The Hill's Morning Report — Signs of trouble for Republicans in House special election




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Republican Troy Balderson leads Democrat Danny O’Connor in Ohio’s 12th Congressional District by less than 1 percentage point, but the House special election remains too close to call — an ominous sign for Republicans ahead of the 2018 midterm elections.

The Washington Post: Ohio special election shows that Democrats remain on the march, even if they don’t win.

Republicans have declared victory but Democrats have not conceded the race. Balderson leads by 1,754 votes. More than 3,300 provisional ballots have not been counted yet and it’s possible that O’Connor could pull within half a percentage point of Balderson, triggering an automatic recount. Still, Balderson is expected to hold on.

That’s the good news for Republicans. There is plenty of bad news.

President TrumpDonald TrumpMcCarthy says he told Rep. Marjorie Taylor Greene he disagreed with her impeachment articles against Biden Biden, Trudeau agree to meet next month Trump planned to oust acting AG to overturn Georgia election results: report MORE — who claimed credit for Balderson’s victory over Twitter — carried the district by more than 11 points in 2016. Balderson needed Trump to campaign for him, and he needed millions of dollars from outside groups to squeak out a lead for a seat that has been in GOP hands for the past 35 years.

Most Republicans agree the race should not have been this close. It’s yet another sign of liberal energy ahead of the 2018 midterm elections that has many election forecasters predicting a Democratic takeover of the House.

Democrats couldn’t quite close the deal on Tuesday night but they’ll leave this election feeling better than Republicans about their overall prospects heading into November.





The takeaway: There are 68 GOP-held House seats in contention that should be more favorable to Democrats than Ohio’s 12th Congressional District. Democrats need to flip 23 seats to win control of the House.

The Hill’s Lisa Hagen and Max Greenwood have your rundown from last night’s action, which includes a couple of other races that remain too close to call. http://bit.ly/2ASYKdT

> Trump surprised election watchers when he waded into the Michigan GOP Senate primary to back Iraq War veteran John James over businessman Sandy Pensler. The endorsement paid off and is the latest example of the president’s sway with GOP primary voters.

James, who is African-American, will take on Sen. Debbie StabenowDeborah (Debbie) Ann StabenowWith a new president and a new Congress, it's time for Medicare drug price negotiation Yellen champions big spending at confirmation hearing Coronavirus relief deal hinges on talks over Fed lending powers MORE (D-Mich.) in a state Trump won narrowly in 2016. The 37-year-old West Point graduate currently runs James Group International, which provides logistics solutions to Fortune 500 companies.

> The GOP’s primary for Kansas governor remains too close to call. Trump backed conservative firebrand Kris Kobach over incumbent Gov. Jeff Colyer in the race. Some Republicans are worried that Kobach would be a disastrous general election candidate, potentially costing the GOP a governor’s race in deep red Kansas.

> It was a mixed night for candidates backed by two progressive stars, Sen. Bernie SandersBernie SandersThe Hill's 12:30 Report: Next steps in the Trump impeachment Sanders selling sweatshirts with his famous inauguration pose for charity Former Sanders spokesperson: Biden 'backing away' from 'populist offerings' MORE (I-Vt.) and Alexandria Ocasio-Cortez (D-N.Y.), who memorably knocked off the No. 4 Democrat in the House in a primary last month.

Their choice for governor was routed in the Michigan gubernatorial primary. A candidate Ocasio-Cortez backed in Missouri’s 1st Congressional District also lost. Their candidate could still pull out a victory in Kansas’s 3rd Congressional District, although the race there remains too close to call. Still, the Democrat in that race will face a tough battle against Rep. Kevin YoderKevin Wayne YoderBottom line Amanda Adkins wins GOP primary to challenge Rep. Sharice Davids Sharice Davids to vote for Trump impeachment articles: 'The facts are uncontested' MORE (R-Kan.). There will be lingering questions about whether the progressive message can resonate in rural and suburban parts of the country, particularly in the Midwest.

The Associated Press: Ohio and Kansas races deadlocked; Trump’s candidates lead.

Reuters: Close-fought Ohio race fuels Democratic hopes for November.


CAMPAIGNS & POLITICS: The Trump administration has relentlessly focused its campaign efforts on Midwest and Rust Belt states, seeing them as Trump’s best path to reelection.

That continues on Wednesday, with Vice President Pence traveling to Duluth, Minn., to campaign for retired police officer Pete Stauber (R), who is running for the open seat in Minnesota’s 12th Congressional District to replace Rep. Rick NolanRichard (Rick) Michael NolanMinnesota Rep. Pete Stauber glides to victory in GOP primary Hold off on anti-mining hysteria until the facts are in Minnesota New Members 2019 MORE (D), who is not running for reelection. Pence will also address the Duluth employees of family-owned Industrial Weldors and Machinists Inc. while he’s there.

Trump visited that district earlier this year in support of Stauber. The president and his allies are hopeful they can flip Nolan’s seat in 2018, as well as the entire state of Minnesota in 2020. Democrat Hillary ClintonHillary Diane Rodham ClintonTexas Supreme Court rejects Alex Jones request to toss lawsuits from Sandy Hook parents Paris Agreement: Biden's chance to restore international standing Samantha Power's Herculean task: Turning a screw with a rubber screwdriver MORE defeated Trump in Minnesota by less than 2 points in 2016.

Following the Duluth visit, Pence will fly to Grand Rapids, Mich., for a fundraiser for the state party. Stabenow is a top target for Democrats in 2018, particularly with Trump-backed newcomer James in the fold. Trump and Pence will also be looking to defend their narrow election victory in Michigan, which went for the GOP presidential nominee in 2016 for the first time since 1988.

More from the campaign trail … Sen. Ted CruzRafael (Ted) Edward CruzEthics complaint filed against Biggs, Cawthorn and Gosar over Capitol riot Hawley, Cruz see approval ratings dip in wake of Capitol riot: poll For Biden, a Senate trial could aid bipartisanship around COVID relief MORE (R-Texas) is asking for Trump’s help as he seeks to defeat Rep. Beto O’Rourke (D-Texas) in a surprisingly close Senate race (The Houston Chronicle) … Latino candidates set to play most prominent role ever in presidential race (The Hill)  … Trump will visit upstate New York next week to raise money for Rep. Elise StefanikElise Marie StefanikLincoln Project hits Stefanik in new ad over support for Trump Wyoming county votes to censure Liz Cheney for Trump impeachment vote Stefanik knocks Albany newspaper over 'childless' characterization MORE (R-N.Y.), who has a tough reelection battle (The Hill) … Missouri voters solidly rejected the state’s right-to-work law, which would have allowed workers to opt out of paying mandatory union fees as part of their contract (The Hill) … Missouri Attorney General Josh Hawley (R) coasted to victory in a primary on Tuesday night, setting up a contest against Sen. Claire McCaskillClaire Conner McCaskillFor Biden, a Senate trial could aid bipartisanship around COVID relief Lobbying world Former McCaskill aides launch PAC seeking to thwart Hawley MORE (D) in November (St. Louis Post-Dispatch).


INVESTIGATIONS: One week into the trial of former Trump campaign chairman Paul ManafortPaul John ManafortWould Trump have gotten away with a self-pardon? History will never know Trump's pardons harshly criticized by legal experts Presidential pardons need to go MORE proved dramatic for special counsel Robert MuellerRobert (Bob) MuellerWhy a special counsel is guaranteed if Biden chooses Yates, Cuomo or Jones as AG Barr taps attorney investigating Russia probe origins as special counsel CNN's Toobin warns McCabe is in 'perilous condition' with emboldened Trump MORE’s star witness, Richard Gates, who faced hostile cross-examination from Manafort’s lawyers after some eye-opening confessions about his own activities.

Gates is testifying against his longtime partner and cooperating with Mueller’s probe hoping to receive a reduced sentence after pleading guilty to charges of conspiracy and lying to the FBI.

As such, Manafort’s attorneys sought to raise questions about Gates’s credibility. On Tuesday, they painted a picture of Gates living a “secret life” that included a private residence in London used with a woman with whom he had an affair.

Gates also acknowledged that he wrote a fraudulent letter to potential investors for a movie project and falsified expense reports to embezzle funds from both Manafort’s firm and the Trump campaign.

“In essence, I was living beyond my means. I’m taking responsibility for it. I made a mistake … I’m here to tell the truth. Mr. Manafort had the same path. I’m here.” – Gates

Reuters: Manafort defense questions star witness Gates about “secret life.”

But Gates also gave detailed testimony about how he and Manafort routed millions of dollars through foreign bank accounts in an effort to avoid paying taxes on it.

The prosecution alleges that Manafort masterminded the scheme to maintain a lavish lifestyle. Manafort’s former accountant Cindy LaPorta testified against him last week, saying that she helped him falsify records. LaPorta was fired from her job at Kositzka, Wicks & Co. on Tuesday (Bloomberg). Manafort faces 18 charges of tax and bank fraud predating his time with the campaign.

The Hill: Gates testifies millions of dollars moved through shell companies and accounts hidden overseas.

The Wall Street Journal: A Cyprus bank becomes key cooperating witness against Manafort.



More on investigations … Former Trump attorney Michael Cohen is being investigated for tax fraud (The Wall Street Journal) … Trump attorney Rudy Giuliani says negotiations with Mueller about an interview with the president are “near the end” (The Hill) … Judge orders Department of Justice to preserve emails from former FBI Director James ComeyJames Brien ComeyBiden to keep Wray as FBI director Comey: 'Republican Party has to be burned to the ground' Juan Williams: The real 'Deep State' is pro-Trump MORE’s personal account (The Hill) … Mueller is under pressure to ensure the special counsel  investigation does not interfere with the 2018 midterm elections (The Hill).


INTERNATIONAL: The president’s reliance on sanctions as a national security and trade tool expanded this week, but with limited evidence of concessions by those targeted for punishment.

Iran: Trump began his day Tuesday with a statement that renewed U.S. sanctions imposed on Iran “are the most biting sanctions ever imposed.” In a tweet, the president said companies doing business with Iran are now shut out of the U.S. marketplace.

> On the other side of that squeeze play is the European Union, which lobbed a threat of its own. European firms that halt their business with Iran because of the U.S. sanctions may face sanctions imposed by the EU, officials said (NBC News).

> On Tuesday, German car and truck manufacturer Daimler, parent of Mercedes-Benz, said the company abandoned expansion plans in Iran because of the Trump administration’s sanctions (Reuters).

> Many U.S. companies that began doing business in Iran after economic sanctions were lifted as part of a nuclear pact signed with Tehran in 2015 reversed course and pulled out by June and July, anticipating that sanctions would be the policy of the Trump administration.

China: The Hill: The Trump administration on Tuesday released a list of approximately $16 billion worth of imports from China that will be subject to 25 percent in additional tariffs, the U.S. Trade Representative announced. The new levies follow tariffs imposed by the United States July 6 on $34 billion of imports from China.

The administration’s vow to slap more tariffs on China’s goods in two weeks escalated an ongoing trade war (Bloomberg).

North Korea: Trump national security adviser John Bolton said on Tuesday that North Korea has not taken steps to wind down its nuclear weapons program, as it indicated it would during a June summit with Kim Jong Un.

“The United States has lived up to the Singapore declaration. It’s just North Korea that has not taken the steps we feel are necessary to denuclearize,” Bolton said during an interview with Fox News Channel (The Washington Post).

Bolton said the U.S. is pushing Pyongyang: “We’re going to continue to apply maximum pressure to North Korea until they denuclearize, just as we are to Iran.”

WASHINGTON ROUNDUP: People: House Speaker Paul RyanPaul Davis RyanBiden's inauguration marked by conflict of hope and fear The Hill's 12:30 Report: Sights and sounds from Inauguration Day Revising the pardon power — let the Speaker and Congress have voices MORE (R-Wis.) is sitting for exit interviews with the news media this summer as he winds up his Capitol Hill career. New York Times magazine profiler Mark Leibovich reports on a conservative congressman who defends why he came to Congress, and explains why Trump came as such a shock.

“I can look myself in the mirror at the end of the day and say I avoided that tragedy, I avoided that tragedy, I avoided that tragedy. … I advanced this goal, I advanced this goal, I advanced this goal.” – Ryan

A less flattering profile of a government official appears in Forbes, describing Commerce Secretary Wilbur RossWilbur Louis RossOn The Money: Retail sales drop in latest sign of weakening economy | Fast-food workers strike for minimum wage | US officials raise concerns over Mexico's handling of energy permits US officials raise concerns over Mexico's handling of energy permits Census Bureau racing to complete noncitizen data, watchdog says MORE (and his business pattern of “grifting”).

Pentagon braces for outer space: Following Trump’s direction, the Pentagon is expected to deliver to Congress plans for the Defense Department’s concept of a Space Force, but likely without calling on the legislative branch to create a sixth military service (ABC News). Current and former U.S. officials are divided about the need for a Space Force, even as they acknowledge the national security and communications rationales.

“We need to address space as a developing war fighting domain," Defense Secretary James MattisJames Norman MattisOvernight Defense: Austin takes helm at Pentagon | COVID-19 briefing part of Day 1 agenda | Outrage over images of National Guard troops in parking garage Senate confirms Austin to lead Pentagon under Biden Overnight Defense: House approves waiver for Biden's Pentagon nominee | Biden to seek five-year extension of key arms control pact with Russia | Two more US service members killed by COVID-19 MORE told ABC News.

Defense One reported on a draft of the Pentagon’s plans a week ago. The proposals call for the creation of a new combatant command, a new joint agency for satellite purchases, and a new war fighting community that pulls in space operators from all service branches.

Immigration: CNN confirmed a report by NBC News on Tuesday that the White House wants new rules, geared to stand up in court, that would penalize migrants seeking citizenship and legal status if they have tapped certain federal benefits programs … The New York Times reports how the administration’s plan to punish immigrants for using welfare, even if weeks away from an official unveiling, could deliver a political benefit: improved GOP election prospects.

> Separately, the American Civil Liberties Union announced on Tuesday it will bring suit against Attorney General Jeff SessionsJefferson (Jeff) Beauregard SessionsHarris to resign from Senate seat on Monday Rosenstein: Zero tolerance immigration policy 'never should have been proposed or implemented' Sessions, top DOJ officials knew 'zero tolerance' would separate families, watchdog finds MORE and the administration for denying asylum protections to some immigrants who came the United States fleeing domestic violence and gang brutality in their home countries. “These policies undermine the fundamental human rights of women and violate decades of settled asylum law,” the organization asserts (The Hill).

Tech & Media: Lawyers for a group of journalists and researchers asked Facebook CEO and founder Mark ZuckerbergMark Elliot ZuckerbergHillicon Valley: Biden names acting chairs to lead FCC, FTC | Facebook to extend Trump ban pending review | Judge denies request for Amazon to immediately restore Parler Facebook to extend Trump ban pending review Facebook has no current plan to end the Trump suspension MORE to change the company’s restrictions limiting how research can be conducted on the site. They want Facebook to create a news-gathering exception to its bans on creating inauthentic accounts and on using automated tools that scrape public data about users for use in large-scale analysis (The New York Times).

> Sen. Chris MurphyChristopher (Chris) Scott MurphyDemocrats float 14th Amendment to bar Trump from office Senate approves waiver for Biden's Pentagon nominee Democrats shoot down McConnell's filibuster gambit MORE (D-Conn.) defended the decision announced Monday by tech companies including Facebook to delete some content created by Alex Jones and posted to his Infowars site, arguing the decision differs from government censorship. (Background: Jones famously denies that the Sandy Hook school shootings of 2012 ever took place, when in fact, 20 children and six adults were killed in the state the senator represents.)



> In the U.K. on Tuesday, Instagram reinstated the account of Tommy Robinson, a far-right activist whose real name is Stephen Yaxley-Lennon. Robinson, recently released from prison, complained that Instagram, the Facebook-owned photo-sharing service, censored his account because of his views. The company said Robinson’s account was deleted in error (The Guardian).

> Facebook wants users’ private banking and financial data (The Washington Post).

> Forty-three percent of Republicans surveyed in a new Ipsos poll said Trump should have the authority to shut down the news media. Almost a third of Americans (29 percent) say “the news media [are] the enemy of the people,” offering support for a false statement often voiced by the president as his opinion (The Hill).

Federal security clearances: The president may soon sign an executive order to transfer the government’s security clearance program from the Office of Personnel Management to the Pentagon. The transfer is one of several reform ideas the administration proposed as part of its plan, unveiled this year, to reorganize federal agencies and streamline operations (Federal News Radio).

West Wing: Wall Street Journal columnist Gerald F. Seib reports that Trump wants to be his own White House chief of staff, even if John KellyJohn Francis KellyMORE keeps that role into 2019 or beyond. The president has now surrounded himself with aides and advisers of his generation, gender and similar end-of-career status for a reason, Seib writes: They let “Trump be Trump.”

The Morning Report is created by journalists Jonathan Easley jeasley@thehill.com & Alexis Simendinger asimendinger@thehill.com. Suggestions? Tips? We want to hear from you! Share The Hill’s reporting and newsletters, and encourage others to SUBSCRIBE!


Trade war a logical step in the age-old quest for power, by Andy Langenkamp, senior political analyst for ECR Research and opinion contributor for The Hill. http://bit.ly/2OPgfyt

Sanctioning Russia will not do anything, by Eugene Rumer, director of the Russia and Eurasia program at the Carnegie Endowment for International Peace and opinion contributor for The Hill. http://bit.ly/2AOYAnA


The House is out until after Labor Day.

The Senate is out this week.

The president is taking a working vacation in Bedminster, N.J., through Aug. 13. Tonight, Trump will dine with unidentified “supporters.” The gathering is closed to the press.

Secretary of State Mike PompeoMike PompeoState Dept. to review Trump admin's decision to label Houthis a terrorist organization VOA reinstates White House reporter reassigned after questioning Pompeo Jilani: China 'sending clear message' to Biden officials with sanctions that opposition could lead to 'future pay cut' MORE meets this morning with Egyptian Foreign Minister Sameh Shoukry.

Attorney General Jeff Sessions speaks tonight at a conference organized by Alliance Defending Freedom, an organization that advocates for legal rights for Christians.


> Drug prices: Drugmakers will be required to negotiate on prices for more medications paid for by Medicare, the latest step in the Trump administration’s efforts to rein in the costs of prescriptions, Health and Human Services Secretary Alex Azar said during a Bloomberg interview on Tuesday. … At a dinner with business leaders at his club in New Jersey on Tuesday, Trump also said the administration will soon announce an agreement with Pfizer and other drug manufacturers to lower prices. These drug companies are very — I mean, look, they’re great, but their prices are too high. And we are announcing next week [changes] to get them down really, really substantially,” the president said.

> Driving the markets: Tesla Chief Executive Elon Musk on Tuesday announced via Twitter that he’s considering taking Tesla Inc. private in what would be the largest deal of its type, moving the electric car maker out of the glare of quarterly investor expectations during the company’s rapid growth under financial constraints (Reuters).

> Veterans: Using the Freedom of Information Act and interviews, ProPublica reports on a trio of wealthy men Trump befriended in Florida who gained unusual “adviser” influence over policy inside the Veterans' Affairs Department (ProPublica).

> Helping hand: Former President Clinton on Tuesday headlined the Clinton Global Initiative Action Network’s V.I.P. gathering to tackle more post-hurricane recovery in the Caribbean. Clinton heads to Miami, followed by St. Lucia on Thursday, and the U.S. Virgin Islands on Friday to focus on economic needs in the region, including energy and public health.

> Counted out: More than 600,000 people who entered the U.S. legally in 2017 overstayed their visas, turning them into illegal immigrants at risk of deportation, according to the Department of Homeland Security (USA Today).

> Looking down: International Space Station commander and astronaut Alexander Gerst is sharing what he sees from 240 miles above Earth this week via Twitter. Sobering views of hot, parched Central Europe and wildfires burning in California:






And finally … It’s August, which means many sane people are on vacation, planning an escape, or kicking themselves that they failed to book some R&R. Under any of these scenarios, the Morning Report encourages escapist reading and binge-streaming and movie viewing for “mental recharge-ation,” and to celebrate the last gasps of summer.

Need ideas?

The best movies in every genre (WTOP radio list).

100 greatest movies of all time (American Film Institute list).

Best summer reads 2018 (Publishers Weekly staff picks).

Best summer reads 2018, curated by authors and cultural figures (The Guardian, part 1); (The Guardian, part 2).

73 summer book choices by genre (The New York Times Book Review).

7 best Netflix originals of 2018, thus far (HuffPost).