Welcome to The Hill's Morning Report, and happy Thursday! Our daily email gets you up to speed on the most important developments in politics and policy, plus trends to watch, co-created by Jonathan Easley and Alexis Simendinger. (CLICK HERE to subscribe!) On Twitter, find us at @joneasley and @asimendinger.

Hill.TV’s “Rising” program, starting at 8 a.m., includes an interview with Mayor Steve Williams of Huntington, W.Va., who talks about battling the opioid crisis in his community and state. http://thehill.com/hilltv

****



President Trump Donald John TrumpSteele Dossier sub-source was subject of FBI counterintelligence probe Pelosi slams Trump executive order on pre-existing conditions: It 'isn't worth the paper it's signed on' Trump 'no longer angry' at Romney because of Supreme Court stance MORE is rolling the dice, making the 2018 midterm elections a referendum on his ability to carry the Republican Party to victory against the odds.

In a string of Wednesday tweets, the president sought to reassure his supporters that they cannot lose as long as he’s in charge. The tweets came in the aftermath of a House special election in Ohio that left the GOP candidate clinging to a small lead in a district the president won by about 11 points in 2016.

With election forecasters increasingly confident that Democrats are poised to take over the House, the president insisted that conventional wisdom is wrong and that a “red wave” is building that will protect GOP majorities in both chambers.

Trump’s contrarian view of the midterm elections pits him against the longtime strategists, pollsters and experts in Washington who largely swung and missed on his shocking 2016 presidential victory. The president’s message to supporters is that if he helped Republicans buck history once, why can’t he do it again?

Trump is focusing on two data points that he believes are being ignored by the news media.

First, Republicans have won eight of the 10 special House elections since Trump came into office.

One of the House losses was a bad one – Rep. Conor Lamb (D-Pa.) defeated Republican Rick Saccone in a district Trump carried by 20 points in 2016. Republicans also lost a special election in the Senate to replace Attorney General Jeff Sessions Jefferson (Jeff) Beauregard SessionsRoy Moore sues Alabama over COVID-19 restrictions GOP set to release controversial Biden report Trump's policies on refugees are as simple as ABCs MORE in Alabama.

But other than that, Democrats have closed the gap in safely GOP districts, Trump argues, but they haven’t shown they can win.

Republicans are skeptical of this argument. In the Ohio special election, Trump visited the district to campaign for Republican Troy Balderson to boost turnout in the closing days before the election. Outside groups also dumped millions of dollars to pull Balderson across the finish line in a district Republicans have held for most of the past century.

"[I] cannot describe to you how amazing it was that the race was close." – Ohio Gov. John Kasich (R) who represented the district from 1983 to 2001

Trump won’t be able to campaign for every House Republican in Balderson’s position – there are nearly six dozen of them. And GOP outside groups, like the Congressional Leadership Fund, which spent nearly $3 million on the race, can’t afford to spend that heavily in every district.

“This remains a very tough political environment and moving forward, we cannot expect to win tough races when our candidate is being outraised.” – Congressional Leadership Fund executive director Corry Bliss

The Hill: Democrats eyeing smaller magic number for House majority.

The Hill: Democrats see wider path to House after tight Ohio race.

Second, Trump believes he has the golden touch. The president has waded into the GOP House primaries to support more than a dozen candidates. None has lost, including the five he backed on Tuesday, although two of those races remain too close to call. Trump did support former Sen. Luther Strange Luther Johnson StrangeSessions hits back at Trump days ahead of Alabama Senate runoff The biggest political upsets of the decade State 'certificate of need' laws need to go MORE (R-Ala.), defeated in last year’s Alabama Senate primary against Roy Moore Roy Stewart MooreRoy Moore sues Alabama over COVID-19 restrictions Vulnerable Senate Democrat urges unity: 'Not about what side of the aisle we're on' Sessions hits back at Trump days ahead of Alabama Senate runoff MORE.

The Hill’s Jordan Fabian and Reid Wilson have an inside look here at whether Trump’s primaries winning streak will continue in the general election. The case study will be Kansas Secretary of State Kris Kobach (R), backed by Trump in the gubernatorial primary despite warnings from Republicans that incumbent Gov. Jeff Colyer (R) was the better general election bet.

The Hill: Trump’s endorsements cement power but come with risks.

The New York Times: Trump claims election night credit but it’s not that simple.

Meanwhile, the verdict from election experts and Republicans following Tuesday’s special election was decisive: It’s time for the GOP to panic.

“There’s a real chance that [Democrats] not only win the House, but they win it by 10 or 12 more seats than they need.” - Sen. Lindsey Graham Lindsey Olin GrahamSteele Dossier sub-source was subject of FBI counterintelligence probe Hillicon Valley: Subpoenas for Facebook, Google and Twitter on the cards | Wray rebuffs mail-in voting conspiracies | Reps. raise mass surveillance concerns Key Democrat opposes GOP Section 230 subpoena for Facebook, Twitter, Google MORE (R-S.C.), to The New York Times.

They see GOP House members retiring in record numbers; Democratic challengers outraising GOP incumbents; an enthusiasm gap in favor of liberals; and history showing that the party in power will lose seats during the sitting president’s first term.

On Wednesday, election analyst Larry Sabato at the University of Virginia’s Center for Politics moved another four GOP-held seats toward Democrats. The marquee race in that group involves Rep. Cathy McMorris Rodgers Cathy McMorris RodgersHillicon Valley: Trump backs potential Microsoft, TikTok deal, sets September deadline | House Republicans request classified TikTok briefing | Facebook labels manipulated Pelosi video Top House Republicans request classified TikTok briefing More than 100 lawmakers urge IRS to resolve stimulus payment issues MORE (R-Wash.), the No. 4 Republican in the House, whose race is now rated a toss-up.

Monmouth University pollster Patrick Murray emails:

“Democratic voter enthusiasm and moderate Republican discontent with Trump have made these special elections very competitive when they should have been cakewalks for the GOP. Imagine what will happen if these trends continue in November in districts where Republicans already were facing a challenge. And as of right now, our polling suggests that’s exactly what the landscape will look like.”

We’ll find out on Nov. 6 whether Trump or the experts got it right.





LEADING THE DAY





> Instead of talking about tax cuts, GOP candidates are running ads that motivate with anxiety over illegal immigration, socialism and House Minority Leader Nancy Pelosi Nancy PelosiPelosi slams Trump executive order on pre-existing conditions: It 'isn't worth the paper it's signed on' On The Money: Anxious Democrats push for vote on COVID-19 aid | Pelosi, Mnuchin ready to restart talks | Weekly jobless claims increase | Senate treads close to shutdown deadline Trump signs largely symbolic pre-existing conditions order amid lawsuit MORE (The Associated Press)

> A former mixed martial arts fighter won the Democratic primary in Kansas’s 3rd Congressional District over a candidate backed by Sen. Bernie Sanders Bernie SandersThe Hill's Campaign Report: Trump faces backlash after not committing to peaceful transition of power Bernie Sanders: 'This is an election between Donald Trump and democracy' The Hill's 12:30 Report: Trump stokes fears over November election outcome MORE (I-Vt.) and Alexandria Ocasio-Cortez (The Hill). That’s more evidence that the Democratic Party’s liberal insurgency has hit a wall in the Midwest (The Washington Post).

> Kobach will not recuse himself from a recount in Kansas governor’s race (The Kansas City Star).

> Record numbers of women have been nominated for governor and Congress this cycle (The Hill).

> Progressives are trying to pull off a second shocking upset in a Democratic primary in two months, this time taking aim at Rep. Michael Capuano Michael (Mike) Everett CapuanoHillicon Valley: Election officials prepare for new Russian interference battle | 'Markeyverse' of online fans helps take down a Kennedy | GOP senators unveil bill to update tech liability protections 'Markeyverse' of online fans helps take down a Kennedy Inside the progressive hunt for vulnerable House Democrats MORE (D-Mass.), a 20-year veteran in Congress (The Hill).

Domenico Montanaro: Lessons for both parties in Ohio special election.

David Catanese: In Ohio, a wash, not a wave.

Sean Trende: Ohio special election is a bad sign for Republicans.

****

CONGRESS: And speaking of unwanted news for the party in power...

Insider trading: Republican Rep. Chris Collins Christopher (Chris) Carl CollinsConspicuous by their absence from the Republican Convention NY Republican Chris Jacobs wins special election to replace Chris Collins 5 things to watch in Tuesday's primaries MORE, 68, of New York was arrested and charged with federal securities fraud on Wednesday related to an Australian pharmaceutical company that counted him as a shareholder and a former director (The Hill). The company, Innate Immunotherapeutics, issued a statement saying it was cooperating with U.S. investigators.

Collins turned himself in to the FBI in Manhattan and announced he would plead not guilty to charges related to insider trading. Part of the federal indictment involves a phone call prosecutors say Collins made to his son during last year’s White House congressional picnic, during which he allegedly passed along an insider tip for stock trading.

Collins, during a news conference on Wednesday night, said he planned to continue his campaign for reelection and called the charges "meritless."

> Speaker Paul Ryan Paul Davis RyanKenosha will be a good bellwether in 2020 At indoor rally, Pence says election runs through Wisconsin Juan Williams: Breaking down the debates MORE removed the congressman from the House Energy and Commerce Committee pending the results of the criminal probe and/or House Ethics Committee investigation (The Washington Post).

Supreme Court: The National Rifle Association’s legislative lobbying arm this week announced a hefty, seven-figure advertising buy to support the nomination of Brett Kavanaugh to the Supreme Court (The Washington Examiner) … Planned Parenthood Action Fund has a six-figure ad buy planned to try to defeat the nominee (The Hill).





IN FOCUS/SHARP TAKES





➔ INVESTIGATIONS: Trump’s lawyers have rejected the latest overture from special counsel Robert Mueller Robert (Bob) MuellerCNN's Toobin warns McCabe is in 'perilous condition' with emboldened Trump CNN anchor rips Trump over Stone while evoking Clinton-Lynch tarmac meeting The Hill's 12:30 Report: New Hampshire fallout MORE to have the president sit for an interview (The New York Times). Trump’s legal team is trying to limit the scope of any potential interview and particularly wants to shield the president from answering questions about obstruction of justice.

Trump attorney Rudy Giuliani told The Hill on Tuesday that “it feels like” the two sides are getting close to concluding the negotiating process.

The president has said he has no problem talking to investigators. His legal team has advised him against it.

> Richard Gates, Mueller’s star witness in the case against former Trump campaign chairman Paul Manafort Paul John ManafortOur Constitution is under attack by Attorney General William Barr Bannon trial date set in alleged border wall scam Conspicuous by their absence from the Republican Convention MORE finished giving testimony on Wednesday against his former boss and mentor.

Reuters: Manafort trial focus shifts to bank fraud as prosecutors near end of case.

It was a dramatic three days on the stand for Gates, who testified that he and Manafort hid millions of dollars in foreign accounts and doctored bank and tax documents.

Manafort’s lawyers sought to raise questions about Gates’s credibility, noting that he pleaded guilty to lying to the special counsel and getting into his personal life and a London flat he rented for a woman with whom he was having an affair.

On Wednesday, the defense argued that Gates has had more affairs than he has previously revealed (The Hill).

Gates has pleaded guilty to two charges of conspiracy and lying to the FBI.

He is cooperating with the special counsel to get a reduced sentence. Manafort faces 18 charges of tax and bank fraud. The case could go to the jury by the end of the week.

➔ INTERNATIONAL: Sanctions and more sanctions...

Iran: Dismissive of Trump’s threat that the United States will no longer do business with companies doing business with Iran, China and Germany on Wednesday defended their respective commerce with Tehran as transparent and in compliance with United Nations resolutions (Reuters) … Iranian President Hassan Rouhani, conferring with North Korea’s foreign minister, warned the United States cannot be trusted (Reuters).

Russia: In an era when personal letter writing is a dying art, Trump penned a message to Russian President Vladimir Putin on behalf of Sen. Rand Paul Randal (Rand) Howard PaulThe Hill's Morning Report - Sponsored by Facebook - Trump previews SCOTUS nominee as 'totally brilliant' Rand Paul says he can't judge 'guilt or innocence' in Breonna Taylor case Overnight Health Care: Health officials tell public to trust in science | Despair at CDC under Trump influence | A new vaccine phase 3 trial starts MORE (R-Ky.). Paul, a member of the Senate Foreign Relations Committee, has been in Moscow for meetings this week (The Hill). (The White House described it as a letter of introduction more than a confidential Trump message to Putin.)

“The letter emphasized the importance of further engagement in various areas including countering terrorism, enhancing legislative dialogue and resuming cultural exchanges.” – Paul

> Separately, the Trump administration on Wednesday hit Russia with new sanctions punishing the government for using a Soviet-era nerve agent against a former Russian spy and Putin critic who lives in Great Britain. Secretary of State Mike Pompeo Michael (Mike) Richard PompeoPutin nominated for Nobel Peace Prize The Hill's Morning Report - Sponsored by Facebook - Trump previews SCOTUS nominee as 'totally brilliant' Pompeo accused of stumping for Trump ahead of election MORE approved a determination that Moscow violated international law by poisoning Sergei Skripal, who survived (NBC News).

➔ WHITE HOUSE & ADMINISTRATION: SEC: Was the Tuesday statement by Tesla Inc. CEO Elon Musk about possibly taking the company private truthful? And why was his disclosure made on Twitter? The Securities and Exchange Commission is asking those questions, according to The Wall Street Journal.

Treasury: The Hill: Eagerly awaited guidance from the IRS and the Treasury Department about a key portion of last year’s tax law came out Wednesday clarifying the 20-percent deduction for income of non-corporate businesses known as “pass-throughs.” The New York Times reports that tax experts see the rule as largely a victory for business groups, which sought a more generous interpretation of a deduction that’s a bonanza for Americans earning $1 million and up, according to the Joint Committee on Taxation.

DHS: The Hill: The Department of Homeland Security said migration dipped this summer, although families are crossing the border at a higher rate than one year ago, according to data released on Wednesday. Overall, migrant crossings at the southern border fell 7 percent in July, the government reported.

Federal budget: The Hill: The GOP tax cuts enacted last year coupled with this year’s spending decisions resulted in a jump of 20 percent in the deficit in the first 10 months of this fiscal year, the Congressional Budget Office reported. It’s the kind of news that gives many economists and deficit hawks the shivers.

Wages: The Hill: Almost everything but wages seems to have revved in the economy this year. So for political reasons, that’s what Democratic lawmakers prefer to criticize among what they see as the Trump administration’s economic policy vulnerabilities.

Medicare: The Hill: Patient groups worry a new administration idea to lower drug costs by requiring that Medicare patients initially try cheaper drugs will harm their care.





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!

OPINION





Kobach should butt out of his own recount — and the Johnson County official behind this mess must go, by The Kansas City Star editorial board. https://bit.ly/2vP6JCN

Kobach is the Republican Party at its worst, by The New York Times editorial board. https://nyti.ms/2Oob8V6

Kavanaugh would strengthen civil liberties protections on the Supreme Court, by Michael DeGrandis, opinion contributor for The Hill. http://bit.ly/2Mreshw

`I was attacked by antifa over breakfast,’ by Charlie Kirk, opinion contributor for The Hill. http://bit.ly/2OUWFB4





WHERE AND WHEN





The House is out until after Labor Day.

The Senate is out this week.

The president is enjoying a working vacation in Bedminster, N.J., through Aug. 13. Today, Trump focuses on prison reform during a roundtable discussion with “state leaders.” The president earlier this month embraced a GOP-backed House-Senate compromise measure that includes sentencing reforms (The Hill).

Vice President Pence will visit the Defense Department for a briefing and will speak at 11:15 a.m. during an honor guard ceremony along with Secretary of Defense James Mattis James Norman MattisBiden courts veterans amid fallout from Trump military controversies Trump says he wanted to take out Syria's Assad but Mattis opposed it Gary Cohn: 'I haven't made up my mind' on vote for president in November MORE.

The Bureau of Labor Statistics releases the producer-price index for July at 8:30 a.m. June’s 3.4 percent increase was the largest year-to-year rise since November 2011.





ELSEWHERE





> Workforce diversity: Lawmakers in the congressional caucus that supports historically black colleges and universities, meeting at a conference this week, said they’re working with tech companies to get African American students into the “pipeline” to diversify jobs recruitment (The Hill).

> Identified: The Pentagon on Wednesday gave the sons of Master Sgt. Charles Hobert McDaniel, a former U.S. Army medic from Indiana, the dog tags he wore during the Korean War. McDaniel’s tags were turned over by the North Korean government along with 55 cases of remains that have yet to be identified conclusively (The Hill).

> Around Washington: Former Secretary of Homeland Security Michael Chertoff is joining the independent watchdog group Freedom House as chairman of the board of trustees.

> Poison laced inside animal carcasses is a growing threat to Africa’s wildlife: Deadly chemicals are a weapon of choice for herdsmen who see lions, elephants, and other wild animals as threats to livestock and property (National Geographic magazine).

THE CLOSER





And finally … because it’s Thursday, we call your attention to the Morning Report QUIZ CONTEST. Notch some newsletter fame on Friday by answering all five questions correctly. Just send your best guesses to jeasley@thehill.com or asimendinger@thehill.com (and please put “Quiz” in your subject line.)

Forty-four years ago, President Nixon become the first U.S. president to resign from office. Let’s test your knowledge of the “Watergate” scandal that led to Nixon’s departure from the White House on this day in 1974.

The burglars cased the Watergate building from a hotel across the street. What is that property today?

A Trader Joe’s A dormitory at George Washington University The Trump International Hotel The Washington Nationals baseball park

During the impeachment process on Capitol Hill, a Republican lawyer acting as a committee investigator asked a question that led to the discovery of the secret White House taping system. Who was that lawyer?

Who was the last member of the Senate Watergate Committee to leave office?

Ranking member Sen. Howard Baker (R-Tenn.) Chairman Sam Irvin (D-N.C.) Daniel Inouye (D-Hawaii) Edward Gurney (R-Fla.)

What former presidential candidate worked on the impeachment process as a staffer on Capitol Hill?

A dozen years ago, who revealed the identity of the secret informant known as “Deep Throat,” naming Mark Felt as the famous source?

Journalists Carl Bernstein and Bob Woodward Felt’s memoirist, Ralph de Toledano Nixon’s chief counsel, Charles Colson Felt’s lawyer, John D. O’Connor





