“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.

• Tuesday, May 30, 2006 | 10:50 a.m. ET
From Kelly O'Donnell and Elizabeth Wilner

  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

Early word on Paulson
President Bush introduced the country to his new nominee to become Treasury Secretary earlier this morning, though there was little need to introduce him to Wall Street.  Henry "Hank" Paulson, Jr. is the chairman of Goldman Sachs and a former colleague of White House chief of staff Josh Bolten, who oversaw the recruitment process, per a White House aide.  At this writing, Paulson seems destined to get confirmed, though Democrats may use his confirmation hearing as a chance to critique some of the Bush Administration's economic policies.

White House deputy press secretary Dana Perino told the press corps that current Treasury Secretary John Snow had indicated "early on in the year he would be interested in wrapping up his public service;" CNBC reported last week that Snow plans to step down in mid-June, though the identity of his successor was not known at the time.

Wall Street's reaction has been favorable so far.  One analyst at Prudential Equity points out that the move burnishes Goldman Sachs' already impressive record of sending its top people to the highest reaches of government: Robert Rubin became Bill Clinton's Treasury Secretary; Bolten is now White House chief; and Jon Corzine went from the US Senate to being governor of New Jersey.  If there's any problem with the Paulson nomination, this analyst points out, it's that Goldman's top people keep leaving so often that "we feel that we have less handle on the inner workings of the company than the typical company that we cover."

• Tuesday, May 30, 2006 | 9:00 a.m. ET
From Elizabeth Wilner, Mark Murray and Huma Zaidi

First glance
Recess may have come just in time for those lawmakers who have been complaining about the raid of Democratic Rep. William Jefferson's office, since as we've noted here before, it's not a great time for them to be emphasizing how they should be treated differently from other Americans when suspected of having committed a crime.  Even as some continued to decry the raid last Friday, a former Jefferson aide was sentenced to eight years in prison for taking part in a scheme to bribe the Congressman.  Democrats have mostly dropped the issue, and indeed, some of their candidates have called for Jefferson to resign.  Republicans continue to be out front with their criticism.  Today, House Judiciary chair Jim Sensenbrenner holds a rare recess hearing on the raid.  Senate Majority Leader Bill Frist's assertion that he doesn't think federal investigators overstepped their bounds might only exacerbate tensions between the House and Senate GOP leadership.

The federal judge who granted the FBI's search warrant to enter Jefferson's office will schedule a public hearing to determine if the property confiscated in the search can be returned to Jefferson, NBC's Joel Seidman reports.  The hearing will be scheduled once attorneys on both sides of the dispute file motions this week.

As former President Clinton and scores of other prominent mourners attend the funeral for former Treasury Secretary Lloyd Bentsen (D) in Houston today, CNBC's John Harwood and NBC’s Kelly O’Donnell report that President Bush is expected to nominate Goldman Sachs chair Hank Paulson to be his next Treasury Secretary, replacing the outgoing John Snow.  There will be a Rose Garden announcement at  9:15 am today.

Following up on his Memorial Day address, Bush continues to try to bolster public support for the war in Iraq by marking some key personnel changes.  Today, he participates in the credentialing ceremony for the Iraqi ambassador to the United States at 11:05 am.  Tomorrow, he'll travel to the CIA to swear in his new director, Gen. Michael Hayden.  Hayden is also the first of a series of recently confirmed presidential nominees whose swearings-in Bush will personally attend this week.

Congress is out until Monday, but the dust is still settling from the blow-ups that took place before they left town: the fight between bipartisan Hill leaders and federal investigators over whether or not investigators can search a member's office, and the Senate's passage of certain immigration reforms that are opposed by vulnerable House Republicans who are worried about their re-election prospects.  The two conflicts are linked, as we wrote last week, in that bitterness among the House GOP leadership over the FBI raid may complicate White House efforts to win passage of a temporary guest-worker program and a path to citizenship for immigrants who are currently in the country illegally.

And although Congress is out, some of its more prominent members will hit milestones this week: On Wednesday, Sen. Hillary Clinton (D) will formally kick off her 2006 re-election bid, and on Thursday, Dennis Hastert will become the longest-serving Republican Speaker of the House in US history.

One week from today, voters around the country will make some decisions with possible national repercussions, starting with the outcome of the special election to replace jailed former Rep. Randy "Duke" Cunningham (R).  Cunningham's fall from grace and the overall political climate have turned a traditionally safe Republican seat into a potential pick-up for Democrats -- and what a pick-up it would be.  Should Democrats win this still somewhat uphill race, they will tout it as a victory for their "culture of corruption" argument against the GOP and claim that it bodes ill for scandal-plagued Republican incumbents who are seeking re-election.  In Montana, Sen. Conrad Burns (R), who has gotten hammered by Democrats for his ties to disgraced lobbyist Jack Abramoff, faces a primary challenge which could provide a clue to how vulnerable Burns might be in November.

Also in California next Tuesday, Democrats will select their challenger to GOP Gov. Arnold Schwarzenegger.  The latest Los Angeles Times survey shows the nominating contest between state Treasurer Phil Angelides and state Controller Steve Westly within the margin of error, with Angelides holding a 3-point lead.  And judge Roy Moore is challenging Gov. Bob Riley for Alabama's GOP gubernatorial nod.  Three years ago, after Moore was ousted as chief justice of the state supreme court for defying a federal order to remove his Ten Commandments monument from a state judicial building, Moore was one of the most popular figures in Alabama.  Now, per one poll, he's trailing Riley by nearly 50 points.

Ethics
Channeling First Read, Roll Call reports on grumbling within the House GOP ranks from members who "worry" that Hastert's outrage over the FBI raid of Jefferson's office "will hurt the GOP politically" because "the public would take the fight as evidence that Congress was trying to protect its own Members from scrutiny...  Even within the Republican leadership, the issue has become a point of debate at Member- and staff-level strategy meetings,... with some staffers arguing that Hastert and his aides should not have made their fight so high-profile and public."

Roll Call's Stu Rothenberg sees Republicans as blowing an opportunity by focusing on the less politically advantageous aspect of the raid.  "Instead of taking advantage of the Democrats’ trouble and keeping the limelight on Jefferson’s alleged illegalities, Republicans in Washington, D.C., are turning an act of public corruption into a constitutional Separation of Powers controversy."

Rothenberg's fellow columnist Norm Ornstein disagrees: "The balance of power between the branches is delicate, and any overreach has to be checked."

Among those Democratic House candidates who have called for Jefferson to resign: Francine Busby, Nick Lampson, and Zack Space, who are running in the districts of Randy "Duke" Cunningham, Tom DeLay, and Bob Ney, respectively.

Neil Volz, former chief of staff to GOP Rep. Bob Ney of Ohio, is expected to testify as the key witness for the prosecution in the David Safavian trial this week, NBC's Seidman reports.  Volz recently pleaded guilty to conspiring with Abramoff to corrupt public officials and violate lobbying rules.  Per the court documents, Volz is said to have contacted GOP Rep. Shelly Moore Capito's chief of staff regarding an Abramoff effort to secure a GSA lease for land for a religious school in Silver Spring, MD.

Senate Minority Leader Harry Reid "accepted free ringside tickets from the Nevada Athletic Commission to three professional boxing matches while that state agency was trying to influence him on federal regulation of boxing" between 2003 and 2005.  Reid told the AP that he "was simply trying to learn how his legislation might affect an important home state industry...  Several ethics experts said Reid should have paid for the tickets."

It's the economy
Top Bush midterm election strategist Karl Rove is "framing a strategy for Republicans to sell the U.S. economy" this fall, judging from his recent economic speech at the American Enterprise Institute and other Administration moves lately, and Bloomberg looks at why that might be "a tough sell."

A fresh round of economic data due out this week could roil the markets again, depending mainly on what the reports suggest about inflation. - USA Today

"Republicans and Democrats plan to address a host of topics during this week’s break, but No. 1 on the list is how much it costs Americans to fill up their gas tanks," Roll Call says.  "Lawmakers left town with marching orders from their leaders to press the case that the other party is to blame for the rise at the pump...  The fight back home is likely to re-emerge in the Senate once lawmakers return next week.  Both parties plan to advance policy initiatives intended to address the nation’s energy troubles."

With a Democratic-controlled House looking like a real possibility, analysts are starting to focus on what that could mean for various business sectors.  The Washington office of economic research firm ISI identifies one interest who doesn't want a Democratic takeover of either chamber of Congress this fall: Wal-Mart.  "The giant retailer has been the subject of a coordinated campaign by organized labor but so far Congress hasn't entered the fray because Republicans run the committees and set the agenda."  A Democratic majority in either chamber would likely lead to "the kind of treatment the tobacco companies received at the hands of Democratic committee chairmen in the early 1990s."  Potential risks for the company include "negative hearings;" passage of the "Employee Free Choice Act," which could "turn a workplace into a union shop without an election;" and increased protectionism on Capitol Hill.

Security politics
In his address at Arlington yesterday, Bush "drew parallels between the forces felled in Iraq and Afghanistan and their predecessors who were killed in Korea, Vietnam and the two world wars."  He also "also used Memorial Day to sign two pieces of legislation aimed at helping military personnel and their families.  One bill revises the Internal Revenue Service code to allow service members to deposit tax-free combat pay into individual retirement accounts, and the other bans some demonstrations at government-run cemeteries." - Los Angeles Times

The New York Times profiles Stephen Kappes, who is poised to become the CIA’s new deputy director.  “Veteran intelligence officials say his expected return is being celebrated within the agency, and some Democratic lawmakers have even characterized Mr. Kappes as a savior who will rescue a moribund agency.  Some critics, including Representative Peter Hoekstra, the Michigan Republican who is chairman of the House Intelligence Committee, have portrayed his return as a victory for a hidebound C.I.A. bureaucracy that resists all change.”

Senate Minority Leader Harry Reid and Democratic National Committee chair Howard Dean do a town hall with veterans in Las Vegas today.

More on the Bush/GOP agenda
The Boston Globe's Canellos writes that with his admission that he's made some missteps, "it seems clear that Bush is seeking to give his administration a more moderate tone, staying above the fray in situations where a more cocky Bush might have been tempted to bait his enemies...  Furthermore, the change seems to have been timed to the arrival two months ago of Joshua Bolten as chief of staff, with a mandate to shake up the president's inner circle."

The Democrats
The New York Times notes how Democrats -- and Republicans -- are dreaming about Speaker Nancy Pelosi .  “Republican strategists say they are eager to conduct a direct assault on Ms. Pelosi, focusing on what they believe are her vulnerabilities.”

And, as she prepares to announce her re-election campaign and formally accept her state party's endorsement, which many view as simply the next steps toward a presidential bid, the Washington Post looks at the difficulties and virtues of Democratic Sen. Hillary Clinton's being so difficult to pin down on issues.  She "is defined by a combination of celebrity and caution that strategists say leaves her more vulnerable than most politicians to charges that she is motivated more by personal ambition and tactical maneuver than by a clear philosophy."  Also: "Many Democrats fear she carries so much baggage that, if she becomes the party's standard-bearer in 2008, she would prove too polarizing and lead it to a third straight defeat.  Many Republicans see a shrewd politician who they fear would be a formidable opponent in a general election."  The story notes that Clinton "will help present a new strategy for the Democrats" later this summer.

The New York Daily News says some Manhattan Democratic clubs “are launching a backlash against Sen. Hillary Clinton amid some of her recent shifts toward the right…  The defections among the activist left of the city's Democratic Party - long considered a loyal chunk of Clinton's political base - suggest that her recent rush to the political middle ground and beyond may exact a price.”

The midterms
The Washington Times notes that political analysts -- so far, at least -- are stopping short of predicting a Democratic blowout and looks at the reasons why Republicans might not lose control of either chamber of Congress this fall.

The AP, on the other hand, says Republicans are three steps away from losing badly.  “First step: Voters must focus on the national landscape on Nov. 7 rather than local issues…  Second step: Voters must be so angry at Washington and politics in general that an anti-incumbent, throw-the-bums-out mentality sweeps the nation…  Third step: Americans must view the elections as a referendum on President Bush and the GOP-led Congress…  Less than six months out, most Democratic and Republican strategists say the first two elements are in place for now - a national, anti-incumbent mind-set - and all signs point to the third.”

In addition to choosing a Democratic nominee to face Schwarzenegger in the fall and selecting who will fill Cunningham's House seat, CALIFORNIA voters next week will also decide the fate of a ballot measure -- Proposition 82 -- that would provide all 4-year-olds who live in the state with free preschool.  Opponents say the measure, which would be financed by additional taxes on those earning more than $400,000 and couples making more than $800,000, creates more bureaucracy and would boost preschool enrollment only by a few percentage points (they note that about 60% of four-year-olds are already enrolled in preschool). "The more voters learn about it, the less they like it," says No on 82 spokesperson Kathy Fairbanks. Schwarzenegger opposes the measure.

But supporters contend that the measure's price tag -- at about $2.4 billion per year -- is money well spent, since studies find preschool education creates better students and better citizens.  And while about 60% of state 4-year-olds are already enrolled in preschool, they say its quality pales in comparison to what Prop. 82 would provide.  "Equating mediocre or low-quality child care with high-quality pre-K is really nothing but deep deception," Libby Doggett, executive director of Pre-K Now (and the wife of Texas congressman Lloyd Doggett), tells First Read.  Recent polls show majorities supporting Prop. 82, but by smaller margins than in previous surveys.  Advocates also seem to have this advantage: Polls show that Democrats widely favor the measure, and more Democrats than Republicans might be flocking to voting booths due to the Democratic gubernatorial primary.

On Monday, the Sacramento Bee reported that in 2003, shortly after he became controller, gubernatorial candidate Steve Westly (D) arranged for investment banks to sign agreements to step in if the state couldn’t pay back its loans.  “His office worked out a deal under which the state eventually paid $140 million to seven investment banks for providing the ‘credit enhancements’ that boosted the credit rating of the short-term bridge loans and reduced the state's interest costs.”  Westly “had a personal financial connection with four of those Wall Street banks, raising questions about possible conflicts of interest, a Bee investigation has found.”

The Republican state party chair in Colorado has asked one of the party's two battling candidates for governor to drop out for the sake of the party's ability to win the race, help a GOP presidential candidate win the state in 2008, and oversee redistricting two years later. - Denver Post

In the Maryland governor's race, incumbent Robert Ehrlich (R) is getting squeezed on guns by Democrats who advocate tighter controls and by Republicans who are "disappointed because he has not done more for them," says the Washington Post.

And in his column yesterday, Bob Novak profiled this year’s high-profile GOP African-American candidates, especially Senate contender Michael Steele.  “Democratic dominance in Maryland has been based on maintaining a hammerlock over the state's substantial African- American vote…  This is a potential bright spot in a dreary 2006 election vista for the Republican Party.”

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