europe rose to at least 10 today, even as floodwaters receded in the hard-hit city of Passau, Germany. Rain-swollen rivers across southern Germany, Austria, Switzerland and the Czech Republic still were rising in other cities. Thousands of German soldiers were called in to help sandbag and get people out of the flood zone.

Wall Street gave ground today amid questions about how much longer the Federal Reserve's stimulus efforts will last. The Dow Jones industrial average lost 76 points to close at 15,177. The Nasdaq fell 20 points to close at 3,445.

Those are some of the day's major stories -- now back to Gwen.

Watch Video | Listen to the Audio

JUDY WOODRUFF: So, how would Comey be received on Capitol Hill? And what challenges lay ahead for the FBI and the beleaguered Justice Department under Attorney General Eric Holder?

We turn to Phil Mattingly of Bloomberg News and Michael Schmidt of The New York Times.

Welcome to you both.

Phil Mattingly, why did the president turn to Jim Comey from the Bush administration?

PHIL MATTINGLY, Bloomberg News: Well, Jim Comey kind of checks all of the boxes.

In a particularly polarized time, he's a Republican, a Bush appointee, but he's one, as we just heard, gained a lot of respect from Democrats during his role in the Bush administration. He's one that's going to get support from both sides.

JUDY WOODRUFF: Michael Schmidt, what is it about his resume, his experience that qualifies him for this job?

MICHAEL SCHMIDT, The New York Times: Well, he's pretty much done everything at the Justice Department.

He prosecuted Martha Stewart. He prosecuted terrorists. He appointed someone to look -- to do a leak investigation. He dealt with significant national security issues between 2003 and 2005. He did gun cases in Richmond, Va. So there's a wide swathe of things, and in all of them he's gotten very high accolades.

And in the sort of the culture -- sort of the temperature up on Capitol Hill, he's seen as someone who will be fairly easy or easier to get confirmed.

JUDY WOODRUFF: Phil Mattingly, what about his views? We heard a little bit of that in the clip just a second ago, but his views on civil liberties, do they square with those of the Obama administration? What do we know about that?

PHIL MATTINGLY: So, it's a bit of an interesting mix.

We have already heard from the ACLU, who came out with a statement just about an hour ago, that said, look, we understand that he's viewed kind of as a white knight by Democrats for his willingness to stand up to senior Bush officials back in 2004. However, he still signed off on a number of the programs that the Bush administration used to counter terrorism.

So, it's kind of a split-the-difference-type issue. I think the important thing that you are going to see from the Obama administration, and the important pitch to Capitol Hill with his nomination is, look, on some of the most egregious of programs, as determined by the lawyers at the Justice Department, Jim Comey was willing to stand firm, to stand up to the most senior officials, and really take a stand for civil liberties, despite some of the programs he signed off on.

JUDY WOODRUFF: Michael Schmidt, how unusual was it for the deputy attorney general to stand up to the White House counsel, the White House chief of staff?

MICHAEL SCHMIDT: Well, I think he was -- I think what he was doing there, he's gotten credit for, is standing up for the law, what people say, in the face of politics.

And I'm sure there have been a lot of examples of it, but I'm not sure there has ever been one where it defined someone's career as much as his. I'm not sure whether we would be talking about a nomination for him today if that story had not come out. It gives him certainly a bipartisan feel that's very different than certainly the other person who was considered for the job, Lisa Monaco, who works at the White House, and pretty much anybody else.

So, there's something kind of different about him that distinguishes him here.

JUDY WOODRUFF: And we should say the president -- there has not been an announcement. This has been -- it's out there in the media. It's expected, but we don't know for sure.

I want to ask you both about what is going on right now at the Justice Department.

Phil Mattingly, you had -- today, the attorney general, Eric Holder, reached out to news organizations. This is in the middle of a lot of controversy about how aggressive the Justice Department has been in going after reporters in investigating government leaks, classified information.

Why did they want -- why do they want these meetings today with news organization executives?

PHIL MATTINGLY: This is Attorney General Holder, and this is actually at the request the President Obama.

This is his effort to reach out. I think people familiar with this within the Justice Department are saying, there has been a sense at DOJ, in the attorney general's front office that maybe on these leak investigations, there might have been some overreach.

There are at least some issues that they wish would have gone a little bit different or at least appeared a little different. He's reaching out in an effort to draw -- to start at least a dialogue for this review ordered by President Obama.

Now, the media organization reaction to that I think has been mixed. The Justice Department wants these meetings to be off the record. Several media organizations, I think eight up to this point, have said, if it's not on the record, we don't want to do it. So, I think what you saw -- what you're seeing right now is the Justice Department reaching out and maybe not getting the response that they wanted, but at least it's a start to a process.

JUDY WOODRUFF: And, Michael Schmidt, we know that the editor of The New York Times, we're reading today, Jill Abramson, said The New York Times would not participate in a meeting they were invited to.

What do we know about any meeting that happened today?

MICHAEL SCHMIDT: All we really know is that the meeting is going on or was going on this after afternoon.

And, beyond that, nothing else has really come out. And, you know, we're sort of waiting, like everyone else.

JUDY WOODRUFF: Why -- is there a sense, Michael Schmidt, that the -- that Justice, that officials at Justice, whether it's the attorney general or people around him -- and, for that matter, the White House -- are now regretting happened with these episodes, going after the AP, going after a reporter at FOX News?

MICHAEL SCHMIDT: Yes, I mean, it certainly -- I don't think you would have seen what was going to go on today in that type of meeting if these things hadn't come out.

So there's certainly an effort to reach out and to try and sort of assuage some of the fears about what's going on. Now, will that have any impact or how seriously that will be taken I think remains to be seen. It seems to be sort of mixed at best so far.

JUDY WOODRUFF: Phil Mattingly, why -- what is the sense of why the attorney general has managed to engender some really tough criticism that has been aimed in his direction, not just from Republicans, who have been critical of him from the beginning of the administration, but now the news media and even some Democrats very critical of him?

PHIL MATTINGLY: Well, look, as you know, throughout his four-and-a-half years as attorney general, he's gotten a lot of pressure from Capitol Hill, almost entirely from Republicans, on a number of different issues.

What makes -- what differentiates what is going on right now is you have got Democrats, you have got some liberal commentators who are coming out and really kind of not only questioning his role in these leak investigations, but actually asking for him to step down or asking for him to at least consider that process.

I think what you're seeing out of his office right now and what you're seeing out of the Justice Department, why they're reaching out, why they're involved in this review, is they're understanding, they're grasping kind of the enormity of what has occurred here. And I think they're trying to address it before it snowballs into a bigger issue. JUDY WOODRUFF: What's your sense, Michael Schmidt, of how the attorney general has managed to draw so much attention, and a lot of it not positive?

MICHAEL SCHMIDT: Well, he seems to get the most criticism out of all of the Cabinet secretaries, and it seems to happen every few months and certainly several times a year, where there's something like this that blows up.

So it makes you wonder what he's doing and why he's not maybe being proactive enough to have -- you know, to try and knock some of these things down, because certainly the other secretaries deal with controversial things like this, and probably the attorney general is one of the most controversial, but he doesn't seem to be able to fend it off the way that the others do.

Maybe he's too aloof or -- you know, I'm not sure. But I was talking to one senior government official today who said that, early on, in Fast and Furious, there was -- he had a lot of trouble sort of pushing back on that, and that allowed it to snowball and to become this sort of Republican issue that they have used against Holder and the White House.

JUDY WOODRUFF: Quickly, finally, Phil Mattingly, connection between the difficulties Holder's having and the choice of Comey?

PHIL MATTINGLY: I don't -- I think this decision was made really before all of this stuff blew up, is my understanding from talking to government officials.

I think the idea the timing of it doesn't hurt. And certainly going after a bipartisan pick like this, if nothing else, it shifts the narrative for a day or two. And, certainly, when Jim Comey is on the Hill representing the administration as a nominee, whenever that does occur, I think that looks better for the administration than having Eric Holder trying to fend off issues about leak investigations.

JUDY WOODRUFF: OK. And, again, we want to stress there has not been a nomination yet. We're -- but -- but a lot of news reports that point in that direction.

Phil Mattingly, Michael Schmidt, we thank you both. 

Watch Video | Listen to the Audio

HARI SREENIVASAN: Another head has rolled at the Internal Revenue Service over targeting conservative groups. The IRS announced today it has replaced Lois Lerner, the official in charge of the agents who did the targeting. The Associated Press reported she has been placed on administrative leave. Lerner has insisted she did nothing wrong. Yesterday, she refused to answer a House committee's questions, citing her right against self-incrimination.

The U.S. House voted today to peg federal student loan rates to those set by financial markets. Republicans said it will forestall a doubling of the current rates set to take effect on July 1st and divorce the issue from politics. Democrats warned the move to variable-rate loans could lead to higher costs in coming years, if market rates rise.

REP. JOHN KLINE, R-Minn.: We want to help students. We want to give them certainty, and we want them not to rely on the whims of politicians here, and we want also not to put a burden on the American people and the taxpayer, not add, not add to that debt.

REP. DAVID CICILLINE, D-R.I.: This bill will hurt young people and middle-class families who are already struggling with crushing student loan debt. The idea that as a country we make money on the pursuit by young people of their education is plain wrong.

HARI SREENIVASAN: Democrats want to keep the subsidized rates at 3.4 percent for another two years, at a cost of nine billion dollars. The House bill is given little chance in the Senate, where Democrats have the majority.

House Republicans pushed through another bill last night to speed approval of the Keystone oil pipeline, bypassing President Obama. It applies to a stretch of pipeline from Canada to Nebraska. The president has delayed approval of that section, but he did approve work on the southern portion of the pipeline extending to Texas. That bill, too, is expected to fail in the Senate.

The Boy Scouts of America will allow openly gay Scouts to join the organization. The policy change today followed a close vote by the Boy Scouts' national council in Texas. The decision came after the national executive board deferred in February. The change is effective in January. A ban on gay adult leaders remains in place.

On Wall Street today, the Dow Jones industrial average lost 12 points to close at 15,294. The Nasdaq fell nearly four points to close at 3,459.

Those are some of the day's major stories -- now back to Judy.

Watch Video | Listen to the Audio

JUDY WOODRUFF: We turn to fireworks on Capitol Hill today during the continuing probe into how the IRS scrutinized conservative groups asking for tax-exempt status.

Jeffrey Brown has our story.

LOIS LERNER, Director, IRS Exempt Organizations Unit: I have not done anything wrong. I have not broken any laws. I have not violated any IRS rules or regulations. And I have not provided false information to this or any other congressional committee.

JEFFREY BROWN: That dramatic defense came from Lois Lerner at the outset of the hearing. She oversees the IRS department that processes tax-exempt applications.

But having delivered her brief statement, Lerner refused to answer any questions from the committee.

LOIS LERNER: Because I'm asserting my right not to testify, I know that some people will assume that I have done something wrong. I have not. One of the basic functions of the Fifth Amendment is to protect innocent individuals, and that is the protection I'm invoking today.

JEFFREY BROWN: Lerner's lawyer had notified the committee in advance that she would take the Fifth, but South Carolina Republican Trey Gowdy was visibly agitated.

REP. TREY GOWDY, R-S.C.: You don't get to tell your side of the story and then not be subjected to cross-examination. That's not the way it works. She waived her right to Fifth Amendment privilege by issuing an opening statement. And she ought to stand here and answer our questions.

JEFFREY BROWN: The chair of the Oversight Committee, California Republican Darrell Issa, asked Lerner to reconsider.

REP. DARRELL ISSA, R-Calif.: Is it possible that we could narrow scope of questions and that there are some areas that you would be able to answer any questions on here today?

LOIS LERNER: I will not answer any questions or testify today.

DARRELL ISSA: Ms. Lerner, would you be willing to answer questions specifically related to the earlier statements made under oath before this committee?

LOIS LERNER: I decline to answer that question for the reasons I have already given.

JEFFREY BROWN: Even before Lerner spoke, committee Democrat Stephen Lynch of Massachusetts warned against refusing to testify.

REP. STEPHEN LYNCH, D-Mass.: We know where that will lead. It will lead to a special prosecutor. It will lead to special counsel being appointed to get to the bottom of this.

So I hope that's not the approach of the IRS going forward, because there will be hell to pay if that's the route that we chose to go down.

JEFFREY BROWN: Ultimately, Issa excused Lerner, but said she might be recalled if the committee finds she didn't properly invoke her Fifth Amendment right.

With that, the focus shifted to former IRS Commissioner Douglas Shulman. He led the agency at the time that employees were singling out conservative groups that applied for tax-exempt status. Shulman acknowledged yesterday that he learned of the practice a year ago, two months after he told Congress there was -- quote -- "absolutely no targeting."

Maryland Democrat Elijah Cummings pressed today for an explanation.

REP. ELIJAH CUMMINGS, D-Md.: But it seems to me that if you say to the Congress, absolutely not, absolutely no targeting, it seems to me that you would come back, even if it was a phone call or a letter, or something, I mean, common sense -- people -- I mean, a reasonable person would expect you, as the head of the IRS, communicating with Congress, to come back and do that. You didn't feel that way, though?

DOUGLAS SHULMAN, Former U.S. Commissioner of Internal Revenue: I mean, I guess I would repeat, in March ...

ELIJAH CUMMINGS: I don't want you to repeat. I don't want you to repeat. I just -- I take it that you disagree with what I just said?

DOUGLAS SHULMAN: At the time I learned about this list, I felt I was taking the appropriate actions and that my course was the proper one. And I still feel that way today.

ELIJAH CUMMINGS: Well, I'm sorry. That's simply not good enough. It's simply not good enough, Mr. Shulman.

JEFFREY BROWN: Even J. Russell George, the treasury inspector general who reported on the IRS targeting, came in for criticism today. Chairman Issa argued George should have alerted Congress of his findings sooner.

George defended himself, saying he was following established procedures.

J. RUSSELL GEORGE, Treasury Department Inspector General: And to ensure fairness and to ensure that we are completely accurate with the information that we convey to Congress, we will not report information until the IRS has had an opportunity to take a look at it to ensure that we're not misstating the facts.

DARRELL ISSA: Mr. George, that is not the statute. That is not the statute.

J. RUSSELL GEORGE: But it would be impractical for us to give you impartial information which may not be accurate.

DARRELL ISSA: This committee last August made it very clear that the statute as written doesn't give you the ability to -- or any I.G. to use us as a whipping boy when you want to, and in fact keep us in the dark until an investigation is completed.

JEFFREY BROWN: The committee also heard from Deputy Treasury Secretary Neal Wolin. He said what happened at the IRS was inexcusable, but no one at Treasury was involved.

Today's hearing came to an end after six hours, but there's no end in sight to the three congressional investigations under way. More hearings are expected after the Memorial Day recess.

Even as these hearings unfold to find out exactly what happened at the IRS, there's continuing confusion about the tax laws and regulations at the heart of the matter: who qualifies for tax-exempt status, how is that determined, and other questions we will try to get at now with Duke University law professor Richard Schmalbeck. He's a former tax attorney. And Kim Barker, she's a reporter with ProPublica.

Well, Kim Barker, you have been looking at the history. So take us back. How did it come to be that groups can seek tax-exempt status in the first place?

KIM BARKER, ProPublica: It's a very good question, and nobody is entirely sure even how social welfare nonprofits came about in the first place.

All we know is that as part of the Revenue Act of 1913, Congress created the idea of social welfare nonprofits. Eventually, they were defined as being formed exclusively to promote social welfare. And then over the years, that was -- that exclusively was defined to mean that you should have a primary purpose as being a social welfare nonprofit.

So there's this big debate over exclusively vs. primary. In the '80s, it came about that these groups -- these groups started to interpret primary to mean that they could actually spend money on politics. And the IRS has agreed with that.

The real argument here is over whether they should have to disclose the donors for the money that they're spending on politics and on these political ads that are then reported to the FEC.

JEFFREY BROWN: All right, so -- well, stay with this, Richard Schmalbeck, about defining this line between social welfare and politics. Help us understand more.

KIM BARKER: Right. I wish I could be -- I wish I could be more definitive.

JEFFREY BROWN: Hold on. Let me ask -- now, let me ask our other guest here.

Go ahead.

RICHARD SCHMALBECK, Duke University Law School: OK.

There are really three types of organizations that are involved in this dispute, and I think it would be helpful to explain a little bit that the largest category of exempt organizations are actually 501(c)(3) organizations. Those are the ones that pursue educational, religious, or charitable purposes. And those are the ones that get the major tax benefits.

And the big tax benefit on the table here is whether donors can deduct their contributions. So, they can to educational, charitable and religious, but they can't to any of the other types of groups. And there are literally a few dozen other types of other categories of groups.

The trouble with the (c)(3), everybody would like that deduction, but they cannot engage in any substantial lobbying. And they're not supposed to do any political campaigning at all. Now, a lot of (c)(4) organizations actually might qualify in terms of charitable purposes that they serve, but they want to do lobbying. That is part of their function and -- as they see it, and they can do lobbying as a (c)(4) organization in any amount.

And as the other guest indicated, they are allowed to do some political participation in actual partisan campaigns, as long as it's not their primary purpose. And the IRS has traditionally understood that to mean as long as it's less than half.

JEFFREY BROWN: Less than half.

Well, Kim Barker, groups can define themselves and proceed in their work? That's also part of what happens, right?

KIM BARKER: Absolutely. You don't even have to apply to the IRS for recognition as a social welfare nonprofit to operate.

You can in effect go out tomorrow, incorporate your own social welfare nonprofit, say it's like “Values for a Better America,” start raising money, spend some money on an election, and then you can fold up before your first tax return is even due. So, in many ways, the IRS can't even make -- match the speed of politics.

And that's something I think that's gotten lost in this debate, is why are we even talking about the IRS monitoring the political spending of these groups, when the FEC is, theoretically, supposed to be the agency that's monitoring political spending?

JEFFREY BROWN: Well, Richard Schmalbeck, what -- do you have an answer for that, or is that just how the system has evolved? Or what -- why is the IRS the one looking at it?

RICHARD SCHMALBECK: Well, it is part of the Internal Revenue Code, and so they are the enforcers in chief as to 501(c)(3)s, 501 (c)(4)s, but they do have a kind of joint jurisdiction with the Federal Election Commission as to political campaign activities.

JEFFREY BROWN: Let me stay with you on this question that was raised earlier about the confidentiality of 501(c)(4)s.

RICHARD SCHMALBECK: OK.

JEFFREY BROWN: What's the history behind that? That goes back to at least the 1950s, I understand.

RICHARD SCHMALBECK: You know, the history is murky.

I think it probably has to do with the fact that (c)(3)s, the charitable type of organization, has long wanted to protect its donor lists. A lot of donors like to make their gifts anonymously. They don't want to be approached by people just because they are known to be generous in their philanthropy.

So, (c)(3)s have always been confidential; (c)(4)s were too. Even political groups under 527 had been able to keep their donors confidential until 2000, and then Congress changed that. And, really, there's probably not a strong argument that suggests that (c)(4) organizations and 527 political organizations ought to be treated differently on this confidentiality issue.

And if they were treated the same, then organizations wouldn't particularly seek to be (c)(4)s if they were going to do a lot of politics, and this issue would never even have come up.

JEFFREY BROWN: Well, Kim Barker, another thing that has been talked about much in the last couple of weeks is noting that the groups involved in the current situation are often relatively small players. And a lot of the much larger players on both the right and left did not fall into these categories or were not receiving the same sort of scrutiny.

Now, does anybody know why that is?

KIM BARKER: We don't really know the full extent of what the inspector general, TIGTA, is doing in terms of an investigation into social welfares, nonprofits' activity as monitored by the IRS.

We know that they're taking a look at what the IRS has done on other social welfare nonprofits involved in politics, but the full course of what the IRS was doing, whether it was actually targeting other groups besides the tea party and patriot groups, we don't know, because the inspector general's report was very limited in looking at whether these allegations of tea party targeting was true.

I think there are two points here that folks have been pointing out to me in the last couple of weeks. Number one was what you mentioned, the fact that the IRS was flagging these groups, like the tea party, that weren't doing much in the way of political spending at all, I mean, basically none at the federal level and some at the state level, and that they -- at least according to this audit, they don't seem to be looking at all at the major players, such as Crossroads GPS, which is a social welfare nonprofit founded in part by Karl Rove, the GOP strategist, which spent more than $71 million dollars on the elections last year without having to report its donors.

JEFFREY BROWN: Let me just ask Richard Schmalbeck very briefly, if you could, is there -- out of all this, is there -- are people looking at all this to kind of fix the system or clarify the system?

RICHARD SCHMALBECK: Well, there's quite a bit that could be done to fix or clarify the system, but a lot of problem is that the appropriations for the IRS have been actually declining in real terms in recent years, even as their duties have increased. So they don't have enough money to provide the right kind of guidance. They don't have enough money to provide the right kind of training. They don't have enough money to provide enough staff.

And they don't have enough money to provide the kind of layers of middle management review that would produce somewhat more consistency in the processing of these applications.

JEFFREY BROWN: All right, we will leave it there for now. Richard Schmalbeck and Kim Barker, thank you both very much.

KIM BARKER: Thanks very much.

RICHARD SCHMALBECK: Thank you. 

Watch Video | Listen to the Audio

JEFFREY BROWN: The drama surrounding the Internal Revenue Service shifted to a new scene today. The Senate Finance Committee heard from the man who ran the agency until last fall and from his successor.

Judy Woodruff has our report.

MAN: Do you swear that the testimony you're about to give is the truth?

JUDY WOODRUFF: The hearing marked the first chance for lawmakers to question former IRS commissioner Doug Shulman since news broke that the agency had targeted conservative groups.

DOUGLAS SHULMAN, Former U.S. Commissioner of Internal Revenue: I'm deeply, deeply saddened by this whole set of events. I have read the I.G.'s report, and I very much regret that it happened, and that it happened on my watch.

JUDY WOODRUFF: Shulman's five-year term expired last November. This month, a Treasury Department inspector general disclosed that IRS agents had singled out groups seeking tax-exempt status with “tea party,” “patriot” or “9/12” in their names.

The report also revealed that Shulman learned of the practice in May of 2012.

Utah Republican Sen. Orrin Hatch noted that, two months before that date, Shulman told Congress there was absolutely no targeting.

SEN. ORRIN HATCH, R-Utah: Mr. Shulman, why have you not come forward before today to correct the record and acknowledge that there was in fact inappropriate screening occurring in the IRS, the organization that you head -- headed?

DOUGLAS SHULMAN: What I knew wasn't the full set of facts in this report. What I knew some time in the spring of 2012 was that there was a list that was being used.

I knew that the word “tea party” was on the list, didn't know what other words were on the list, didn't know the scope and severity of this, didn't know if groups that were pulled in were groups that would have been pulled in anyway.

JUDY WOODRUFF: Michigan Democrat Debbie Stabenow complained that the targeting by staffers in a Cincinnati regional office went on for 18 months.

SEN. DEBBIE STABENOW, D-Mich.: How in the world could it take so long for senior people at the IRS to find the problem, fix the problem? And was there no ongoing oversight of the employees in Cincinnati and what they were doing?

DOUGLAS SHULMAN: I'm not there to go ask a set of questions of people what happened, when, who and how.

DEBBIE STABENOW: But, with all due respect, you were there, though.

DOUGLAS SHULMAN: I was there. But since this all came to light and the full set of facts are there, I haven't been able to be back there, talking with people, doing things. So, let me just answer, though, your question.

DEBBIE STABENOW: But why didn't you know when you were there?

DOUGLAS SHULMAN: I -- I agree that this is an issue that, when someone spotted it, they should have run up the chain, and they didn't. And why they didn't, I don't know.

JUDY WOODRUFF: The news ultimately came out when an IRS official, Lois Lerner, took a prearranged question at a public conference on May 10^th and issued an apology.

Today, Steven Miller, who was ousted last week as the acting IRS commissioner, said it was his idea to get the news out that way.

STEVEN MILLER, Former IRS Commissioner: We had our response. We thought we should begin talking about this. We thought we'd get out an apology.

The way we did it, we wanted to reach out to the -- to Hill staff about the same time and come and brief. It didn't work out. Obviously, the entire thing was an incredibly bad idea.

JUDY WOODRUFF: The committee also heard from J. Russell George, the treasury inspector general for tax administration, who conducted the audit.

Idaho Republican Mike Crapo was skeptical of his conclusion that IRS agents were not driven by politics.

SEN. MIKE CRAPO, R-Idaho: Now have you reached the conclusion that there was none or that you haven't found it?

J. RUSSELL GEORGE, Treasury Department Inspector General: It's the latter, that we have not found any, sir.

MIKE CRAPO: Because it seems to me that it's almost unbelievable to look at what's happening and then say, well, there's no political motivation here. How could an agency with the power that the Internal Revenue Service has, engage in this kind of conduct and it not be politically motivated?

JUDY WOODRUFF: There were also plenty of questions directed at the White House again today. The administration's timeline surrounding who knew what and when about the activities at the IRS faced mounting scrutiny.

Presidential Press Secretary Jay Carney said Monday that the White House's top lawyer and the chief of staff were told in April about the inspector general's report, but the president wasn't informed. Today, he said:

JAY CARNEY, White House Press Secretary: There was nothing the president could or should do until that process was completed. And upon the release of that information, the release of the final report, the president moved very quickly to make clear his feeling that the conduct portrayed within it was outrageous and inappropriate and wrong.

JUDY WOODRUFF: Amid the questions and answers, tea party groups protested outside IRS offices around the country today, and there will be more tomorrow when the House Oversight Committee holds its first hearing on the matter. 

Douglas Shulman, who vacated his position last November when his five-year term expired, told the Senate Finance Committee he didn't learn all the facts until he read last week's report by a Treasury inspector general confirming the targeting strategy.

In his first public remarks since the story broke, Shulman said: "I agree this is an issue that when someone spotted it, they should have brought it up the chain. And they didn't. I don't know why."

Shulman testified at Congress' second hearing on an episode that has largely consumed Washington since an IRS official acknowledged the targeting and apologized for it in remarks to a legal group on May 10. Shulman and the two officials who testified at Tuesday's three-and-a-half hour session -- the outgoing acting commissioner, Steven Miller, and J. Russell George, the Treasury Department inspector general who issued the report -- were all sworn in as witnesses, an unusual step for the Finance panel.

Shulman said he first learned about the targeting and about the inspector general's investigation in the spring of 2012, during the presidential election. He said that in a meeting with Miller, he was told that IRS workers were using a list to help decide which groups seeking tax-exempt status should get special attention, that the term "tea party" was on that list and that the problem was being addressed. But he said he didn't know what other words were on that list or the scope and severity of the activity.

Pressed by committee Chairman Max Baucus, D-Mont., on how the improper screening system could have occurred in the first place, Shulman said, "Mr. Chairman, I can't say. I can't say that I know that answer."

Shulman said he took what he thought were the proper steps - making sure the inspector general was looking into the situation. He said he did not tell Treasury officials about the improper activity.

"I don't recall talking to anyone about it," Shulman told the committee. "This is not the kind of information" that, with an inspector general's probe underway, "should leave the IRS."

Asked by Sen. John Cornyn, R-Texas, whether he owed conservative groups an apology, Shulman said, "I'm certainly not personally responsible for creating a list that had inappropriate criteria on it."

That was a reference to a list of words IRS workers looked for in deciding which groups to screen, a list that included the terms including "tea party" and "patriot."

"I very much regret that it happened and that it happened on my watch," Shulman said.

The testimony by Shulman and Miller drew skepticism from lawmakers of both parties, including critical remarks from people who have been unhesitant to say anything negative about the IRS since its activities were revealed nearly two weeks ago. Republicans openly rejected George's assertion that he has no evidence that the decision to target conservative groups was politically motivated.

A lack of political motivation "is almost beyond belief," said Sen. Mike Crapo, R-Idaho.

George's report blamed ineffective management for allowing agents to inappropriately target conservative groups for more than 18 months during the 2010 and 2012 elections. Shulman was appointed by President George W. Bush and served from March 2008 until last November.

At a separate hearing, Treasury Secretary Jacob Lew said the IRS's actions against conservative groups were "unacceptable and inexcusable."

Lew told the Senate Banking Committee that he has directed the agency's incoming acting director, Daniel Werfel, to hold people accountable and to fix any flaws in IRS management to make sure there is no recurrence of the problems.

Lew said he first learned about the inspector general's investigation in March but that he was unaware of the findings until they became public this month. Lew became Treasury secretary in February, and was White House chief of staff before that.

For more than a year, from 2011 through the 2012 election, members of Congress repeatedly asked Shulman about complaints from tea party groups that they were being harassed by the IRS. Shulman's responses, usually relayed by a deputy, did not acknowledge that agents had ever targeted tea party groups for special scrutiny.

At one House hearing on March 22, 2012, Shulman was adamant in his denials, saying, "There's absolutely no targeting."

On Tuesday, Republicans expressed anger that Shulman and Miller didn't reveal the screening of conservative groups to Congress, despite lawmakers' repeated inquiries. Miller learned of the situation in early May 2012.

"Mr. Miller, that's a lie by omission," said Sen. Orrin Hatch of Utah, top Republican on the Finance committee. "There's no question about that in my mind. It's a lie by omission and you kept it from people who have the obligation to oversee this matter."

President Barack Obama has forced Miller to resign, and he is leaving office this week.

Shulman said he didn't later tell lawmakers about the targeting because he didn't have full information about the situation.

"I had a partial set of facts," Shulman said. "Sitting there then, sitting here today, I think I made the right decision" to let George, the inspector general, conduct his audit of the targeting.

Shulman said that when he did finally read about the details of the targeting in the inspector general's report, "I was dismayed and I was saddened."

Hatch and Baucus both criticized the agency and said they would investigate how and why the improper screening occurred.

"I intend to get to the bottom of what happened," Baucus said.

George, the Treasury inspector general, has said he told Shulman on May 30, 2012, that his office was auditing the way applications for tax-exempt status were being handled, in part because of complaints from conservative groups. However, George said he did not reveal the results of his investigation.

The IRS agents were conducting the screening to determine whether the groups were engaged in political activity. Certain tax-exempt groups are allowed to engage in politics, but politics cannot be their primary mission. It is up to the IRS to make the determination, so agents are supposed to look for clues when reviewing applications for tax-exempt status.

In March 2010, agents starting singling out groups with "Tea Party" or "Patriots" on their applications. By August 2010, it was part of the written criteria for identifying groups that required more scrutiny, according to George's report.

Agents did not flag similar progressive or liberal labels, though some liberal groups received additional scrutiny because their applications were singled out for other reasons, the report said.

Meanwhile, a conservative organization that says its tax-exempt status is being unfairly held up by the IRS filed a federal lawsuit in Washington against the agency. True the Vote, a Houston group that watches for voting irregularities, is seeking damages and asking to immediately be granted tax-exempt status.

Citizens for Responsibility and Ethics in Washington, a campaign finance watchdog, also sued the IRS on Tuesday, seeking to force it to write new rules clarifying restrictions on political spending by some non-profit groups. The law says some groups qualify for tax-exempt status if they engage "exclusively" in social welfare projects, but IRS regulations allow the status if they are "primarily engaged" in social welfare -- giving them leeway for some political activity as well.

Support Your Local PBS Station

Watch Video | Listen to the Audio

JUDY WOODRUFF: Congress today formally launched the first of its investigations into the furor swirling around the Internal Revenue Service. The star witness was the official who had been running the agency until Wednesday.

NewsHour correspondent Kwame Holman has our report.

MAN: What you are about to give will be the truth, the whole truth, and nothing but the truth, so help you God.

KWAME HOLMAN: Steven Miller, the man forced out as acting head of the IRS, began by acknowledging failures.

STEVEN MILLER, Former Internal Revenue Service Commissioner: I want to apologize on behalf of the Internal Revenue Service for the mistakes that we made and the poor service we provided.

The affected organizations and the American public deserve better. Partisanship or even the perception of partisanship has no place at the IRS. It cannot even appear to be a consideration in determining the tax exemption of an organization.

KWAME HOLMAN: But, at the same time, Miller asserted IRS staffers didn't act out of political motivation when they gave special scrutiny to tea party and other groups on the political right.

STEVEN MILLER: I think that what happened here was that foolish mistakes were made by people trying to be more efficient in their workload selection.

The listing described in the report, while intolerable, was a mistake, and not an act of partisanship.

KWAME HOLMAN: Miller resigned Wednesday, at the behest of Treasury Secretary Jack Lew. Joseph Grant, who oversees requests for tax-exempt status, also will step down. He's retiring next month.

But it was clear today that neither the personnel shakeup nor apologies have calmed the storm for many, especially Republicans. Michigan Republican Dave Camp chaired the House Ways and Means hearing.

REP. DAVE CAMP, R-Mich.: The reality is, this is not a personnel problem. This is a problem of the IRS being too large, too powerful, too intrusive, and too abusive of honest, hardworking taxpayers.

KWAME HOLMAN: Camp and other Republicans also argued that what happened at the IRS is part of a culture of cover-ups by the Obama administration.

DAVE CAMP: It seems like the truth is hidden from the American people just long enough to make it through an election. The American people have a right to the truth, to a government that delivers the facts, good or bad, no matter what.

KWAME HOLMAN: The committee's top Democrat, Sander Levin of Michigan, fired back, saying that goes too far.

REP. SANDER LEVIN, D-Mich.: I totally, totally disagree. If this hearing becomes essentially a bootstrap to continue the campaign of 2012 and to prepare for 2014, we will be making a very, very serious mistake and, indeed, not meeting our obligation of trust to the American people.

KWAME HOLMAN: Today's hearing is just the beginning of Congress' examination of IRS scrutiny of the tea party and other conservative groups. So far, three congressional committees have announced plans to investigate.

And, on Tuesday, Attorney General Eric Holder announced the Justice Department was looking into whether any criminal violations have taken place. So far, the main source of information about what happened is J. Russell George, a Treasury Department inspector general. His report, released this week, singled out the IRS office in Cincinnati that screens applications of groups for tax exemptions.

J. RUSSELL GEORGE, Treasury Department Inspector General: IRS employees actually began selecting tea party and other organizations for review in early 2010.

KWAME HOLMAN: George said the practice lasted about 18 months, and he blamed ineffective management. He said IRS officials told him they were not under any political pressure to act.

Washington Democrat Jim McDermott pursued that conclusion.

REP. JIM MCDERMOTT, D-Wash.: The inspector general's report says that no one acted out of malice or political motivation.

Mr. George, I want to know, do you still stand by that?

J. RUSSELL GEORGE: We have no evidence at this time to contradict that assertion, sir.

KWAME HOLMAN: In fact, Steven Miller argued that even the term targeting is unfair. He said the Cincinnati office simply was overwhelmed when applications from tea party groups exploded.

STEVEN MILLER: What happened here is that someone saw some tea party cases come through. They were acknowledging that they were going to be engaged in politics.

People in Cincinnati decided, let's start grouping these cases. Let's centralize these cases. We have a limited number of people, 140 to 200, that work on the 70,000 applications that come in for tax-exempt status.

KWAME HOLMAN: Republican Mike Kelly of Pennsylvania complained the IRS would never accept that kind of explanation from any business.

REP. MIKE KELLY, R-Pa.: You're not allowed to be shoddy, you're not allowed to be run horribly, you're not allowed to make mistakes. You're not allowed to do one damn thing that doesn't come in compliance. If you do, you're held responsible right then.

I just think the American people have seen what is going on right now in their government. This is absolutely an overreach and this is an outrage for all America.

KWAME HOLMAN: Republicans also demanded to know why Miller and others at the IRS didn't inform Congress after they learned what was going on in May of 2012.

Louisiana Congressman Charles Boustany:

REP. CHARLES BOUSTANY JR., R-La.: You sent letters to Congress acknowledging our investigation of these allegations, but consistently omitted that such discriminatory practices that are alleged were actually, in fact, taking place. Why -- why did you mislead Congress and the American people on this?

STEVEN MILLER: Mr. Chairman, I didn't mislead Congress nor the American people. I answered the questions as they were asked.

KWAME HOLMAN: And California Congressman Devin Nunes wanted to know why Miller didn't fight to keep his job, if he feels that way.

REP. DEVIN NUNES, R-Calif.: You have said that numerous times on the record today, that you did nothing wrong. So I find it hard to believe, why did you resign? Or why are you resigning?

STEVEN MILLER: I never said I didn't do anything wrong, Mr. Nunes. What I said is contained in the questions. I resigned because, as the acting commissioner, what happens in the IRS, whether I was personally involved or not, stops at my desk. And so I should be held accountable for what happens.

Whether I was personally involved or not are very different questions, sir.

KWAME HOLMAN: Democrats at the hearing rejected claims of wide corruption in the Obama administration, but they agreed that political neutrality at the IRS must be beyond question.

REP. JOE CROWLEY, D-N.Y.: So, we're all outraged. We're all upset about this. I don't believe, nor do any of my colleagues believe that any organization, political organization, should be targeted solely because of their thought. That's on both sides of the spectrum.

REP. XAVIER BECERRA, D-Calif.: Let me key off of something, Mr. Miller, you said. You said, “Foolish mistakes were made.” I think the president actually said it better. He said that the handling of those tax-exempt applications in that process at the IRS was outrageous and intolerable. No excuse.

KWAME HOLMAN: And as the four-hour hearing drew to a close, there came a pledge from the chairman.

DAVE CAMP: But I promise the American people, this investigation has just begun. Hearing adjourned.

KWAME HOLMAN: The Senate Finance Committee formally begins its investigation with a hearing next Tuesday. 

Watch Video | Listen to the Audio

KWAME HOLMAN: The Justice Department is being faulted for failing to ensure a small number of terror suspects were on the government's “no-fly” list. The department's inspector general said today the once-suspected terrorists were in the federal witness protection program. Their new identities weren't shared with a tracking center, so they were allowed to take commercial flights. In response, the Justice Department said it has imposed a more restrictive travel policy for the witness program.

There was terror in Texas overnight from a powerful storm system. Tornadoes killed at least six people, injuring dozens and left hundreds homeless.

It was the worst outbreak of severe weather this year.

MAN: Oh, my God!

KWAME HOLMAN: Dark funnel clouds appeared over North Central Texas, accompanied by heavy rain and hail the size of grapefruit.

ELIZABETH TOVAR, Resident of Granbury, Texas: I heard glass shattering and I knew my house was gone. And we looked up and then, like, on top of the bathtub, we -- like, the whole ceiling was gone. And that was when we knew we were -- we were probably gone, we were in trouble.

KWAME HOLMAN: All of those killed were in the small city of Granbury, about 40 miles southwest of Fort Worth. At about 8:00 p.m., a twister dropped from the sky there with winds up to 200 miles an hour and tore up two neighborhoods, hurled cars into trailers and splintered trees.

WOMAN: There is nothing left. I mean, our neighborhood is gone. It's just gone.

DANIEL LANYE, Resident of Granbury, Texas: The windows in the cars are gone. Both of our cars are messed up. I had a big shop. Ain't a piece of it left now.

KWAME HOLMAN: There also was heavy damage in the town of Cleburne.

All told, the National Weather Service said up to 10 tornadoes struck in the region. The sheriff of Hood County, where Granbury is located, spoke this afternoon.

SHERIFF ROGER DEEDS, Hood County, Texas: Search mode is pretty much winding down, and we're going into a recovery mode now, but we're not going to stop searching until every piece of debris is overturned, and we can make sure nobody is there, no pets, before we start the cleanup on this.

KWAME HOLMAN: Authorities warned that the death toll still could rise as the search continues.

Federal and state officials have not yet pinpointed the cause of last month's fertilizer plant explosion and fire in West, Texas. But they said today they're not yet ruling out criminal activity; 14 people died at the plant, including 10 first-responders and two volunteers fighting the fire. The April 17^th blast leveled homes and even registered as a small earthquake in the area.

In West today, officials reported on their month-long investigation.

CHRIS CONNEALY, Texas State Fire Marshal: The cause of this fire is undetermined. The investigation will remain open. An undetermined cause occurs when the cause cannot be proven to an acceptable level of certainty, again, to acceptable level of certainty. This could be due to insufficient information or if multiple causes could not be eliminated.

KWAME HOLMAN: Officials also said the plant had 150 tons of highly explosive ammonium nitrate on site at the time.

In Afghanistan, a suicide car bomber plowed into a U.S. convoy in Kabul, killing at least 15 people. Six were Americans, two soldiers and four civilian contractors. Nine Afghan civilians also died, including two children; 40 people were injured. The force of the blast completely mangled vehicles in the convoy. And it was so strong it rattled buildings on the other side of the capital city. The Islamic militant group Hezb-e-Islami claimed responsibility.

Sectarian violence in Iraq continued with a wave of bombings and shootings targeting Shiites and Sunnis. In the last 48 hours, more than 50 people have been killed. Today, bombs exploded in the Shiite neighborhoods -- in Shiite neighborhoods across Baghdad, striking a market, a Shiite praying area and a bus stop at morning rush hour. At least 21 Iraqis were killed today. More than 30 died in attacks on Wednesday.

President Obama called in Pentagon leaders today, and afterward, he said they're ashamed about the failure to stop sexual assault in the ranks. Defense Secretary -- Defense Secretary Chuck Hagel and the Joint Chiefs of Staff chairman, Gen. Martin Dempsey, were there, along with others. Dempsey said today the issue has become a crisis.

In Congress, a bipartisan group of senators called for removing commanders from deciding whether sexual assault charges are prosecuted.

New York Democrat Kirsten Gillibrand:

SEN. KIRSTEN GILLIBRAND, D-N.Y.: Today, we're standing in a united front to take on these issues with new legislation that will fundamentally remove the decision-making from the chain of command and gives that discretion to an experienced military prosecutor, where it belongs.

KWAME HOLMAN: The Pentagon estimated last week there were some 26,000 cases of unwanted sexual contact last year. Most went unreported. And this week, there were allegations of sexual misconduct against an Army sergeant whose job was to prevent such crimes.

The U.S. House has voted to repeal the president's health care reform law again. It was the 37th time the Republican-led House has tried to kill the law since its passage in 2010. The Democratic-controlled Senate is expected to ignore the bill.

The Senate today confirmed Ernest Moniz as the next secretary of energy. He's a nuclear physicist and a former energy undersecretary during the Clinton administration. Meanwhile, Senate committees approved the nominations of Gina McCarthy to head the Environmental Protection Agency and Thomas Perez to serve as secretary of labor. The nominations now go to the full Senate, where both may face Republican opposition.

Wall Street gave back a little ground today. The Dow Jones industrial average lost 42 points to close at 15,233. The Nasdaq fell six points to close at 3,465.

Those are some of the day's major stories -- now back to Jeff.

Watch Video | Listen to the Audio

GWEN IFILL: And now we go back to the IRS story.

Just a few minutes ago, President Obama announced the acting director of the IRS has been forced out.

He spoke in the East Room of the White House.

PRESIDENT BARACK OBAMA: First, we're going to hold the responsible parties accountable.

Yesterday, I directed Secretary Lew to follow up on the I.G. audit to see how this happened and who was responsible and to make sure that we understand all the facts. Today, Secretary Lew took the first step by requesting and accepting the resignation of the acting commissioner of the IRS, because, given the controversy surrounding this audit, it's important to institute new leadership that can help restore confidence going forward.

Second, we're going to put in place new safeguards to make sure this kind of behavior cannot happen again. And I have directed Secretary Lew to ensure the IRS begins implementing the I.G.'s recommendations right away.

Third, we will work with Congress as it performs its oversight role. And our administration has to make sure that we are working hand in hand with Congress to get this thing fixed. Congress, Democrats and Republicans, owe it to the American people to treat that authority with the responsibility it deserves and in a way that doesn't smack of politics or partisan agendas, because I think one thing that you have seen is across the board everybody believes what happened in -- as reported in the I.G.'s report is an outrage.

The good news is, it's fixable, and it's in everyone's best interest to work together to fix it.

JEFFREY BROWN: And we pick up on some of the latest developments and lingering questions in this story.

For that, we're joined by Josh Gerstein of Politico, who covers the White House specializing in legal and national security issues. He was at today's House hearing. And Paul Streckfus, creator and editor of EO Tax Journal, a weekly newsletter focused on tax-exempt organizations.

Welcome to you both.

Well, Josh, clearly, the president felt he had to come out and do something quickly.

JOSH GERSTEIN, Politico: Yes, Jeff, this is really a White House in firefighting mode today, not just on the IRS story, but on the Benghazi story and as well as this AP leaks investigation.

Just a clear initiative from the White House to try to put some cold water on all these stories and to do it as quickly as possible, so they can turn the page and get back to some of the policy items on their agenda that they're eager to deal with.

JEFFREY BROWN: He had said the other day he was waiting -- and the outrage was there, but he was waiting for the inspector general's report. We just heard him refer to that. That came yesterday.

JOSH GERSTEIN: Right.

And this has been a very difficult story, the IRS one, for the White House, because it's not an agency that the White House typically has much control over, for obvious reasons, dating back to the Nixon years. And suddenly they find themselves confronted with a politically volatile controversy at an agency where they stress that they have only two presidential appointees.

So it took them a while to really get into a proactive mode to try to knock this down.

JEFFREY BROWN: Well, Paul Streckfus, tell us a little bit about this independence and who's who here, first of all, the acting director who's just left or been resigned, I guess, is the way to look at it.

PAUL STRECKFUS, EO Tax Journal: Yes.

I personally feel that it's a loss for the American taxpayers and the IRS that Steve Miller has been forced out. He's a dedicated public servant. There was nothing in the report that said that there was any political favoritism. True, there appeared to be some managerial incompetence, but I'm not sure you force someone out on that basis, especially when that individual might have been -- is and -- probably is in the best position to make the reforms that are needed.

JEFFREY BROWN: Well, how much independence does the IRS have in making the kinds of decisions about tax-exempt status of the kind that are being -- are so much in focus right now?

PAUL STRECKFUS: Well, they are supposed to be independent.

There's -- I believe it's a law that says the White House cannot contact the IRS commissioner or anyone at the IRS directly. Those contacts have to be done through the treasury secretary, Jack Lew. So it's possible that the White House could have some impact, but they'd have to do it through treasury secretary. He would then have to talk to the commissioner. He would then have to talk to his employees.

Having worked at the IRS, I know that would get out to the public very quickly if that kind of activity was occurring. So it seems to me that much of the talk is about political favoritism, and yet I see very little evidence that there was an intent to go after the tea party groups and let others have a free pass.

JEFFREY BROWN: Well, what kind of firewalls exist to prevent politics from entering into these kinds of decisions?

PAUL STRECKFUS: Well, just as I said, the White House is isolated.

The IRS is very much nonpartisan. Most folks at the IRS are not involved in politics. It's -- from day one, you're told not to favor any particular group or individual. If you were so -- if you were a new employee and you did, someone would quickly come by and say, you know, we cannot be taking positions.

JEFFREY BROWN: Well, that's -- but that's the question, because there is this -- the question of potential rogue -- rogues within the agency. Could it be isolated to a few people, or is there enough oversight that somebody would see this, somebody would step in? Who would that somebody be?

PAUL STRECKFUS: Well, it could be anywhere on the chain.

I recall many years ago when I was at the IRS, there were two individuals who actually were able to sort of put their views into action through their position. But the supervisors and others quickly became aware of what was going on, and stepped in, and basically separated them and said, this is not the way we operate.

I have -- I have followed this area, the exempt organizations area, now for about 40 years, and followed the IRS E.O. function very closely. I see no evidence that anyone there is involved in favoring Republicans over Democrats or vice versa.

JEFFREY BROWN: Right, but even with these revelations about looking at the names of organizations with “tea party,” with other such names?

PAUL STRECKFUS: Well, that was a mistake.

But the idea was, in 2010, or whenever these -- that was when the tea party movement started springing up. They then all started sending in these applications. The reality is, tea parties seem to be a lot like many political parties. If that's the case, they belong under Section 527 of the code, not 501(c)(4), but the only reason they're all coming in for (c)(4) is because you don't to disclose your donors.

JEFFREY BROWN: Well, clearly, the Republicans -- you were at the Hill today. They see it quite differently, that this was clearly targeting one side, and others were not -- others were essentially getting a pass.

JOSH GERSTEIN: Yes, they view it as intentional targeting.

And they're angry not only about that, but they believe that the senior IRS officials lied to them. We had a Republican member say that Lois Lerner, who is the head of the Exempt Organizations Division at the IRS, lied to him specifically and lied to his staff.

And obviously with Holder talking about a criminal investigation into all this, he mentioned that false statement charges are among the criminal statutes that they're looking at in this investigation. So, they're very eager to get to the bottom of it. And I was kind of surprised that Republicans said -- seemed to be satisfied with the notion of a criminal investigation by the Justice Department.

We didn't hear talk of a special counsel, not today anyway.

JEFFREY BROWN: But they are looking at the chain, right, of -- because, again, we're looking at people in a Cincinnati office or in a Washington office. What's the chain? How far does it go?

JOSH GERSTEIN: Right.

I mean, the Cincinnati thing I think is a little bit of a canard, because that handled, as far as I know, all these exempt organizations. So, it just happened to be in Cincinnati. It seems to downplay it as a regional problem. It was really a national problem.

And they don't believe corrective action was taken promptly enough here. And with something of this sensitivity, that may be why Mr. Miller's resignation was called for. It wasn't his fault that was this was done. In fact, most of it happened on his predecessor's watch, but maybe he didn't act quickly enough and wasn't candid enough with Congress about what was going on.

JEFFREY BROWN: And I heard in some of the hearing today when I was listening, there was this question of, is the IRS really independent or not? That's still out there, right? They report to Jack Lew, the treasury secretary. He reports to the president. These are all the questions around it.

JOSH GERSTEIN: It's officially a Treasury agency, so it's not completely independent. You do have an unusual I think five-year term for the IRS commissioner.

But these the questions that are swirling, and the Republicans were suggesting, this is not a problem that the president can completely divest himself and wash his hands of. It appears the president and his advisers agree, given the prominence of this announcement tonight, going on national television to announce that he's dismissed the acting IRS commissioner.

JEFFREY BROWN: It's not an end, though, because more hearings.

JOSH GERSTEIN: No. I mean, it's an effort to throw water on all of this.

And you will have the ongoing criminal investigation into what happened here. But it's an effort to maybe move this to the inside pages of the newspaper, instead of the front page.

JEFFREY BROWN: All right, Josh Gerstein, Paul Streckfus, thank you both very much.

JOSH GERSTEIN: Thank you. 

Watch Video | Listen to the Audio

JEFFREY BROWN: The nation's capital was alive with talk of scandal today, starting with the revelations about the Internal Revenue Service. Questions grew over reports of overzealous enforcement aimed at groups on the political right.

The day began with new disclosures about what the IRS had done and who knew about it. The Washington Post reported the targeting of conservative groups was not limited to the agency's Cincinnati office, as the IRS initially said. Instead, The Post said agency officials in Washington and at least two other offices were also involved.

That prompted new calls by Republicans for more information. Senate Minority Leader Mitch McConnell demanded full transparency.

SEN. MITCH MCCONNELL, R-Ky.: So this morning, I'm calling on the president to make available completely and without restriction everyone, everyone who can answer the questions we have as to what's been going on at the IRS, who knew about it and how high it went, no stonewalling, no more incomplete answers.

JEFFREY BROWN: President Obama on Monday said singling out conservative groups for tax scrutiny would be -- quote -- "outrageous."

And at the White House today, Press Secretary Jay Carney said again the president is determined to get to the bottom of the scandal.

JAY CARNEY, White House Press Secretary: If what we're seeing in some of these reports about specific targeting and actions taken by personnel within the IRS turns out to be true, then people should be held accountable. And what that means in concrete action, we will have to see, based on the information and the facts that are gathered, principally, at least at first, by the inspector general.

JEFFREY BROWN: The acting commissioner of the IRS was heard from, too, for the first time. In a USA Today op-ed column, Steven Miller acknowledged agency workers reported to -- quote -- "shortcuts" because they had so many applications for tax-exempt status. Miller conceded the actions demonstrated -- quote -- "a lack of sensitivity to the implications of some of the decisions that were made."

Yesterday, the IRS said Miller had learned last year that groups with “tea party,” “patriot,” or “9/12 Project” in their names were targeted, but he did not notify Congress, despite inquiries by some lawmakers.

This afternoon, Republican Sen. Orrin Hatch of Utah said that failure raises serious questions.

SEN. ORRIN HATCH, R-Utah: He purposefully misled me, because I wrote a letter. I had other senators on the letter. I got a letter back from him basically saying that's no problem, when he knew. According to the information I have right now, he knew that that wasn't true.

JEFFREY BROWN: Another Republican, Missouri Sen. Roy Blunt, said if the reports about Miller are true, he should resign or be fired.

But the chamber's Democratic majority leader, Harry Reid, said such talk is premature.

SEN. HARRY REID, D-Nev.: The person who was working on this at the time it happened was a Republican appointee during the Bush years. The man acting now is temporary. He's acting. And there's work being done now to get a permanent person there. So to act -- to have some temporary guy resign -- his name is Miller -- as far as I know, he's done a good job.

JEFFREY BROWN: Lawmakers will have the opportunity to question Miller on Friday, when he testifies before the House Ways and Means Committee.

Meanwhile, Attorney General Eric Holder said he's ordered the FBI to see if any laws were broken.

ATTORNEY GENERAL ERIC HOLDER, United States: Those were, I think, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable, but we are examining the facts to see if there were criminal violations.

JEFFREY BROWN: A full report on the matter by a Treasury Department inspector general is expected to shed further light on the matter.

And that report has, in fact, just been released a short time ago.

Joining us now with the latest, Juliet Eilperin, White House reporter for The Washington Post, and Eliza Newlin Carney. She covers campaign finance issues for CQ Roll Call.

Well, Juliet, I guess you have been doing some fast reading over there. What can you tell us about the I.G. report? What does it say?

JULIET EILPERIN, The Washington Post: So the most significant new information coming from the I.G. report is essentially saying that because of this screening criteria that they applied to conservative groups, there was virtually no work done in terms of approving these groups for 13 months.

And over a period of 18 months, they had criteria that, again, singled out groups with names such as “tea party,” “patriot,” and “9/12.” So that's the most interesting new information. It also points out that some groups faced considerable delays, including in some cases more than three years, spanning two election cycles.

So it gives you a sense of what was the real-world impact of this effort by the IRS to categorize all of these conservative groups in one place.

JEFFREY BROWN: Does it tell us anymore about who is making these decisions, what the -- name names or anything within the IRS?

JULIET EILPERIN: No.

In fact, of course, it does raise some questions. There's a great deal that's redacted, including the fact that there is event at the very beginning of the timeline in February 2010 which is completely blacked out. So it still does raise some real questions about who knew what when and really what was the instigation for this program in the first place.

JEFFREY BROWN: Eliza, what about the announcement of the FBI starting a criminal investigation? What do we know about what they're looking at?

ELIZA NEWLIN CARNEY, CQ Roll Call: Well, it is, in fact, a violation of law for the IRS to engage in discrimination in the enforcement of the tax code.

So there could have been criminal violations here. And I think, to some degree, this reflects the Obama administration trying to get a little bit ahead of this controversy.

JEFFREY BROWN: And what do you see? You have had a chance to look at some of the I.G. report. What does it tell you about the workings of the IRS here?

ELIZA NEWLIN CARNEY: Well, the IRS has long been subject to complaints from groups on both sides of the aisle that its enforcement of this area of tax law, namely, political activity by tax-exempt groups, is vague and inconsistent.

And everything we see in this report and in the reports about this so far suggest that the IRS to some degree really didn't know what it was looking for, what it was trying to accomplish. The officials were said first to look for one set of criteria, then to look for another set of criteria. The criteria kept changing from year to year.

So it creates an impression of an agency that, frankly, didn't know what it was doing.

JEFFREY BROWN: And when, as we saw, the acting director today said -- wrote today that the agency took short cuts because of so many applications coming. The context there is the changes in the campaign finance laws?

ELIZA NEWLIN CARNEY: Yes.

And we should say that in the IRS' defense, they had literally thousands of applications for tax exemption. These had more than doubled since the Citizens United ruling in 2010, which deregulated political spending, and which to some degree invited these groups to play a bigger political role.

So, at the same time, the IRS had cuts in its budget, cuts in its staff. So they clearly were overwhelmed. But it doesn't take away from the fact that they have long been criticized for having subjective and vague criteria for how to regulate these groups.

JEFFREY BROWN: Juliet Eilperin, one thing we do know from your story this morning is that this did go beyond the original reports, beyond the office in Cincinnati. Right? So where's the focus that you see for all of these questions right now?

JULIET EILPERIN: Well, I think still ultimately these are questions that people like Steven Miller will have to answer, the acting commissioner.

It's obvious that while, again, Cincinnati played the central role because that was the division charged with considering these applications for tax-exempt organizations, you had other field offices as well as headquarters involved in it, and really they're going to have to answer some key questions about to what extent did people beyond Lois Lerner make decisions about what was the approach that IRS rank-and-file employees were taking when they were targeting these groups.

JEFFREY BROWN: And what do you see -- Juliet, staying with you, what do you see as the White House response so far? Can you tell? We can see what they're saying publicly. Can you tell what's going on behind the scenes?

JULIET EILPERIN: Well, it's a little unclear, though, I think. And as the clip that you played from Senate Majority Leader Harry Reid indicated, I wouldn't be surprised if they're working very quickly to get a new nominee for commissioner of the IRS in place, so that, for example, they can at least address that one aspect now that Steven Miller is coming under fire.

It wouldn't surprise me if they were trying to come up with a new replacement who wouldn't be associated with these activities. So -- but, publicly, they have been very tentative. They said they wouldn't comment in detail until the I.G. report was released. Now that it is, we haven't got our comment yet, but we're hoping that they will be a little more forthcoming.

JEFFREY BROWN: And, Eliza, last word, what do you see behind the scenes?

ELIZA NEWLIN CARNEY: I think this is just going to escalate. This problem of how the IRS regulates political groups isn't going go away. There aren't easy answers. It is somewhat difficult to draw bright lines around political activity.

JEFFREY BROWN: You mean the larger picture?

ELIZA NEWLIN CARNEY: The larger picture. And this is going to continue. And I think it is going to continue to be a political problem for the administration.

JEFFREY BROWN: All right.

Eliza Newlin Carney, Juliet Eilperin, thank you both very much.

ELIZA NEWLIN CARNEY: Thank you.

JULIET EILPERIN: Thank you. 

Watch Video | Listen to the Audio

JUDY WOODRUFF: And late today, the House Ways and Means Committee announced that it will hold a hearing this Friday.

To help us understand the tax law and what the groups are charging, we are joined by Duke University Law School professor Richard Schmalbeck. He's a former tax attorney. And former IRS attorney Jay Sekulow, as chief counsel at the American Center for the Law and Justice, he is representing tea party organizations. He also hosts a conservative talk radio program.

Gentlemen, welcome to you both.

And, Jay Sekulow, let me start with you. Let's go back to the applications that these groups made for tax-exempt status. What sort of tax treatment exactly were they asking for?

JAY SEKULOW, American Center for Law and Justice: Most of them were asking for -- our clients were asking for (c)(4) status, which is -- allows for the -- money given is not taxable. It's not tax-deductible by the donor, but it's not a taxable event to the organization.

So it was a 501(c)(4) legal status. And the application actually is very straightforward. And the first series of questions were not terribly intrusive. It was the second round of questions that were very intrusive and has caused the problem here.

JUDY WOODRUFF: Well, let me ask you Professor Schmalbeck.

Why -- if they were seeking this status, which is tax-exempt, as we just heard him say, why then are they eligible for tax exemption?

RICHARD SCHMALBECK, Duke University School of Law: Well, there are a number of organizations that are eligible. And I think in many cases, the primary explanation is that they are simply not activities that are engaged in for profit.

And so the normal course of things wouldn't be that they would generate profit. They spend their funds on activities that advance some purpose. In the case of (c)(4) organizations, they're considered social welfare organizations. And they are presumed to advance social welfare.

So it includes things like volunteer fire departments. It includes organizations -- I believe the ACLU is a 501(c)(4). I think the National Rifle Association is a 501(c)(4).

JUDY WOODRUFF: And, Jay Sekulow, I just want to pursue this very quickly to help people understand because some people are confused about the term “tax-exempt.”

They get this status, they're seeking this status even though they pursue a very strong set of beliefs, as we just heard, whether it's the National Rifle Association or another group. For example, today I got an e-mail from a group that is a 501(c)(4), but they are, they said, strategically partnered with a Republican group.

But that's OK, right?

JAY SEKULOW: Well, you can't be part of the national Republican Party or the Democratic Party, per se, and that's not allowed.

But it's exactly what was just said. The ACLU is a 501(c)(4). They advance a particular agenda. That agenda is deemed to be beneficial to the social welfare. That includes their educational activities and their litigation activities. My clients were engaged in mostly educational activities. They had civic forums. They had discussions on issues. They were not involved with a particular political party.

That's where the line gets different. The standards are different. It's a facts and circumstance test. But, Judy, at the outset I think it's important to understand the 501(c)(4)s have been around for a long time. The ACLU has been one for decades. And they're entitled -- I believe they're completely entitled to it.

The fact is that what has happened here is, as the IRS has admitted, they engaged in targeted discrimination in picking out the groups with the name “tea party” or “patriot” and then broadening it out to groups that were concerned about the Constitution. The IRS has admitted that, but that doesn't prevent what's happened here.

JUDY WOODRUFF: Then, Professor Schmalbeck, what normally should happen or would happen? If a group is applying for this status, what does the IRS -- what are they supposed to do? What kinds of questions would they ask?

RICHARD SCHMALBECK: OK.

So, in this case, there is another type of organization also tax-exempt called political organizations. And they're exempt under Section 527 of the Internal Revenue Code. And the IRS position on this has long been that if you want to be a (c)(4) social welfare organization, you cannot engage primarily in political activity.

And they define primarily as essentially more than 50 percent of your activity. So I think the concern on the part of the IRS -- and I think this is a legitimate concern, a concern that they have an obligation to act on -- is that organizations that are probably more accurately considered 527 political organizations prefer to be social welfare organizations under 501(c)(4).

And the primary reason for that is that 527 organizations have to disclose publicly the names of their donors. And no such obligation exists for 501(c)(4) organizations. So ...

JUDY WOODRUFF: Jay Sekulow, does that sound like the principal distinction there, is these groups, these tea party groups ...

JAY SEKULOW: Well, that's exactly the law.

But the difference here is that the questions that were asked by the Internal Revenue Service in their subsequent follow-ups, which is where the questions and the problems started, as the IRS acknowledged, were outside the scope of a 501(c)(4) question. They weren't relative to 527 questions, for that matter. These were questions that were inappropriate under any circumstances.

JUDY WOODRUFF: What is an example of a question?

JAY SEKULOW: Well, how about conversations you had with members of your family and what they may have said to members of Congress, or your membership lists?

The -- if you're applying for (c)(4) status, those membership lists are off-limits. And the professor is right. And that's the difference between a 527 and a 501(c)(4). The (c)(4) organizations can engage in activity that is deemed political as long as that's not their primary purpose. That wasn't the question, though, that was asked, Judy.

And that's the problem here. It's the IRS intrusive nature of their questions, which has created their own problem. And the only reason we know about it now, besides the fact that our organization objected to those questions when they were raised, is that the inspector general acknowledged that that was a problem. That report is about to be made public.

And that's the only reason that this is out today is the IRS tried to get ahead of it. They asked the wrong questions to the wrong organizations. So, they weren't looking at the 527 applications. These were 501(c)(4)s. The IRS could have said, well, they didn't qualify. But that was never what they asked. These were intrusive questions, nothing to do with 27s.

JUDY WOODRUFF: Professor Schmalbeck, what is the limit if the IRS would be asking if they're determining legitimate tax-exempt status?

RICHARD SCHMALBECK: Well, I think one of the problems here is that these questions do seem to me, at least in some cases, relevant to the question of whether they are more accurately considered political organizations or social welfare organizations.

So, for example, if you knew that the primary donors ...

JAY SEKULOW: Your membership data?

RICHARD SCHMALBECK: ... to an organization were the Democratic Senatorial Committee, that would incline you to think that it was more of a political organization, rather than a social welfare organization.

So things like names of donors are not irrelevant. I am sympathetic to the tea party in this respect, though. It is true that if you are awarded (c)(4) status, your application must be made public. And application is defined in such a way that it includes all communications with the Internal Revenue Service.

So there is a bit of a catch-22 here. The IRS says basically that you are entitled to privacy as to your donors if you qualify for (c)(4) status, but we're not going to approve your (c)(4) application unless you disclose your donors. And once you disclose them to us, they will be disclosed to the public.

JAY SEKULOW: Right.

RICHARD SCHMALBECK: So, there is a problem. And that's largely a problem of Congress' making. There is a statute, Section 6104 of the Internal Revenue Code, that requires that public disclosure of the application materials.

That could be amended to permit redaction of some of the information that I think they regard as most sensitive.

JUDY WOODRUFF: In less than a minute, Jay Sekulow, so what questions remain to be answered to get to the bottom of this?

JAY SEKULOW: Well, I think we don't -- number one, need to find out who authorized this, because this did not come from -- this idea that these were low-level agencies, where tax law, tax-exempt specialists -- I was -- as you said, I in chief counsel's office of the IRS -- that we were their lawyers. So these were not low-level people. These were well-trained revenue agents specializing in tax-exempt.

We need to decide who determined to coordinate these audits, why they picked names to go after, and find out who is responsible. At the end of the day, the president said today, if this in fact happened -- well, his own staff, his own team has acknowledged this has happened. And, as I said, the White House counsel was notified of this in late April.

JUDY WOODRUFF: And, very quickly, Professor Schmalbeck, what would you add? What questions need to be answered to get to the bottom of this?

RICHARD SCHMALBECK: I don't disagree with the list that Jay just offered very much.

I guess the one thing that I would say in conclusion is that when people hear that organizations with the name “tea party” in them have been targeted, it's hard to imagine an explanation for that that isn't rooted in political bias.

But there is an explanation, possibly, that is rooted in a legitimate effort to try to distinguish political organizations from social welfare organizations. And I think if you asked 100 people on the street what the tea party is about, I think most of them would say that it's a political organization. So this is at some level a legitimate inquiry, even though the IRS may have bungled it.

JUDY WOODRUFF: Well, gentlemen, we hear you both. And this story continues.

Professor Schmalbeck, Jay Sekulow, we thank you both.

RICHARD SCHMALBECK: My pleasure.

JAY SEKULOW: Thanks, Judy. Thank you. 

Watch Video | Listen to the Audio

JUDY WOODRUFF: There were stern words at the White House today over IRS targeting of tea party and other conservative groups. President Obama said he first learned about it last week, and he warned it won't go well for those responsible.

The president's rebuke came as he answered a question at a joint news conference with British Prime Minister David Cameron.

PRESIDENT BARACK OBAMA: If you've got the IRS operating in anything less than a neutral and nonpartisan way, then that is outrageous. It is contrary to our traditions. And people have to be held accountable, and it's got to be fixed.

JUDY WOODRUFF: The news broke last Friday that IRS agents had applied extra scrutiny to groups with “tea party” or “patriot” in their names when they applied for tax-exempt status.

The head of that IRS division apologized on Friday. Lois Lerner said it took place during the 2012 campaign. And she blamed low-level officials in the agency's Cincinnati office, which handled the applications. But additional reports over the weekend said Lerner herself was informed of the targeting as early as 2011.

Other reports claim that the IRS also zeroed in on groups that focused on government spending or educating Americans about the U.S. Constitution. That information was based on a draft report from a Treasury Department inspector general. The president said today he will wait for that investigation to be completed before making a final judgment.

PRESIDENT OBAMA: This is something that I think people are properly concerned about.

The I.G. is conducting its investigation. And I am not going to comment on their specific findings prematurely. So we'll wait and see what exactly all the details and the facts are. But I've got no patience with it. I will not tolerate it. And we will make sure that we find out exactly what happened on this.

JUDY WOODRUFF: Lawmakers from both parties also demanded answers. On Sunday, Republican Sen. Susan Collins of Maine told CNN that she doubts the misconduct was limited to low-level IRS staffers.

SEN. SUSAN COLLINS, R-Maine: I just don't buy that this was a couple of rogue IRS employees. After all, groups with progressive in their names were not targeted similarly. There's evidence that higher-level supervisors were aware of this. And the IRS wasn't forthcoming in telling Congress about the problem.

JUDY WOODRUFF: Florida Republican Sen. Marco Rubio went further. In a letter to Treasury Secretary Jack Lew today, he called for the resignation of acting IRS Commissioner Steven Miller.

The Senate's Democratic majority leader, Harry Reid, also spoke out.

SEN. HARRY REID, D-Nev.: The alleged actions of IRS employees in the Cincinnati field office would be a terrible breach of the public's trust. Whether investigating conservative groups or liberal groups, they should not be involved in this. Targeting any group based on its political stance is completely inappropriate.

JUDY WOODRUFF: The chair of the Senate Finance Committee, Montana Democrat Max Baucus, has said his panel will look into the matter. And two Republican committee chairs in the House also have vowed to investigate. 

The Center for Medicare and Medicaid Services (CMS) compiled a report that examines the costs of 100 of the most common inpatient procedures from 3,300 hospitals nationwide. What it revealed was that in many cases, hospitals -- sometimes in the same city -- price treatments up to twice as much as they would in another location.

For instance, in one Miami hospital, the average cost to insert a permanent pacemaker ran a little more than $60,000 in 2011. Meanwhile, in another facility, which is less than a third of a mile away, the same procedure costs more than $127,000. The Washington Post has compiled an interactive graphic looking at these discrepancies.

Yet despite the often staggering differences in costs, experts today questioned what impact these prices really have on the average consumer -- roughly 84 percent of whom had either public or private health insurance in 2011.

In theory, hospitals determine the costs of their procedures using what they call a chargemaster, which is essentially a database containing the costs of every item and procedure required at the facility. These prices vary depending on the location of the hospital and are adjusted for specific factors, including whether the hospital services low-income patients, is located in densely populated areas or is designed to be a teaching center.

Medicare payments, however, are not based on this data, but rather on a set of rates determined by the Center for Medicare and Medicaid Services, which are considerably lower. Additionally, private insurers will directly negotiate with hospitals to lower these costs for their clients. Ultimately, this means that insured patients will pay significantly less than what is being asked by these hospitals.

Based on the data from CMS, on average Medicare paid roughly 27 percent of the charges hospitals were requesting in these specific cases.

"The chargemaster can be confusing because it's highly variable and generally not what a consumer would pay," Carol Steinberg, vice president at the American Hospital Association, told the Washington Post.

Still, there is some disagreement as to whether this actually occurs in practice or not. Steven Brill, who wrote extensively about ballooning medical costs for Time Magazine, explained on the PBS NewsHour how hospitals often pad the costs in their chargemasters.

"They're typically five to 10 times what it costs the hospital to buy those items or provide those items," he said. "And insurance companies get big discounts off of the chargemaster, but the discounts that they get are still not enough to keep these hospitals from making very high profit margins and from all the non-doctor administrators at these hospitals from making exorbitant salaries."

Meanwhile, Jonathan Blum, the deputy administrator and director for the Center of Medicare, stressed that it is not the insured but rather the uninsured and underinsured who are most at risk, as they are the ones most likely to be faced with these charges.

"While the vast majority of patients in our country have public or private insurance there is a significant number of patients who are subject to these charges," Blum said. "We do not see any business reason why there is so much variation in the data. We want to have that conversation, but today we have not heard a logical business reason. While we can appreciate that there are variations due to the teaching status or the health status of patients, that cannot explain 5-to-1, 10-to-1, 30-to-1, 40-to-1 variations."

Ultimately, Blum added, the goal of the release is to better educate consumers of their options regardless of their insurance status. In addition, he said consumers can expect further releases in the future which may include more procedures.

"This is a two-goal effort," he said. "First to help those consumers who are navigating a very complicated pricing market and second to continue and elevate conversation as to why there's so much variation."

Support Your Local PBS Station