Aug. 12

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New Senate: DEM 48             GOP 52

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Report: China Would Not Help North Korea If It Attacks the U.S.

An influential state-run Chinese newspaper wrote yesterday that if North Korea attacks the U.S. and the U.S. retaliates, North Korea will be on its own. In practical terms, this means that North Korea will be obliterated and the ruling dynasty will be ended. On the other hand, if the U.S. attacks North Korea first, China will help its neighbor.

While this message is not official Chinese policy, it is pretty close to it. This doesn't solve the problem of North Korea getting nuclear weapons onto a missile it can deliver to any part of the U.S., but makes it clear to Kim Jong-un that even if he can do it, he better not. China's main concern is that it shares a 900-mile border with North Korea. In the event of any actual war, millions of Korean refugees would come streaming into China and China has no way it could possibly stop all these unwanted immigrants, despite its history of actually building impressive walls, not just talking about them. (V)

Trump Threatens Venezuela

North Korea isn't the only country, and Kim Jong-un isn't the only leader, to be in Donald Trump's crosshairs right now. Venezuela's there, too. Although the South American nation does not currently present a threat to the U.S., the administration of President Nicolas Maduro is very repressive and highly undemocratic. This does not sit well with Trump, and on Friday he said military intervention is on the table: "Venezuela is not very far away, and the people are suffering, and they're dying. We have many options for Venezuela, including a possible military option, if necessary." He also refused to speak to Maduro on the phone. All of this prompted Venezuelan Defense Minister Vladimir Padrino to denounce Trump's talk as a "crazy act."

You can never be sure how serious Trump is—or, for that matter, how crazy he is—when he speaks, but expert opinion is unanimous that any use of force would be a mistake. The U.S. hasn't had much success messing around with other nations' governments in the past (Iran, Vietnam, Nicaragua, etc.), and such an act would alienate allies in South America and would likely provide a rallying point for Maduro. There's also the small matter of Afghanistan, not to mention the need to be prepared for any possible conflict with North Korea. Intervention in Venezuela would leave the military spread mighty thin.

It's hard to believe it's just a coincidence that Trump is engaged in a high-profile war of words with two unpopular world leaders at the same time. Is he in a bad mood because of the heat, or because of how tough his job is proving to be, or because of the health care fiasco? Is someone in his ear, like Steve Bannon? Or has he decided that, with his legislative agenda stalled, harangues like these are the best way to rally the base? If it's the latter, it may be working, as Trump pulled a 45% approval rating in the latest Rasmussen Poll. That's not very good, especially given Rasmussen's pronounced pro-Republican house effect. However, it is within shouting distance of 50%, and it's a six point improvement over the 39% he got in last week's survey. (Z)

Republicans Come under Pressure at Town Halls

Many Republican members of Congress had hoped to go back home in August to talk to friendly crowds about how they finally repealed Obamacare and to explain that tax reform was next. Instead, they are facing large, hostile crowds who mostly want to talk about health care, not tax reform. Rep. Mark Meadows (R-NC), the leader of the House Freedom Caucus, found himself fending off constituents who backed single-payer health insurance, not something on Meadows' agenda. Across the country, Rep. Doug LaMalfa (R-CA) faced furious crowds complaining about his vote to repeal the ACA. Some of them accused him of trying to kill them. Rep. Buddy Carter (R-GA) ran unopposed in 2016. That's unlikely to happen in 2018, as his many of his constituents are hopping mad. In addition to many questions about health care, he was asked if he would let special counsel Robert Mueller's probe continue. He said he was worried about some of Mueller's lawyers. Some of them have donated to Democrats in the past, although Mueller himself is a registered Republican. The crowd did not appreciate their congressman's response. And the upshot is that many Republicans are going to be on the hot seat this August. (V)

Manafort Changes Lawyers as Mueller Turns the Screws on Him

If last month's predawn raid on former Trump campaign chairman Paul Manafort's house was intended to make it clear to him that Robert Mueller is gunning for him, it seems to have worked. Manafort has fired his legal team and replaced it with the boutique D.C. firm of Miller and Chevalier, which specializes in complicated financial crimes. From the evidence already made public, including Manafort's receiving millions of the dollars from Ukraine off the books, it is likely he has come to the right place. After all, Al Capone was never nailed by the feds for killing people, but he was put in prison for tax evasion. Income from illicit activities is taxable, and unless Manafort paid taxes on the $17 million he got from a pro-Russian Ukrainian political party, he's got a Capone-sized problem.

The tax angle is important. If Manafort failed to declare and pay taxes on that income on his Virginia state income tax return, he will be in violation of Virginia's tax laws and can be prosecuted for that. Although the president has the power to pardon people for committing federal crimes, he has no power to pardon them for state crimes. It is worth noting that the AG in Virginia, Mark Herring, is a Democrat who would surely love to burnish his resume with a few lines about helping take down Donald Trump. Mueller, of course, knows all of this very well and will undoubtedly use every trick at his disposal to flip Manafort and get him to spill the beans on Trump. Manafort's choice of his new attorneys indicates that he understands the situation as well. (V)

Wall Street Growing Bearish

If Donald Trump cares about his popularity, and we know he most certainly does, he should be very worried about the U.S. economy. As someone with 50 years as a businessman under his belt, he surely knows that the economy ebbs and it flows. He probably even knows that the economy has been flowing for almost nine years, and is very much due for an ebb. And Trump may even be vaguely aware that, fair or not, the state of the economy is perhaps the single biggest thing on which presidents are judged. If he wants to give himself nightmares, The Donald might read up on George H. W. Bush, who recorded the highest approval rating ever measured shortly after the Gulf War, at 89%, but then saw a bad economy drag that down a staggering 70 points in 18 months.

In any case, we're about 200 days in to the Trump presidency, which means Wall Street is beginning to make some decisions about what they've got on their hands. And their conclusions, if this week's indicators are meaningful, are not optimistic. The Dow Jones and S&P had their worst weeks in months, CNN's "fear index" is at its highest point since Trump took office, and all the money was being invested in gold, government bonds and defense contractors. The latter investment, of course, is a de facto prediction that the U.S. could be getting close to a war, while the former two investments are very safe "insurance" policies that offer fairly limited returns, but that also insulate against losses if the market should go south. The signs aren't all bad yet—the market rebounded a bit on Friday, for example—but a few more weeks like this one, and a recession could be on its way. For Trump's reference, the lowest approval rating ever recorded was 22%, by both Harry S. Truman and Richard Nixon. A bad economy, coupled with Trump's current mid-30s approval numbers, could well give him a chance to shoot for the record. (Z)

Kyrsten Sinema Is Considering a Run Against Flake

Sen. Jeff Flake (R-AZ) is one of the least popular senators, with an approve/disapprove rating of 37%/45%. He is from a state that Donald Trump won by only 3.5 points. Finally, he has been an outspoken critic of Trump, which has drawn pro-Trump primary opponents to the race, some of whom already have substantial funding. Needless to say, the vultures are circling. He is going to have a very tough reelection race in 2018, second only in difficulty to that of Sen. Dean Heller (R-NV).

The first Democrat to sort of announce a run is three-term Rep. Kyrsten Sinema (D-AZ), who is 41. She is the only openly bisexual member of Congress. Sinema is centrist and a member of the Blue Dog caucus, which makes her a reasonably good fit for reddish Arizona. No doubt Arizona's other three Democratic representatives will take notice of Sinema's announcement and move up their schedules if they are also planning runs. It wouldn't be surprising if all four of them end up running against the very vulnerable Flake. (V)

Secretary of Energy...Joe Manchin?

According to White House insiders, there have been serious internal discussions about nominating Sen. Joe Manchin (D-WV) to head the Department of Energy He was considered for the job once before, and comes from a state whose economy is built on energy production, so the reports are certainly believable. For his part, the Senator says that he's had no conversations with the White House, and remains committed to serving his constituents.

The thinking here is pretty obvious. Donald Trump cares little about that department, and if he gets Manchin out of the Senate, the seat will surely become a permanent possession of the GOP. The Republican (as of last week) governor of West Virginia, Jim Justice, would appoint a GOP placeholder (maybe himself). Then, in 2018, that appointee or some other Republican would be elected in their own right. This would make the Democrats' chances of retaking the Senate, which are already quite long, almost zero. Manchin obviously knows all of this, and it will presumably factor into his decision if and when the job is actually offered.

Trump has gone down this road before. Early in his administration he considered Sen. Heidi Heitkamp (D-ND) for secretary of energy for exactly the same reason: She is from an energy-producing state and if she could be removed from the Senate, the Republicans would take over the seat more or less forever. It didn't happen, though. Most likely, Trump made the offer and Heitkamp was wise to the game and refused. For Manchin, another thought has probably crossed his mind: Although West Virginia voted for Trump by a margin of over 40 points, Manchin has a good shot at keeping his Senate seat in 2018 and in 2024 and in 2030 and in 2036. In 2042, he'll be 95, so that is less certain. A cabinet job might last 4 years. Or maybe 4 months. He might decide that being at the mercy of the voters every 6 years is a better bet than being at the mercy of a president who changes his personnel on a whim rather frequently.

Meanwhile, there's also the fact that, as far as anyone knows, Energy already has a secretary, namely Rick Perry. The scuttlebutt is that Perry might take over the Department of Homeland Security, since that secretaryship was just vacated by newly-anointed Chief of Staff John Kelly. Perry, whose entire political career has been spent at the state level, doesn't actually know anything about homeland security. On the other hand, although he was the longest-serving governor of a major oil-producing state, it turns out that the Department of Energy doesn't have much to do with oil, so his experience with the petroleum industry isn't worth much there. Two-thirds of their budget goes to the maintenance and storage of nuclear weapons, a subject about which Perry doesn't know much. Whatever happens, Perry does not seem to be long for his current position. (Z)

McConnell Is Backing Kid Rock in Michigan Senate Race

When musician Kid Rock (whose real name is Robert Ritchie) announced he might run for the Senate, a lot of people laughed out loud, much as they did when real-estate developer and reality-show star Donald Trump announced his run for president a couple of years ago. Rock's announcement has caught the eye of Senate Majority Leader Mitch McConnell (R-KY). McConnell controls a super PAC with a lot of money, so his views on Senate candidates matter a lot. For example, the super PAC is pouring money into the primary campaign of Sen. Luther Strange (R-AL) in advance of next week's Alabama primary.

Yesterday the president of McConnell's super PAC, Steven Law, said in reference to Rock: "I certainly wouldn't count him out." While this is different from: "We intend to spend $3 million promoting Rock," the candidate hasn't even announced officially yet and McConnell is cautious enough to want to see that Rock is actually capable of running a campaign. Also, Gov. Rick Synder (R-MI) is term limited and might decide he has always wanted to be a senator, so McConnell wants to get to know the lay of the land before making any real committments. Nevertheless, the positive statement from Law should be interpreted as: "If no one better comes along to take on Sen. Debbie Stabenow (D-MI), we can live with Rock as our candidate." (V)

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