updated 2/7/2006 9:21:54 AM ET 2006-02-07T14:21:54

“First Read” is a daily memo prepared by NBC News’ political unit, for NBC News, analyzing the morning’s political news. Please let us know what you think. Drop us a note at FirstRead@MSNBC.com.  To bookmark First Read, click here.

First glance
The Bushes attend Coretta Scott King's funeral service at the New Birth Missionary Baptist Church in Lithonia, GA at 11:45 am.  President Bush, who has directed the American flags on government and public buildings to be flown at half-staff today, is scheduled to speak around 12:30 pm.  He and Laura Bush will return to Washington after the funeral concludes around 3:00 pm.  Also attending: former Presidents Carter, Bush and Clinton; Senator Clinton; RNC chair Ken Mehlman and DNC chair Howard Dean; and sizable congressional delegations.  Democrats will be led by Ted Kennedy and Nancy Pelosi; Republicans have not announced their CODEL leaders.

  1. Other political news of note
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      House Speaker John Boehner became animated Tuesday over the proposed Keystone Pipeline, castigating the Obama administration for not having approved the project yet.

    2. Budget deficits shrinking but set to grow after 2015
    3. Senate readies another volley on unemployment aid
    4. Obama faces Syria standstill
    5. Fluke files to run in California

Big black SUVs will swarm Capitol Hill today and tomorrow as Cabinet-level officials arrive to testify before the appropriate House and Senate committees about their 2007 budget requests, as NBC's Mike Viqueira notes.  Among today's lineup on the Senate side: Defense Secretary Rumsfeld and Joint Chiefs chairman Pace, Treasury Secretary Snow, and White House budget director Bolten.  Tomorrow's lineup on the House side includes Rumsfeld and Pace, Bolten, director of national intelligence Negroponte, Veterans Affairs Secretary Nicholson, and HHS Secretary Leavitt.

We've compared Bush's effort to fund two wars, make his tax cuts permanent, and halve the deficit by 2009 to the boardwalk game of Whack-a-Mole in reference to the difficulties in pulling off such a combination simultaneously.  Now that Bush has laid out his first budget that includes what's becoming known in Washington as "tax-cut permanence," analysts are zeroing in on the potentially impossible hurdles for Bush in achieving the agenda that spokesperson Scott McClellan summed up yesterday: "We are a nation at war; we're going to fund our troops both in Iraq and Afghanistan and elsewhere.  But we've also got to reduce non-security discretionary spending elsewhere.  We did that last year, an actual cut.  Now we are proposing another cut in non-security discretionary spending.  So we have a good record of changing the direction of spending in Washington, D.C.  And that's why it's also important to continue to make the tax cuts -- keep taxes low, and that means making the tax cuts permanent.  And that's something that this budget calls for."

On that note, here are some highlights of the proposed $2.77 trillion budget in the face of a record projected deficit of $423 billion.  All highlights are covered in the numerous articles clipped below.  Note the bones for conservatives:

-- A 7% increase in funding for the Department of Homeland Security, with a focus on border security, and a similar increase in funding for the Pentagon which leaves out the cost of the wars in Iraq and Afghanistan.  As CNBC’s Steve Liesman reported earlier, the Administration expects to make war supplemental funding requests as necessary.

-- The smallest one-year spending increase of Bush's presidency.

-- $36 billion in proposed Medicare cuts over five years, which is a fairly modest cut, but one that will be opposed by unified Democratic caucuses -- and possibly by enough moderate GOP lawmakers to prevent passage.  (Remember that 13 House Republicans broke ranks on the similarly modest cuts in the 2006 budget-reconciliation bill.)

-- An expansion of health savings accounts (HSAs) at a cost that would exceed the savings generated by the cuts in Medicare.

-- Making Bush's 2001 and 2003 tax cuts permanent.  As some Washington-based economic analysts point out, this effort to date has been blocked because it lacks the votes to overcome a Senate filibuster.  Republicans would need to employ budget reconciliation procedures to push an extension through, and it's unclear whether they're prepared to do that.

-- Funding to encourage the development of low-emissions alternative fuels, and oil drilling in ANWR, which is politically dead for at least this year.

-- Additional funding for needy and high-achieving students, and no further cuts in student loans, which were reduced in the last budget-reconciliation bill.  But the budget includes a reduction in Education Department funding by just over $3 billion, which arguably conflicts with Bush's call for bolstering math and science education.  The education proposal also includes school vouchers.

Senate Democrats hold a press conference at 12 noon to criticize Bush's proposed cuts in education and health care.  Sen. Maria Cantwell, her caucus's point person on energy issues, holds a press conference call to talk about energy-related issues and the budget at 3:00 pm.

Budget and spending politics
"The White House’s calculations have been driven by two political imperatives: to address the growth in entitlements under President George W. Bush; and to back Democrats into a corner by seeking increased spending in sensitive areas such as Iraq and homeland security," says the Financial Times.

The Washington Post notes the White House's "twin political objectives: not forcing Congress to make too many hard spending choices in an election year, and taming the deficit to satisfy conservatives...  White House officials assert that the new budget remains on a path to meet a goal the administration set two years ago to cut the deficit in half... by 2009."

"Bush's budget would slow overall spending increases -- which have run at an annual growth rate of 5 percent to 8 percent in the past five years -- to 2.3 percent in response to rising complaints from his conservative base...  If the Republican-run Congress were to approve his recommendations, it would be the smallest one-year spending increase of his presidency and represent a sharp brake on future discretionary spending," says the Washington Times.

"Bush is betting that voters will accept painful measures in the name of controlling government growth," says the Los Angeles Times.  "That calculation aligns Bush with conservative lawmakers, especially in the House, who believe that an offensive against federal spending is crucial to generating a large turnout from the Republican base in November's election."

The Wall Street Journal, however, suggests that the budget "presents Republicans with such difficult political choices that it could force Congress to postpone major decisions until a lame-duck session after November's elections."

Bush's budget "protects his two top priorities - permanent tax cuts and a vigorous war on terrorism - by cutting programs that serve millions of Americans, from seniors to students...  To pay for extending the tax cuts and the wars overseas, Bush has few places to turn" but entitlements, like his proposed Medicare cuts.  "Lobbyists for seniors immediately put the proposal on life support." – USA Today

The New York Times' analysis focuses on the tax cuts, which will cost nearly $300 billion over the next five years and $1.5 trillion over the next 10 years.  Critics have lambasted Bush for trying to enact spending cuts when he’s also cutting taxes.  “Gene B. Sperling, a former economic adviser to President Bill Clinton, compared it to a man who leases three fully loaded Hummers, finds it stretches his family's budget to the breaking point, and decides his family has to start buying cheaper peanut butter.”

"The budget plan for fiscal 2007 underscores what budget analysts of all political stripes have been saying for years: The goals of balancing the budget, waging a global fight against terrorism and making Bush's first-term tax cuts permanent may be fundamentally at odds." – Washington Post

The plan "relies on what fiscal analysts call a variety of debatable assumptions, and it does not include long-term plans to overhaul Social Security, Medicare, or the tax system, which the analysts say must happen for the government to put itself on a course toward erasing skyrocketing deficits." – Boston Globe

"Republicans, who narrowly control both the House and Senate, face the daunting task of winning Democratic support for the plan" to cut Medicare.  "No House Democrats supported the last round of budget reductions, including more modest Medicare cuts, and 13 Republicans broke ranks to vote against the measure." - Bloomberg

With the White House targeting billions in cuts for Medicare, on top of its failed attempt last year to partially privatize Social Security, and the less-than-stellar beginning of its prescription-drug program, is it risking a voter backlash from seniors, the very people who actually vote in midterm elections?  "I think it could be a huge problem for the Republicans," says David Sloane, who runs AARP's government relations office.  "But Congress is unlikely to adopt much of what is here."  "We all recognize all these [entitlement] programs are on an unsustainable path," he tells First Read.  But fixes must be made "in a spirit of shared sacrifice" -- i.e., without additional tax cuts for the well-off.

USA Today focuses on how the expansion of HSAs would more than offset the savings from the Medicare cuts.

The Wall Street Journal sees "no significant restraint on Social Security and... only modest curbs on Medicare...  Politically, the president may find it tough to persuade Congress to endorse his plan.  Much of the squeezing would be of programs aimed at low-income Americans -- and wouldn't save all that much money in the aggregate.  Targeting domestic programs tends to cause political indigestion for lawmakers, who know how easy it is to put a human face on those who feel the impact of budget cuts, particularly in a congressional election year."

Medicare's "$36 billion cut won't be enough to please fiscal conservatives, who complain about runaway federal spending...  But it would be too much for liberals, who want government to cover more healthcare costs for the elderly...  It illustrates how budget choices complicate governing and politics." – Miami Herald

The New York Daily News reminds us that two Bush officials who were fired or shunted aside had correctly predicted the cost of the Iraq war, which has soared beyond $300 billion.  “Retired Army Chief of Staff Gen. Eric Shinseki and White House economic adviser Larry Lindsey had pegged the cost of the war at $200 billion.  Defense Secretary Donald Rumsfeld said it would cost only $50 billion.  Budget director Josh Bolten paused yesterday when asked if they were owed an apology.  ‘I don't think so.  The costs of the war are what they are,’ he said.”

Roll Call says that Bush's budget, "plus a shiny, new Majority Leader and an agenda-setting retreat at the end of this week," may give House Republicans "a rudder with which to navigate what is likely to be a treacherous election year."  Yet getting the budget through the House will be newly minted Majority Leader John Boehner's first big test, as First Read noted last week.

Security politics
The Administration's NSA domestic wiretapping program came under bipartisan attack from Senate Judiciary members yesterday, as Attorney General Alberto Gonzales defended the program in nearly seven hours of testimony.  NBC's Chip Reid reports that the committee plans more hearings on the program and that witnesses will include former Justice Department officials who had objections to it.  Gonzales and former NSA chief General Michael Hayden will testify behind closed doors before the Senate Intelligence Committee on Thursday.

A pair of Washington Post accounts note that "Gonzales offered the legislative branch little deference yesterday, and certainly no apology for the administration's decision not to seek congressional approval for its surveillance program," and that "Gonzales also suggested... that the administration had considered a broader effort that would include purely domestic telephone calls and e-mail but abandoned the idea in part due to fears of the negative public reaction."

The Houston Chronicle on that last point: “Some Democrats wondered if the program was going far enough when Gonzales made it clear that Bush had decided that no calls made entirely within the United States would be included.  ‘You would not intrude into al-Qaida-to-al-Qaida within the country?’ asked Sen. Herb Kohl, D-Wis., who suggested that such restraint might not be wise.”

The Washington Times leads its coverage with how the hearing bogged down right at the top when some Democrats insisted that Gonzales be sworn in.

The New York Times looks at the political risks Democrats face with these hearings, if they don't “strike the right tone in the debate” over the NSA program.

Four Judiciary Committee Republicans joined Democrats in challenging Gonzales' defense of Bush's authority.  "Specter rejected Bush's argument that Congress had effectively authorized Bush to spy on Americans without warrants...  (Lindsey) Graham said the administration was putting soldiers and intelligence officers at risk of prosecution by asking them to follow orders that violate the law...  (Sam) Brownback argued that to sustain public support for what could be a decades long war on terrorism, the administration should work with Congress to adjust the warrant law's procedures rather than rely on the broader wartime powers as a way to ignore the law...  And (Mike) DeWine told Gonzales that it would be better for the country if Bush took care of the 'legal issues' by asking Congress to amend the wiretapping law." – Boston Globe

Knight Ridder; “Although Democrats were unanimously unsympathetic to Gonzales' position, the bipartisan grilling seemed to deflate Bush's argument that the criticism of his rationale for the program has been partisan and politically motivated.”

The Washington Post also takes its turn examining the rift among Republicans over "how to resolve the tension between two principles they hold dear: avoiding government intrusion into private lives, and combating terrorism."

When the Senate's two least partisan voices on lobbying reform fall into a dispute, it doesn't exactly bode well for the reform effort.  In a surprisingly bitter and sarcastic letter yesterday, Sen. John McCain (R) accused Democratic colleague Barack Obama of giving up on real bipartisan lobbying and congressional ethics reform in favor of siding with his party and seeking to use the issue against Republicans in this midterm election year.  The freshman Obama arguably took a risk in agreeing to become his caucus's point person on lobbying and ethics reform, forcing him to negotiate a middle ground between Senate Minority Leader Harry Reid and Reid's war room pushing this issue as a Republican problem, and Obama's own apparent inclination to assume a national role as a bipartisan reformer.

In a letter to McCain last week, Obama wrote, "I know you have expressed an interest in creating a task force to further study and discuss these matters, but I and others in the Democratic Caucus believe the more effective and timely course is to allow the committees of jurisdiction to roll up their sleeves and get to work on writing ethics and lobbying reform legislation that a majority of the Senate can support.  Committee consideration of these matters through the normal course will ensure that these issues are discussed in a public forum and that those within Congress, as well as those on the outside, can express their views, ensuring a thorough review of this matter."

McCain's barbed, eyebrow-raising reply to Obama yesterday: "When you approached me and insisted that despite your leadership’s preference to use the issue to gain a political advantage in the 2006 elections, you were personally committed to achieving a result that would reflect credit on the entire Senate and offer the country a better example of political leadership, I concluded your professed concern for the institution and the public interest was genuine and admirable.  Thank you for disabusing me of such notions."

Obama and aides profess to being uncertain about exactly what's gotten McCain upset.  "I confess that I have no idea what has prompted your response," Obama responded in a second letter to McCain.  "But let me assure you that I am not interested in typical partisan rhetoric or posturing."

The Chicago Tribune also covers the Obama/McCain story.

Roll Call reports on how some lobbyists found favor with congressional staffers through involvement in Hill day care.  The Senate Employees’ Child Care Center "has not done any fundraising activities for several years and now requires that at least half of its board of directors either be Senate employees or their spouses.  However, its use in the past by tobacco lobbyists and others to gain access highlights the lengths to which lobbyists can go in attempting to influence lawmakers."

Roll Call also reports that "attorneys for David Safavian, the former Bush administration official who was indicted last year over his dealings with former GOP lobbyist Jack Abramoff, have challenged whether the Senate Indian Affairs Committee had the right to investigate their client.  The defense team has also subpoenaed one of the panel’s aides for notes or documents relating to his conversations with Safavian."

More on the Bush agenda
Roll Call reports on Bush's goal of tying tie the line-item veto to deficit reduction.

The asbestos litigation reform bill, which Senate Majority Leader Bill Frist pledged would be his first priority this year, was the source of some sniping between Senate Judiciary chair Arlen Specter and Minority Leader Harry Reid yesterday after Reid sought to hold up the bill as an example of the so-called GOP "culture of corruption."  And The Hill reports that per planning documents, "[n]early 20 corporations have paid a total of about $3 million to defeat" the bill.

The Democrats
The New York Times covers Sen. Hillary Clinton’s dismissal yesterday of RNC chair Ken Mehlman’s charge that she is “angry.”  “‘I would suggest that the Washington Republicans worry about these devastating budget cuts, the confusion and bureaucratic nightmare in the prescription drug benefit - that that's where they should be spending their time and energy, instead of trying to divert attention away from their many failures and shortcomings,’ Mrs. Clinton said.”

House Democrats heard from red-state Democratic governors, Bono and Al Gore at their retreat this past weekend.


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