Spiegel Stuff: The Hill's Morning Report — Trump versus Obama with midterms in the balance | Obama endorses dozens of Democratic candidates | Trump tweets he wants Sessions to end Mueller probe | Manafort trial judge keeps prosecution on its toes | Congress makes inroads to fund government before elections | Senate defeats election security money for states | White House mulls capital gains tax break for wealthy

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.

A battle between two heavyweights is on: It’s President Trump versus former President Obama for the 2018 midterms.

Some liberals have been frustrated by Obama for keeping a low profile since leaving office. With the former president offstage, the Democratic Party has lacked an obvious leader as it seeks to recover from a devastating 2016 election cycle and the ongoing conflicts between the grass-roots and establishment wings of the party.

But Obama announced his return to politics on Wednesday, endorsing dozens of Democratic candidates at all levels of government. The president also has a memoir on the way and a deal with Netflix. He had been working behind the scenes to raise money for the Democratic campaign arms and a few candidates.

The endorsements marked a cautious first dip into the 2018 midterms cycle for the former president, who notably steered clear of several high-profile or contentious races on Wednesday.

Obama did not endorse Alexandria Ocasio-Cortez (D), the self-described democratic socialist who defeated longtime Rep. Joseph Crowley (D-N.Y.) in shocking fashion, or New York Gov. Andrew Cuomo (D), who faces a primary challenge from the left in actress Cynthia Nixon (D).

The former president also passed on endorsing Democratic incumbents up for reelection in the Senate. The only Senate candidate he endorsed is Rep. Jacky Rosen (Nev.), who is challenging Sen. Dean Heller (R-Nev.). The list of endorsements does not include Rep. Beto O’Rourke (R), who appears to be within striking distance of Sen. Ted Cruz (R) in Texas.

Another round of endorsements will come before Nov. 6. In the meantime, the former president will focus on the redistricting efforts led by his former attorney general, Eric Holder, and campaign on behalf of the candidates he’s endorsed.

Trump, of course, is already in full campaign mode.

He holds a rally in Wilkes-Barre, Pa., on Thursday to stump for Rep. Lou Barletta (R), the underdog trying to unseat incumbent Sen. Bob Casey Jr. (D) in a state the president narrowly won in 2016.

On Saturday, Trump will head to the Delaware County Fair in Ohio to stump for state Sen. Troy Balderson (R), who is fighting to hold on to the reliably Republican seat in Ohio’s 12th District in a special election against Democrat Danny O’Connor. Trump carried the district by more than 11 points in 2016 but a Monmouth University survey released Wednesday found the race to be a dead heat.

We’ll also get another test of Trump’s grip on the GOP on Thursday, as primary voters head to the polls in Tennessee. Trump is backing Rep. Marsha Blackburn (R), who is expected to triumph in her primary and face former Gov. Phil Bredesen (D) in a Senate race that is a priority for both parties.

The Hill: What to watch for in Thursday’s primaries.

It will be fascinating to hear how Trump, who lambasts his predecessor often, and Obama, who never mentions his successor by name, describe the stakes for voters this fall.

Trump routinely blames his predecessor for all of the nation’s problems. Obama has declined to weigh in on the daily frenzy of controversies.

There is almost certain to be a Herculean tug-of-war over credit for the booming economy.

Democrats believe Obama does not get enough credit for pulling the country out of a catastrophic recession. They argue that Trump inherited an economy well into a historic expansion.

Republicans, however, say Obama’s policies slowed growth and job creation. The GOP’s tax-cuts bill and the White House’s deregulation efforts made all the difference, they insist.

More stories from across the web…

CNBC: Private payrolls boomed in July, the best showing since February.

Pew Research: Trump’s approval rating stable, and the most partisan in history.

Wesleyan Media Project: Ohio’s 12th district race attracts millions of dollars in ad spending.

LEADING THE DAY

INVESTIGATIONS: ABC News is reporting that special counsel Robert Mueller wants to speak with Trump about obstruction of justice.

And yet on Wednesday, the president launched one of his most aggressive attacks to date against Mueller, saying over Twitter that Attorney General Jeff Sessions should end the special counsel “right now.”

Sessions has recused himself from the probe, which is being overseen by Deputy Attorney General Rod Rosenstein.

The Associated Press: Do Trump’s tweets cross legal line for obstruction of justice?

Jonathan Turley: Trump’s reckless tweeting may be foolish, but it isn’t a crime.

Trump’s lawyers and the White House sought to soften the president’s remarks, saying that he wasn’t interfering in the investigation, but merely expressing his opinion that it is time to wrap it up.

“[The tweet was] not an order. It's the president's opinion." – White House press secretary Sarah Huckabee Sanders.

The president on Wednesday also vented his frustration with the FBI for not warning his campaign that former chairman Paul Manafort was under investigation.

The second day of Manafort’s trial took place at a Virginia courthouse on Wednesday. The trial has so far been notable for the colorful exchanges between the prosecution and Judge T.S. Ellis III, an appointee of Former President Reagan.

The Washington Post: Manafort judge known for being tough during trials.

Ellis has previously expressed concern that the special counsel charged Manafort with crimes that fall outside their purview. Manafort faces more than a dozen corruption and financial fraud charges, but nothing pertaining to the Russia investigation.

On Wednesday, Ellis told the prosecution to stop using the word “oligarch” to describe Russian businessmen and told them to rein-in their facial expressions during his scoldings.

Prosecutors have spent the first two days focusing on Manafort’s lavish lifestyle. On Wednesday, a suitmaker testified on the nearly $1 million Manafort spent on fine clothes.

Ellis has noted that profligacy is not a crime and has urged prosecutors to narrow their focus.

Still, Manafort looks to be in big trouble and is fighting to stay out of jail for the rest of his life.

The special counsel is alleging that he used dozens of foreign bank accounts to hide tens of millions of dollars he earned by consulting for foreign governments.

The New York Times: Mueller inquiry exposes culture of foreign lobbying.

Other interesting news of note about Facebook …

The Hill’s Ali Breland reports that thousands of people attended anti-Trump rallies that were co-organized by groups that Facebook has since banned for being part of a disinformation campaign. Democrats have blamed Russia for being behind those groups. It’s further evidence that the foreign entities were looking to sow division and anger on the left and the right.

> Real people continue to get entangled with fake accounts and pages on Facebook (The New York Times)

> Facebook’s security chief departs for Stanford University (The New York Times).

> Facebook’s prowess is tested by evolving, sophisticated foes creating influence campaigns (The New York Times)

****

CONGRESS: The Senate agreed on a spending package for four federal departments on Wednesday as it works to meet a Sept. 30 deadline to fund the entire government into the new fiscal year. Senators approved spending for the departments of Agriculture, Transportation, and Housing and Urban Development, as well as financial services and general government (The Hill).

> The Senate also approved a compromise $717 billion National Defense Authorization Act aimed at upgrading the military and challenging Chinese foreign investment and telecommunications technology (The Hill). The Senate next turns to legislation to fund the Defense Department, which will likely be bundled with an annual Labor-Health and Human Services-Education measure that leaders hope can attract bipartisan support (Politico).

> Along the way, Senate Republicans followed the lead of colleagues in the House on Wednesday and defeated a Democrat-sponsored plan that would have provided $250 million in federal grants to states to help them protect the integrity of future elections. The GOP resistance emerged despite bipartisan House and Senate worries about outside interference with the upcoming elections (The Hill).

> In the House, the conservative Freedom Caucus has become something of a curiosity, as allies and foes of the renegade group try to plot what may happen if Democrats seize control of the House next year. Some Freedom Caucus members are privately preparing for congressional life in the minority and are strategizing about how to remain relevant if Democrats control the House (The Hill).

IN FOCUS/SHARP TAKES

➔ ADMINISTRATION: Treasury Department – capital gains tax: The Hill: The notion of lowering the capital gains tax without help from Congress, and in an election year, gives some Republicans pause, but Trump asked his advisers to examine a tax policy change that would largely benefit higher-income taxpayers, his spokeswoman confirmed.

The administration has been weighing a change to index capital gains to inflation, which would result in large tax benefits when upper-income filers sell investments. The president signed a major tax bill in December, but some conservatives want to see additional tax changes this year that could attract voter and donor enthusiasm, as well as get ahead of possible House Democratic control in 2019.

Treasury Department – sanctions: The Treasury Department slapped two Turkish government officials with sanctions to register strong objections to the continued detention of an American pastor being held on espionage charges. The decision to confront President Recep Tayyip Erdoğan with financial punishment is notable because Turkey is a NATO ally and relations with the Turkish government have been strained (The New York Times).

Justice and Homeland Security – sanctuary cities: The administration is defending its “sanctuary city” opposition after a U.S. appeals court on Wednesday ruled that Trump’s executive order threatening to withhold funding from such communities is unconstitutional. The 9th U.S. Circuit Court of Appeals upheld a district judge’s ruling in favor of two California counties that sued the Trump administration for threatening to withhold money from jurisdictions that have declared themselves sanctuary cities and limit their cooperation with federal immigration officials. The administration asserts that sanctuary cities become magnets for criminals in the country illegally and migrants who tap public benefits meant for U.S. citizens (The Associated Press).

White House - China sanctions: Trump continued to pressure China for trade concessions by proposing to go from 10 percent to 25 percent in tariffs on $200 billion worth of Chinese imports, U.S. Trade Representative Robert Lighthizer said in a statement on Wednesday (Reuters).

Trump - fact and falsehoods: The Washington Post Fact Checker reported that in 558 days of his presidency, Trump made 4,229 false or misleading claims, for an average of nearly 7.6 such claims a day.

OPINION

We’re losing the fight against online extremism, by Hany Farid, opinion contributor, The Hill. http://bit.ly/2KjLLkL

Senate Democrats should meet with Judge Kavanaugh, by C. Boyden Gray, former White House counsel to George H.W. Bush, and opinion contributor with The Hill. https://bit.ly/2MbI56i

WHERE AND WHEN

The House is out until after Labor Day.

The Senate convenes Friday for a pro forma session at 10:30 a.m.

The president meets with Sen. David Perdue (R-Ga.) in the Oval Office. Later Trump flies to Wilkes-Barre, Pa., for a roundtable with supporters, followed by a rally for his reelection. Tonight the president will head from Pennsylvania to New Jersey, where he expects to remain at his home in Bedminster through Aug. 13.

Vice President Pence and Karen Pence are enjoying Hawaii through Aug. 4.

Secretary of State Mike Pompeo will be in Asia through Aug. 5. He’s in Kuala Lumpur, Malaysia on Thursday, where he’s meeting with senior officials.

Department of Justice acting Assistant Attorney General for the Office of Justice Programs Laura Rogers speaks this morning about the government’s support for crime victims and survivors. She’ll address the national board of trustees of Parents of Murdered Children Inc., in Arlington, Va.

ELSEWHERE

> States to implement new sports gambling rules. It won’t be easy, by Reid Wilson (The Hill).

> Separated: Children at the border. Documentary on migrant children and their parents during the Trump administration (Frontline and PBS, 55 minutes).

> Adding up the cost of climate change in lost lives: A new study projects the economic and life-or-death costs of rising temperatures worldwide, by Greg Ip (The Wall Street Journal)

THE CLOSER

And finally … we bring you our weekly Morning Report QUIZ CONTEST.

It’s August, so get out your very pointy sun hats and garden brooms and try matching these five quotes with the presidents who uttered them. This week’s phrase — “witch hunt” — is one Trump favors, but his predecessors in the Oval Office used it, too. Your presidential choices this morning: George H.W. Bush, Lyndon Johnson, Barack Obama, Harry Truman and Donald Trump.

Win newsletter fame in Friday’s newsletter by getting all five pairings correct. Arrange your guesses, then send to jeasley@thehill.com or asimendinger@thehill.com. (Please put “Quiz” in your subject line.)

“I have purposely, because of this ridiculous witch hunt, I have said I'm going to stay away from the Justice Department until it's completed. So I wanted to stay away. Now, that doesn't mean I have to, because I don't have to. I can get involved. But I don't want you people to say that I'm interfering, that I'm doing anything.”

“We are committed now, however great the trial and tension, to protecting the right of free expression and peaceful dissent. We have learned to despise the witch hunt, the unprincipled harassment of a man's integrity and his right to be different. We have gained in tolerance, and I am determined to use the high office I hold to protect and to encourage that tolerance.”

“Disloyal and subversive elements must be removed from the employ of the government. …The overwhelming majority of federal employees are loyal citizens who are giving conscientiously of their energy and skills to the United States. I do not want them to fear they are the objects of any witch hunt. They are not being spied upon; they are not being restricted in their activities.”

“I want to look forward and not backwards on this issue. On the other hand, I've also said nobody is above the law. …I trust career prosecutors to be judicious. I've made clear both publicly and privately that I have no interest in witch hunts. But, ultimately, the law is the law, and we don't go around sort of picking and choosing how we approach it.”

“Let's talk about character and trust. Gov. Clinton, over the last 24 hours, has been frantically flopping around like a bass on the side of the Arkansas River … These crazy charges you heard out of him last night are not new. We've responded to them over and over again; you taxpayers have spent about $40 million on this Democratic witch hunt, and I'm sick and tired of it.”

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!