Tuesday, July 11, 2006 | 5:30 p.m. ET
From Alex Isenstadt

  1. Other political news of note
    1. Animated Boehner: 'There's nothing complex about the Keystone Pipeline!'

      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

Is Social Security privatization back?
It isn't every day that Bush Administration officials face reporters at the National Press Club, but that's exactly what OMB Director Rob Portman did this afternoon, joining the Administration's day-long offensive in touting their projections showing better-than-expected numbers for the deficit. Echoing Bush's comments from earlier in the day, Portman argued that the lowered projection was a result of the tax cuts. He also said the Administration had been successful in its attempt to "flatten" spending. And he rejected the notion that this celebration was spin, arguing that a lower-than-expected deficit is an accomplishment -- especially when considering the Iraq war and Hurricane Katrina.

Portman also echoed Bush's call to reduce entitlement spending. "The President is passionate" about the issue, he said, adding that reform was on the horizon. Both Bush and Portman didn't explain what the reforms would be, but liberal interest groups answered the question for them: Social Security privatization. Americans United, a group opposing Social Security privatization, fired off a press release hitting the White House on this issue that's a proven winner for the Democrats. "For Bush to once again roll out the same old reckless and hugely unpopular privatization plan signals just how hopelessly out of touch he really is. Privatization was a terrible, irresponsible idea in 2005; it's every bit as bad today."

Tuesday, July 11, 2006 | 11:25 a.m. ET
From Mark Murray and Elizabeth Wilner

Entitlement reform resurrected
President Bush used the bully pulpit this morning to crow about the latest government projection showing that this year's budget deficit is a lower-than-expected $296 billion -- fueled primarily by a growth in corporate tax revenue. "This economy is growing," Bush said.  "Federal [tax revenues] are rising, and we're cutting the federal deficit faster than we expected."

But to borrow a metaphor from Bush's favorite sport of baseball, celebrating the new deficit projection is like cheering a pitcher who's brought his ERA down from 9.00 to 6.00. It's a big improvement, but he's still getting hammered and has a long way to go before winning the Cy Young Award. "At $296 billion, the projected budget deficit for Fiscal 2006 would constitute the fourth largest deficit in American history -- and even this estimate grossly understates the real size of the budget deficit," said House Minority Whip Steny Hoyer, D-MD, in a statement.

In his speech, Bush also brought up a subject that had virtually disappeared from newspaper headlines since his failed bid to revamp Social Security a year ago: entitlement reform. The growth in spending on Social Security, Medicare, and Medicaid, Bush said, is unsustainable, and that entitlement spending needs to be cut. "We need to fix this for younger generations of Americans to come." And unless that fix happens, future budget deficits will only go up. Democrats looking to revive the issue of Social Security reform to motivate senior voters for the midterm elections are welcoming any mentions of it from Bush or other Administration officials.

Tuesday, July 11, 2006 | 9:20 a.m. ET
From Elizabeth Wilner, Mark Murray, Huma Zaidi andAlexIsenstadt

In today's issue:
Good news on the deficit, but a "Bush Economic Boom?"
Senators consider the legal rights of suspected terrorists
More pot-stirring on immigration
Kinky gets to be Kinky

First glance
It's true that by some measures, including employment, the US economy is still humming along.  But a "Bush Economic Boom?"  That's the catch phrase House Republicans are using in their enthusiasm over President Bush's forthcoming announcement that unexpectedly high tax revenues are driving down his Administration's deficit projection for the year and expediting his goal of halving the deficit.  NBC's Kelly O'Donnell reports that Bush will say he's on track to cut the deficit a year sooner than he had promised, and that he'll credit his tax cuts for this development.

Republicans need to convince Americans that the economy is doing well in advance of the looming midterm elections, but in calling it a "boom," they risk appearing out of touch at a time when many Americans are pessimistic about the nation's economic outlook and gas prices, for example, are nearing $3 per gallon.  The June NBC/Wall Street Journal poll showed Bush with a 38% approval rating on handling the economy and only 16% saying the economy will get better over the next 12 months.  Asked to name reasons why they feel the economy is not in good shape, 42% of those polled named the "high price of health care and education," and 35% said the "high price of gas."  GOP lawmakers have proposed a slew of measures to tackle high gas prices in the long run, but there's little that Congress can do about it in the near term.  Democrats have made gas, health care and education costs a rallying cry for the midterms.

That said, there is room for Republicans to gain ground on the economy by talking up deficit reduction.  In the June NBC/Journal poll, "the large federal budget deficit" ranked third among reasons why people feel the economy is not in good shape, at 27%.  But the party starts at a disadvantage: When asked which party they prefer to handle reducing the deficit, respondents favored Democrats over Republicans by 25 points.

Bush will announce the Administration's revised deficit and tax revenue projections at 9:40 am, claiming that his tax cuts have sped up his ability to cut the deficit in half before leaving office.  As spokesperson Tony Snow said yesterday, the Administration is basing that claim on their original -- and inflated -- projection of a $521 billion deficit.  White House budget director Rob Portman is expected to echo this case in a speech at the National Press Club's "newsmakers luncheon" today.  In their remarks, both may overlook that Bush inherited a surplus when he took office, and that the Administration's rate of federal spending might be just as responsible for the increased revenues as the Bush tax cuts.

The President's other schedule highlight today is a trip to the Allen Edmonds shoe factory in Port Washington, WI at 4:55 pm ET, followed by a fundraiser for Rep. Mark Green, the GOP's challenger to vulnerable Democratic Gov. Jim Doyle.  Tomorrow, he heads to Germany, and from there to the G8.

In Washington, as Congress begins its two-week run before the August recess, hearings rather than legislating seem to be grabbing the attention.  Yesterday's Miami field hearing on the Senate immigration bill featured an emotional Joint Chiefs chairman Peter Pace speaking of his Italian immigrant father.  Today, the Senate Judiciary Committee will convene a closely watched session on the legal rights of suspected terrorists, the first of three congressional hearings scheduled on this topic just this week.  NBC's Ken Strickland reports that Senate Majority Leader Bill Frist yesterday said Congress will indeed respond legislatively to the recent Supreme Court ruling that deemed the military commissions for Guantanamo detainees unconstitutional -- but probably not before September.

On the House side, the GOP leadership indicated yesterday that they plan to bring the Voting Rights Act reauthorization to the floor this week after their previous effort to do so was blocked by members of their own ranks, who objected to the re-upping of certain provisions in the act.  Opposition to renewing the provision for multilingual ballots put the party at risk of alienating Latinos.  It's unclear whether GOP leaders have managed to settle that issue behind the scenes.

Also today, at 9:15 am, President and Mrs. Bush greet the President of Peru and his wife at the White House.  And at 11:35 am today, Bush takes part in a photo op with members of the National Council on the Arts.

Your favorite, constantly updated political calendar is always available on MSNBC.com.

It's the economy
Channeling First Read, the Los Angeles Times looks at the Administration's efforts to play the expectations game with their deficit projections, and notes that "the focus on this year's budget will distract attention from the real budget crisis, which will begin in two years as the eldest of the baby boom generation become eligible for Social Security benefits."

"Gasoline costs rose to their highest in more than 10 months Monday as the average U.S. price at the pump neared $3 a gallon," USA Today reports.  "Gas prices have risen in the past several weeks in response to a number of factors, including a switch in gasoline formulations, the threat of another busy hurricane season and strong demand from drivers.  Despite high prices, gasoline demand is up from a year ago."

The New York Times says of the swearing-in of Hank Paulson as Treasury Secretary: "White House officials seemed intent on coordinating Mr. Paulson's arrival with a broader effort to generate more excitement for Mr. Bush's economic agenda and record...  But Mr. Paulson will be taking over at a time when the economy appears to be slowing, inflation is rising and gasoline prices have climbed to nearly $3.20 a gallon in many regions."

Security politics
Democratic Sens. Jack Reed and Joe Biden hold a press conference to talk about their recent trip to Iraq at 11:00 am.  Their colleagues Chuck Schumer, Hillary Clinton, and Ken Salazar hold a 10:15 am press conference to call for "a new direction" -- the party's buzzword for the midterms -- "to secure America's ports and borders."

The Senate Foreign Relations Committee has added an Iraq hearing to its schedule for Thursday, reports NBC's Strickland, with expected testimony from US Ambassador to Iraq Zalmay Khalilzad.  The hearing is billed simply "An Iraq Update."  Six members of the committee are considering presidential bids in 2008, making the dynamics potentially interesting.

With the Senate Judiciary Committee expected to hold a hearing this week on 4th Circuit nominee William J. Haynes II, eight left-leaning groups sent a letter yesterday to committee chair Arlen Specter (R) and ranking member Pat Leahy (D) expressing "concerns" about him.  "Because Mr. Haynes has been both a primary architect and a primary facilitator of the Bush Administration's secret and now thoroughly-discredited policies leading to the torture and abuse of military detainees, we have deep concerns about his commitment to the rule of law," the letter reads.

In addition to these complaints by liberal groups, Bloomberg reports that 20 retired military officers wrote the committee that they're concerned about Haynes' fitness to serve as a judge "because he approved coercive techniques to interrogate terror suspects" as the general counsel at the Defense Department.  "The letter cited Mr. Haynes's recommendation that dogs be used 'to exploit phobias' of terror suspects." – New York Times

The Los Angeles Times updates the status of the lawsuit in a Detroit federal court to stop the controversial NSA warrantless wiretapping program.  "U.S. District Judge Anna Diggs Taylor, who is expected to be the first to rule on the issue, asked only one question during the hearing and gave no indication of how she would rule or when."  Yesterday's "was the second hearing she has held within a month on the complex legal issues surrounding the program."

The immigration debate
At the Aspen Institute in Colorado yesterday, NBC's Andrea Mitchell reports, Karl Rove spoke passionately of a need to find some solution to accommodate guest workers as essential to the American dream and the US economy.  The audience -- who had been occasionally hostile to Rove on issues related to Iraq -- gave him a standing ovation for these closing remarks.

Also yesterday, also in Colorado, "lawmakers approved a measure" that "would deny most non-emergency state benefits to illegal immigrants 18 years old and older - forcing people to prove legal residency when applying for benefits or renewing their eligibility."  Both chambers which passed the measure are controlled by Democrats.  "The bill would apply to Medicare, Medicaid, unemployment insurance, energy assistance programs and aging and adult services." – USA Today

Rep. Mike Pence, a leading GOP conservative, lays out his plan for a guest worker program and argues in favor of a "border security first" approach in a USA Today op-ed.

The Washington Times has an update on the gradual pace of the Administration's effort to send 6,000 National Guard troops to the US-Mexico border.

The Wall Street Journal questions whether the United States physically can hold the estimated influx of guest workers who may enter the country should that provision become law.  "Demographers can only estimate how many illegal immigrants are here now, and how many would bring families...  The economy would help determine how many new immigrants would come for jobs and how many would stay.  But the Heritage Foundation, a conservative Washington think tank that opposes expanded immigration, estimates that 66 million immigrants would be added to the population during the next 20 years."

The New York Times profiles Rep. Jim Sensenbrenner (R), chair of the House Judiciary Committee and a staunch opponent of illegal immigration and of the Senate's more liberal immigration bill.  "One could dismiss him as something of a cartoon, except that Mr. Sensenbrenner has been a feared and vital character in some defining political dramas, like the Clinton impeachment... and the current legislative donnybrook over immigration, an issue that he calls his toughest in nearly four decades of public life."

More on the Bush agenda
Roll Call reports that Senate Republicans are planning to tout their accomplishments stretching back to 1994 in what, we'd note, may be an effort to disguise the fact that they don't have many accomplishments to tout for this year.  Also, Majority Leader Bill Frist "has decided to use the remaining legislative schedule to address traditional kitchen-table-type issues rather than topics such as gay marriage and flag burning."

One non-kitchen table issue that seems likely to come up for a vote is federal funding for embryonic stem cell research, which has already passed the House and is likely to pass the Senate, in which case it could become the subject of Bush's first veto.  Senate supporters don't appear to have the votes to override.  USA Today maps out the bill's status and politics:

The New York Times covers yesterday's argument in federal court over last year's passage of the Deficit Reduction Act -- which plaintiffs argued violated the Constitution because "although the measure had been approved by the Senate and signed by President Bush, the House had passed a different version of it."

The Democrats
Roll Call also reports on how Democrats are trying to resurrect Social Security as an issue for the midterms.  "Congressional leaders are planning a major event later this month and are looking to tie their 'anti-privatization' Social Security message to legislative items moving through Congress in the coming weeks...  Members plan to bring the issue up on the floor, at home in their districts, in message events and in radio addresses."  An ad blitz is expected to begin by early August.  Republicans say "it is a risky move for a minority party they contend lacks an agenda of its own" -- and given that "a large share of Senate Democrats opposed a Republican proposal earlier this year to prevent illegal immigrants from collecting Social Security credits."

Ethics
While he's optimistic that his name will be removed from the ballot, former Rep. Tom DeLay (R) says he'll wait until an appeals court makes the final decision before he decides whether he'll run for the same office from which he resigned last month, reports the AP.

Federal Judge Thomas Hogan ruled yesterday that the May FBI raid of Democratic Rep. William Jefferson's Capitol Hill office was constitutional: "There was no impermissible intrusion on the legislature."  The raid was the first ever of a member of Congress' office, NBC's Joel Seidman reminds us.  There was "[n]o support for the proposition that a Member of Congress must be given advance notice of a search," ruled Hogan, who had authorized the raid by signing the search warrant.  After members of Congress, including Speaker Dennis Hastert, protested the raid and Justice Department officials reportedly threatened to resign if they had forced to return materials seized in the raid, President Bush ordered that the materials be sequestered by the US Solicitor General's office for 45 days -- a period which just ended on Sunday.

Hogan agreed in part with Jefferson's lawyers that the Hill search "entailed an invasion somewhat greater than usual," but he wrote, "the Government has demonstrated a compelling need to conduct the search in relation to a criminal investigation involving very serious crimes, and has been unable to obtain the evidence sought through any other reasonable means."  Robert Trout, Jefferson's attorney, is expected to appeal and hopes to have the seized materials returned to Jefferson.  Meanwhile, attorneys for the Justice Department and the House are trying to reach an agreement on procedures to be followed if DOJ decides to raid another Hill office.

The New Orleans Times-Picayune adds, "Law enforcement officials have said they would expect a decision by a Virginia grand jury on whether to indict Jefferson fairly soon after the material taken from the office is made available."

GOP Rep. John Doolittle is being accused by good-government groups of pushing the envelope on the use of leadership PACs, and Democracy 21 has asked the House Ethics Committee and Justice Department to investigate, Seidman also reports.  The Washington Post examines the money flowing from Doolittle's PACs to a one-person fundraising firm owned and operated by his wife.

Embattled GOP Rep. Bob Ney, who may be in increasing legal trouble because of his ties to Jack Abramoff, is insisting he's still running for re-election.

More on the midterms
USA Today rounds up battles in various states over voter registration laws, which could play a big role in determining the outcome of some close races this fall.

The liberal group MoveOn told First Read yesterday that the ads it has been airing for the past two and a half months in four GOP congressional districts -- held by Rep. Nancy Johnson in Connecticut, Chris Chocola in Indiana, Deborah Pryce in Ohio, and Thelma Drake in Virginia -- have helped make these races more competitive (per polls, analyst ratings, and a controlled experiment of other districts where they didn't run ads).  "It is very clear that the battleground is much broader now than when the program began," said MoveOn's Eli Pariser.  Pariser added that MoveOn is considering running additional ads and will take their campaign to the ground.  "If [Nancy Johnson] goes to a nursing home, our members will be out there highlighting the amount of money she has taken from pharmaceutical companies," he said.

The San Francisco Chronicle reports that California Gov. Schwarzenegger (R) quietly slipped out of Sacramento yesterday for the White House dinner honoring his mother-in-law, Eunice Kennedy Shriver.

In Connecticut yesterday, Sen. Joe Lieberman's campaign filed paperwork to run as an independent in November in case he loses the August 8 Democratic primary.  "The 25 people who signed petitions to create the party, called Connecticut for Lieberman, will run the drive to collect the 7,500 signatures needed to allow the senator's presence on the ballot, said Marion Steinfels, a spokeswoman for the campaign.  By running with the party rather than individually, Mr. Lieberman could receive a higher place on the ballot, officials said." – New York Times

The Hill reports that only three of Lieberman's Senate Democratic colleagues have said they'll support him if he runs as an independent.

The Washington Post looks at the website of GOP Senate candidate and Lt. Gov. Michael Steele of Maryland, which prominently features photos of Steele with Democrats, and doesn't seem to feature photos of Steele with President Bush or other top Republicans -- neither of which is all that surprising given Maryland's Democratic tilt.

The New York Post writes that as part of a fundraising jaunt "that could... help him should he decide to run for president in 2008," Rudy Giuliani stumped for OHIO Sen. Mike DeWine (R) yesterday before stopping in Pennsylvania to help out Rick Santorum (R).

In Rhode Island, a candidate for the state legislature retired Marine Lt. Col. James Haldeman, "has gotten an unusual endorsement--from the mayor of Fallujah, Iraq, praising him as that city's 'favorite USA colonel.'" – MSNBC.com

The Secretary of State of Texas ruled yesterday that gubernatorial candidate Carole Keeton Strayhorn (I) can't appear on the ballot as "Grandma" -- but that fellow candidate Kinky Friedman will appear as Richard "Kinky" Friedman.  We wonder if the Secretary of State would have allowed Strayhorn to appear under First Read's nickname for her: "Scott McClellan's Mom." – MSNBC.com

"'I like the name "Richard Kinky Friedman," he said in a statement issued by his spokeswoman.  'It evokes a certain sense of nobility that falls somewhere between Richard the Lion-hearted and Richard Nixon.'" – Houston Chronicle

And in advance of Bush's visit to Wisconsin today, the Milwaukee Journal-Sentinel says both parties "think the visit benefits them in the hotly contested governor's race."  For GOP Rep. Mark Green, "the evening fund-raiser in Milwaukee is a chance to raise his profile in the race against Gov. Jim Doyle, as well as bring in $500,000 to $1 million.  Democrats, meanwhile, are gleefully using the visit to cement the image of Green as a Bush rubber stamp in the minds of voters...  And, they're quick to add, Bush's approval ratings here... have sunk amid concerns about the war in Iraq, the economy and ever-rising gas prices."

“First Read” is an analysis of the day’s political news, from the NBC News political unit. Please let us know what you think.  Drop us a note at FirstRead@MSNBC.com.  To bookmark First Read, click here.

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