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Wednesday, June 2, 2005 | 9:25 a.m. ET
From Elizabeth Wilner, Mark Murray, and Huma Zaidi

First glance
The Deep Throat bombshell doesn't just cost Washington its favorite parlor game.  As NBC's Tom Brokaw has suggested, it serves as a reminder of the value of anonymous sources at a time when that longtime journalistic practice has come under criticism.  It also gives the recently bruised mainstream media a lift by reminding them of one of the profession's more stunningly revelatory endeavors, in which the identity of a source was successfully protected for decades.

  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

There are implications for Bush in both.  First, the Deep Throat story utterly wiped from yesterday's news lead Bush's Rose Garden effort to regain control of the overall Washington story after suffering three defeats last week, on the filibuster compromise, the House stem-cell vote, and the Bolton cloture vote.  Judging from his tone, he seems even more determined to go around Congress and appeal directly to the public for support for his top priorities like Social Security.

Second, there's arguably a parallel to be drawn between Bush's efforts to gin up public support for reforming Social Security and what's going on with the EU.  On Social Security, "Bush's effort shows that despite new tactics, going over Congress' head doesn't work.  It's hard to get people engaged in a top-down way," says Tom Gallagher, chief political analyst at DC-based economic research firm International Strategy & Investment.  "This is a bottom-up country, politically," he tells First Read.  "And the EU is discovering that top-down doesn't work so well there anymore, despite stronger elitist traditions."  Gallagher's team at ISI wrote to clients yesterday on the French "non" vote, "If the economic theme... was a rejection of market-oriented reforms, the political theme is the rejection of an elitist approach to EU policy making."

Bush also talked a lot in his news conference yesterday about "setting aside partisan differences and getting something done" on Social Security.  But the White House has always viewed Social Security as a political issue -- and not just in terms of their very campaign-style approach to selling it.  This is the issue on which Bush White House has hung hopes of a permanent political realignment.  Remember this line from White House aide Peter Wehner's memo back in January: "For the first time in six decades, the Social Security battle is one we can win -- and in doing so, we can help transform the political and philosophical landscape of the country."

President Bush today meets with the South African President at 11:25 am and with the NATO Secretary-General at 1:20 pm.  Vice President Cheney gives the commencement address at the US Air Force Academy in Colorado Springs at 12 noon.

Bill Frist highlights his physician credentials today as he lectures at Harvard Medical School today on “Bioterrorism and the Rise of Infectious Disease: Combating the Greatest Global Threat of the 21st Century.”  His remarks start at 1:30 pm.  Now that it's June, we're reminded that the American Academy of Neurology has asked the American Medical Association to approve a resolution which would "oppose all state and federal legislation that would presume to prescribe the patient’s preferences for artificial hydration and nutrition in situations where the patient lacks an advance directive or living will," per the memo posted on the AMA website.  The request was inspired by Congress' intervention in the Terri Schiavo case; the AMA's annual meeting is in mid-June.

Los Angeles Mayor-elect Antonio Villaraigosa is in DC for a 2:00 pm speech; see below for details.

And, in Europe today, the Netherlands is expected to deliver the second half of the one-two punch to the EU constitution after France said "non" on Sunday.  The Dutch vote is non-binding but likely to be just as searing for EU officials, who will regroup in Brussels on June 16-17.

Deep Throat
"Woodward and Bernstein expressed a concern that the Deep Throat story has, over the years, come to obscure the many other elements that went into exposing the Watergate story: other sources, other investigators, high-impact Senate hearings, a shocking trove of secret White House tape recordings and the decisive intervention of a unanimous U.S. Supreme Court," says the Washington Post.  "By tethering the myth to a real and imperfect human being, Americans may be able to get a clearer picture of Watergate in the future, they said."

The Post also recounts how it got scooped by Vanity Fair.

The Wall Street Journal on the Post's public face yesterday: "For most of the day..., the Post... appeared just as removed from the story as any other news publication.  The Post's Web site, which often includes up-to-the-minute, staff-written stories of breaking news events, ran wire reports of the Vanity Fair article and said late into the afternoon that the newspaper had no immediate comment on the story."

The Los Angeles Times: "The stories Woodward and Bernstein wrote about Watergate also have been credited with helping launch an era of investigative journalism - and with encouraging the use of anonymous sources in stories dealing with controversial subjects."

Whither the EU
Much of the coverage of the "non" vote fallout this morning mentions, as the Wall Street Journal did yesterday, that new French Prime Minister Dominique de Villepin very vocally opposed the Iraq war.

"Political analysts said opponents of the constitution were not necessarily against the idea of a stronger, more consolidated Europe.  Polls in France show that about two-thirds of French voters want to accelerate the political and economic unification of the continent, as long as they don't lose the generous social and welfare benefits that are acting as a drag on the national economy."  - Washington Post

In the Netherlands as in France, "the major political forces, including both [the prime minister's] centre-right conservative government and the main opposition Labour Party, back the constitution, which they say would streamline decision-making in the Union," says the London Times.  "But Dutch opponents of the document fear that the Netherlands, with a population of just 16 million, risks being swamped in a European superstate run by Brussels and dominated by the major European powers.  As with France, voters also see the referendum as a chance to send a message to their own unpopular national government."

"British Prime Minister Tony Blair said the French 'no' on Sunday posed a profound question about the future of Europe, and he hinted strongly that his government's plan for a referendum would be put on hold to allow a 'period of reflection.'" – Los Angeles Times

"Concern spread to financial markets, where the value of Europe's common currency continued to drop against the dollar, hovering at a seven-month low." - USA Today

Investment firms' take on the sizable speed bump for the EU posed by the French and (expected) Dutch vote against its constitution: "In terms of the impact on European economic policies, the 'No' vote is a setback for market-oriented reforms," says ISI of the French vote.  "Many US investors' view of the EU is influenced by British commentary, which tends to view the EU as a social welfare bureaucracy.  But many continental voters see the EU as an Anglo-Saxon encroachment on their social democratic principles."

"Also, the 'No' vote is interpreted as a negative reaction to expanded immigration within the EU.  Therefore the impact on economic policy is likely to move the debate away from market-oriented reforms are more toward a greater nationalistic view of economic policy."

The Merrill Lynch research folks write in a memo to clients that although "market reaction to the [vote] was relatively subdued - it was widely expected and was priced-in - the political repercussions and its effects on the euro are huge."  On the appointment of Villepin as the new French prime minister: "his socialist leanings are not expected to benefit reform or market focus developments.  After this news, the euro weakened further versus the U.S." dollar.

The New York Times says the White House yesterday “took a public position of benign aloofness on Tuesday to France's vote…  But behind the scenes there was considerable debate about what the vote meant for the relationship between the United States and Europe, and a feeling among policy experts that the more significant development was the weakened position of" Blair, Schröder, and Chirac.  "The setbacks for those leaders, the experts said, will have far more lasting effects on dealings with Europe on issues like Iran and the Middle East than will the debate over European integration.”

It's the economy
Is there a disconnect between how Washington and the general public view China as a potential economic threat?  The May NBC/Wall Street Journal survey shows that Americans don't see China as the nation's most serious economic competitor now -- or as the most serious competitor in the future.  China ranked second behind Japan as the nation's top current economic competitor.  Seventy-one percent call Japan "currently an economic competitor," while 61% say that of China.  While only 39% call the EU a current economic competitor, 35% say it will be a serious one in the future.  On that score, China placed fifth behind Russia, South American and Latin American nations, India, and the EU.  Japan actually ranked last.

As Commerce Secretary Gutierrez prepares to head to Beijing, USA Today says that "beyond a $150 billion-plus trade deficit, a growing list of gripes about China is starting to displace what had been four years of proud White House talk of" amicable ties.  But the story also explains why France's "'no' vote on the European Constitution this week could begin to shift Beijing's alignment back toward the U.S."

United Airlines is e-mailing frequent fliers that it is "pleased to share two important announcements...  The members of the Aircraft Mechanics Fraternal Association (AMFA) ratified their tentative agreement.  Also, following a constant, good faith engagement, United and the International Association of Machinists (IAM) reached an agreement in principle.  Together these actions set the stage for the completion of our restructuring and ability to offer you the very best service for years to come."  The New York Times covers these agreements that enable the airline to dodge a strike, saying they reflect “the reality of bargaining with a company under bankruptcy protection.”

Bloomberg reports that "General Motors Corp. and Ford Motor Co.... may report today that May sales fell from a year ago and their U.S. market share slump continued amid gains for Toyota Motor Corp. and Nissan Motor Co." -- and also reports that "[g]rowth at U.S. manufacturers probably slowed for a sixth-straight month in May, as excess inventories led factories to hold down production, economists forecast an industry report to show today."

The Democratic House campaign committee and state Democratic parties are sponsoring press events this week in competitive Republican-held congressional districts to highlight what they call a lack of leadership in addressing gas prices.  DCCC spokesman Bill Burton tells First Read that the House GOP's energy bill is a giveaway to American energy companies, but "doesn't do a thing to bring down the price of gas."  Targeted Republican congressmen include Arizona's Rick Renzi, California's Richard Pombo, Connecticut's Rob Simmons, New York's Vito Fossella, Ohio's Bob Ney, and Pennsylvania's Tim Murphy.

A USA Today op-ed by a University of Michigan professor reminds us, "Measured in real dollars, gas prices peaked in March 1981 at more than $3 per gallon.  We have not even come close to paying the highest real gas price in history - today's prices are still 30% below the all-time high."

Ethics and institutions
The US Supreme Court's decision to overturn charges against Enron accounting firm Arthur Andersen for allegedly obstructing justice in that US government case has some in the business world saying the government is getting too involved in its affairs and echoing suggestions, already being made by the likes of the US Chamber of Commerce, that Sarbanes-Oxley be rolled back.  While the CW is that the government's case against HealthSouth's Richard Scrushy probably will be unaffected, Frank Quattrone, formerly of Credit Suisse First Boston, may have gotten a boost in his defense because his case is similar to the Andersen case.

The Wall Street Journal says "the ruling undid the first major conviction in the wave of corporate-scandal cases following the collapse of Enron in 2001, and could make it harder for the government to pursue future cases alleging obstruction of justice against both individuals and companies.  That gave encouragement to some high-profile stars of the 1990s Wall Street boom who have been charged with fraud-related crimes."

The Washington Post reports that "some lawyers said the court's decision shows its sympathy for corporate America's view that companies should be freer to engage in routine document destruction..."

The Wall Street Journal editorial page calls the Andersen case "an exception to what has otherwise been a good Bush Administration record in prosecuting corporate wrong-doing."

On Tom DeLay, the Houston Chronicle writes that he was treated to accolades by about 400 supporters and friends at a lunch in Houston yesterday.  “[S]peakers … all thanked DeLay for his past support in getting government funding and said they look forward to working with him in the future.  In a videotaped message, Ed Young of Second Baptist Church called DeLay ‘a man who stands straight and tall for God and for good’ and encouraged him to ‘stay in the battle.’

Campaign for Congress (D) will launch radio spots today in Iowa targeting GOP Rep. Jim Nussle as he announces he's running for Iowa governor.  The spots, which the Nussle camp says contain nothing new, criticize Nussle for accepting campaign donations from DeLay. – Des Moines Register

The Bush agenda
Links to coverage leading with Bush's press for his agenda/rejection of the suggestion that he's a lame duck:
Washington Post
Boston Globe
Los Angeles Times

The New York Times leads with Bush’s criticism that Democrats are stalling Bolton’s nomination.

The Wall Street Journal and Houston Chronicle start off with Bush making his case for CAFTA.

The Washington Times, Chicago Tribune, and New York Daily News highlight Bush's dismissal of the "absurd" Amnesty International report on treatment of terror suspects at Gitmo.

And the Sacramento Bee leads with Bush lowering expectations “that Congress will adopt his proposal to overhaul Social Security anytime soon, likening his campaign to ‘water cutting through a rock.’”

The Democrats
The liberal Campaign for America kicks off its annual "Take Back America" conference today at the Washington Hilton.  Los Angeles Mayor-elect Villaraigosa speaks at 2:00 pm; John Edwards and DNC chair Howard Dean, whose presidential candidacy got a huge boost from this group in 2003, give "major speeches" tomorrow.  Per a Villaraigosa spokesman, the Mayor-elect's remarks today will focus on his campaign's grassroots efforts and how they might be applied nationally, and also the challenges he sees facing American cities.

The Washington Times covers the new report by centrist Democratic group Third Way showing that Democrats were "trounced by Republicans among" middle-class voters in the 2004 election," and that Democrats face "'a crisis with the middle class.'"  The report says "says support for Republicans begins at much lower income levels than researchers had expected."

John Harris of the Washington Post, author of the first comprehensive look at the Clinton presidency has hit bookstores, turns from Hillary Clinton to his primary subject and 42"s emergence as an international leader in today's Post.

Washington state

Although he has repeatedly insisted that he won't, the Spokane City Council has now asked Mayor James West to step down.  "The vote was advisory. The mayor can be removed from office only by a recall election.  A group of residents has begun circulating a recall petition.”  - Chicago Tribune

The trial about the Washington state gubernatorial race outcome is now in its second and final week, and the Seattle Post-Intelligencer says Republicans argued yesterday that the state’s elections director (who once ran for state lands commissioner as a Republican) is biased against the GOP.  “A key issue in the case is whether mistakes and foul-ups across the state in keeping track of ballots and counting them represent innocent errors by elections workers… or are signs of official misconduct or fraud, as the GOP claims.  So far, Judge John Bridges has not recognized the GOP claims.  Unless he does, Rossi likely will need to prove he would have won if illegal and improper votes are excluded, instead of merely showing that the number of clouded votes exceeds Gregoire's margin of victory."


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