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By Anna Palmer, Jake Sherman and Daniel Lippman

Presented by

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DRIVING THE DAY
GOOD MORNING from COLUMBUS, OHIO.

HOUSE REPUBLICANS, who appear to be the narrow winners of last night's special election here, face a conflicting political picture. Here's the picture many of them want to see: They've won nearly every special election in the Trump era. Unemployment numbers are low. And private polling shows embattled incumbents faring well against their Democratic challengers.

BUT the other picture: Incumbents are getting outraised. Sky-high -- and unsustainable -- spending has masked a tough political environment. Several of the GOP victories in special elections have been wholly unimpressive. History tells us Republicans are near certain to lose the House. And last night, DANNY O'CONNOR appears to have come within 1,700 votes of toppling TROY BALDERSON for a seat that should be a walk for the GOP.

THIS IS MAGNIFIED BY PRESIDENT DONALD TRUMP, who seems to boast that the public perception of the 2018 electoral climate is wrong, and that Republicans could indeed expand their majorities in November.

AND NOW, 90 DAYS before Election Day, the GOP finds itself facing this rough political reality with their eight-year-old majority hanging in the balance.

WHAT PEOPLE ARE CHATTERING ABOUT: Republicans avoided a multi-faceted disaster last night. If they lost, money would've gone dry. ... Balderson's tight-as-a-tick victory should put all GOP incumbents on notice that this is a very challenging electoral climate. It's the second-tier candidates -- the R+5s to R+10s -- who need to watch their backs. Endangered incumbents are already well aware they have races.

THINGS TO THINK ABOUT ...

-- MORAL VICTORIES WARM HEARTS, BUT DON'T WIN POWER BACK. Democrats will take solace that they kept this thing close. But the reality is: Dems have flipped a total of one single House seat in nine special elections since Trump became president. We're not saying they don't have a extremely favorable electoral climate -- they do -- but near victories don't count.

-- A SEAT OCCUPIED BY REPUBLICAN HEAVY HITTERS WAS A NAILBITER. The last two occupants of this Columbus area seat were John Kasich and Pat Tiberi. Both used the district's strong leanings to become big-time GOP players. Kasich was chairman of the House Budget Committee, ran for president and became a popular two-term governor. Tiberi was a close ally and lieutenant to John Boehner. He almost became Ways and Means chairman, but was thwarted by Paul Ryan in one of his first moves as speaker. NOW, this district will be represented by a former state senator who barely squeaked by a 31-year-old political novice. They'll face off again in November.

-- IF DEMOCRATS can make a bunch of seats like this competitive, they'll win some and they can, of course, win the House. These kinds of seats -- R+7s and the like -- are the heart of the GOP majority. There are nearly 70 seats with a better partisan makeup for Democrats than this one. DAVE WASSERMAN (@redistrict): "If anything, tonight's #OH12 result reinforces our view that Dems are substantial favorites to retake the House in November."

-- PELOSI AS THE ISSUE? Republicans say they had a tough time finding negatives to hit O'Connor on until he appeared to open the door to backing Nancy Pelosi in a television interview.

-- REPUBLICANS CAN'T KEEP THIS SPENDING UP. The GOP has so far overcompensated for a bad environment -- and bad candidates -- by spending heaps of money. They spent $3.1 million here and $3.5 million in an unsuccessful bid to drag Rick Saccone over the finish line against Conor Lamb. There is simply no way they can keep doing that.

CLF'S CORY BLISS: "While we won tonight, this remains a very tough political environment and moving forward, we cannot expect to win tough races when our candidate is being outraised. Any Republican running for Congress getting vastly outraised by an opponent needs to start raising more money."

-- WIN FOR STIVERS, CLF. NRCC Chairman Steve Stivers -- who represents a district next door -- got a W here in an important way. It is sure to stave off doubters, who would've seized on a O'Connor victory to criticize his leadership of the party committee. Bliss' CLF dumped $3.1 million into this district -- 10 percent of his Sheldon Adelson bounty -- and there's an argument he got what he paid for: a win. Alex Isenstadt breaks it down POLITICO

KANSAS CITY STAR: "Colyer, Kobach wait as Republican governor's race hinges on Johnson County results": "Gov. Jeff Colyer and Secretary of State Kris Kobach remained effectively tied in the Kansas Republican race for governor early Wednesday, hours after Sen. Laura Kelly won the Democratic contest.

"Kobach had 118,591 votes to Colyer's 118,058 at 3 a.m., with 93 percent of precincts reporting. At watch parties in Topeka and Overland Park, the campaigns waited for results from Johnson County, one of the state's most populated areas. The county rolled out new voting machines Tuesday, but results dripped in at a glacial pace." KC Star

A message from AARP:

What role will Hispanic voters over 50 play in Arizona this fall? Read POLITICO Magazine's new series "The Deciders" which focuses on this powerful voting bloc that could be the determining factor in turning Arizona blue.

THE BIG PICTURE ... WAPO'S DAVE WEIGEL, "Democratic Party's liberal insurgency hits a wall in Midwest primaries": "The Democratic Party's left-wing insurgency found its limits Tuesday night, with voters favoring establishment candidates over more liberal challengers in almost every closely watched race across several states. In Michigan, former state senator Gretchen Whitmer easily won the Democratic nomination for governor over Abdul El-Sayed, a doctor backed by Sen. Bernie Sanders (I-Vt.) who was vying to become the country's first Muslim governor.

"In suburban House districts across the Midwest, left-wing candidates lost to Democrats backed by party leaders, abortion rights groups and labor unions. And in St. Louis, where party giant-slayer Alexandria Ocasio-Cortez traveled to help another young insurgent candidate topple an incumbent, Rep. William Lacy Clay (D-Mo.) cruised to an easy primary win over challenger Cori Bush." WaPo

-- ELANA SCHOR and HEATHER CAYGLE are going to break down the results and what they mean for women candidates this cycle at 2:30 p.m. Send them your questions using #askPOLITICO on Twitter and they might answer them in a Q&A.

FOLLOW US -- on Facebook to get notified when we go live and check out POLITICO's Women Rule Candidate Tracker for all the latest results.

NEW -- "Poll: Majority says race relations have gotten worse under Trump," by Steven Shepard: "One year after President Donald Trump said there were 'some very fine people on both sides' of violent protests in Charlottesville, Virginia, a majority of voters in a new POLITICO/Morning Consult poll say race relations have gotten worse since Trump became president.

"According to the poll, 55 percent of voters say race relations have worsened under Trump, compared with 16 percent who say they have gotten better. Another 18 percent say race relations have stayed about the same since Trump became president last year.

"Just over half of white voters, 51 percent, say race relations have worsened under Trump, while larger majorities of African-American voters (79 percent) and Hispanics (60 percent) say they have gotten worse." POLITICO

BURGESS EVERETT in INDIANAPOLIS: "Key red-state Democrat sides with Trump on wall funding": "One of the most vulnerable Democratic senators said he supports giving President Donald Trump billions of dollars for his border wall this fall - a sharp break from the rest of the party planning to spurn Trump's wall in spending negotiations this fall.

"Sen. Joe Donnelly (D-Ind.), who is facing a new round of ads criticizing his position on immigration this week, said that Trump should get far more than the $1.6 billion the Senate Appropriations Committee has been preparing to send him. Trump has repeatedly threatened to shut the government down either before or after the election without a significant infusion of money to fulfill his signature campaign promise, often telling lawmakers he wants $5 billion in the September spending bill.

"The moderate Democrat says he does 'not want under any circumstances' a shutdown. So he said Congress should 'absolutely' provide the president with a larger amount of border wall funding this fall in order to avoid one.

"'I'm fine with providing him some more. I actually voted for border wall funding three different times,' Donnelly said in an interview here. 'I'm fine with that. I'm fine with $3 [billion], $3.5, $4 or $5' billion this fall." POLITICO

BEHIND THE SCENES ... BRYAN BENDER, "Leaked document: Putin lobbied Trump on arms control: A list of issues he shared with Trump in Helsinki suggests Russia wants to continue traditional nuclear talks with the U.S. - but doesn't answer all questions about their meeting": "Vladimir Putin presented President Donald Trump with a series of requests during their private meeting in Helsinki last month, including new talks on controlling nuclear arms and prohibiting weapons in space, according to a Russian document obtained by POLITICO.

"A page of proposed topics for negotiation, not previously made public, offers new insights into the substance of the July 16 dialogue that even Trump's top advisers have said they were not privy to at the time.

"Putin shared the contents of the document with Trump during their two-hour conversation, according to a U.S. government adviser who provided an English-language translation. POLITICO also reviewed a Russian-language version of the document, which bore the header in Cyrillic 'Dialogue on the Issue of Arms Control.' The person who provided the document to POLITICO obtained it from Russian officials who described it as what Putin had conveyed to Trump in Helsinki." POLITICO

THE LATEST FROM GIULIANI -- "Obstruction questions still on table for Mueller-Trump interview, Giuliani says," by Darren Samuelsohn: "President Donald Trump's lawyers plan to send a letter to special counsel Robert Mueller later this week signaling they remain open to allowing the president to sit for an interview and be questioned about possible obstruction of justice, Rudy Giuliani said Tuesday.

"'We'll leave a little wiggle room,' Trump's personal attorney said in an interview. 'It's not so much obstruction questions. It's really sucker punches.' A willingness to let the president address Mueller's obstruction questions surrounding the firing of FBI Director James Comey marks a reversal for Giuliani from Monday, when the former New York mayor told The Washington Post that Trump's lawyers had a 'real reluctance about allowing any questions' on that topic.

"'If he can demonstrate to us he's got a couple questions on obstruction that he doesn't have the answer to, that he really needs the answer to and he hasn't made up his mind that Trump is lying, we might - we might - allow that,' Giuliani explained to POLITICO." POLITICO

MANAFORT TRIAL -- DARREN SAMUELSOHN emailed us this dispatch: "Day 7 of the Manafort Trial kicks off at 9:30 a.m. with Rick Gates back on the stand for more cross-examination. Manafort attorney Kevin Downing told Judge Ellis as Tuesday's session reached its end that he expected to take another hour on his end. From there, special counsel prosecutor Greg Andres will have a chance for follow-up questions.

"Mueller's team hasn't said who they'll call as a witness after Gates. But we did learn Tuesday that the prosecutors won't be calling all 35 of the witnesses that they'd originally listed for the trial. Counting Gates, prosecutors have brought 15 people to the stand.

"Ellis during Tuesday's session pressed for clarity on what's ahead. 'I assume not all of them you expect to call,' the judge said. 'That's absolutely true,' Andres responded. Andres also told Ellis that the prosecution's plan remains the same to finish up its arguments by the end of this week. 'That's our intention,' he said."

-- AP: "Cross-examination focuses on Manafort protege's own crimes," by Eric Tucker, Matthew Barakat and Chad Day: AP

KNOWING KAVANAUGH -- "Brett Kavanaugh once predicted 'one race' in the eyes of government. Would he end affirmative action?" by WaPo's Ann Marimow: "In the spring of 2015, Brett M. Kavanaugh returned to his alma mater in New Haven, Conn., to address the Black Law Students Association. The student who introduced him said Kavanaugh was concerned that African Americans and other minorities were being shut out of coveted clerkships with federal judges like him.

"Kavanaugh concluded the session by handing out his email address and phone number and encouraging the Yale students to apply. Indeed, two of Kavanaugh's four law clerks this year were African American students he met during annual visits to Yale, and Kavanaugh and his supporters have touted his record of hiring young lawyers from diverse backgrounds to work with him at the U.S. Court of Appeals for the District of Columbia Circuit. ...

"Yet even as Kavanaugh has taken steps to open up an elite, historically white and male network, civil rights advocates cite legal opinions, interviews and writings that suggest he would weaken broad legal protections for minorities. Interest groups on both sides say Kavanaugh could be the vote conservatives have been looking for to speed the demise of affirmative action in college admissions." WaPo

A message from AARP:


Social Security is the most important issue for voters over 50 in Arizona this fall. View the latest POLITICO/AARP poll results at politico.com/thedeciders

BORDER TALES - "Despite crackdown, immigrants flowing through Arizona border," by AP's Astrid Galvan in San Luis, Arizona: "The Border Patrol's Yuma Sector has seen a more than 120 percent spike in the number of families and unaccompanied children caught at the border over the last year, surprising many in an area that had been largely quiet and calm for the past decade. So far this fiscal year, agents in the Yuma sector have apprehended nearly 10,000 families and 4,500 unaccompanied children, a giant increase from just seven years ago when they arrested only 98 families and 222 unaccompanied children.

"The Trump administration's policy of separating families did not seem to be slowing the flow. The Border Patrol here apprehended an average of 30 families per day in June, when the uproar over the policy was at its peak, an increase from May. Yuma is now the second-busiest sector for family border crossings next to the Rio Grande Valley in Texas." AP

PLAYBOOK ON THE ROAD -- Tweet or send us a photo of you, your friends and companions reading Playbook this August to @playbookplus using hashtag #PlaybookLoyal or email them to Daniel at daniel@politico.com for the chance to be featured on Friday each week this month.
PLAYBOOK READS


PHOTO DU JOUR: Lourdes de Leon is reunited with her 6-year-old son, Leo Jeancarlo de Leon, at a Guatemala City shelter after being separated for months by U.S. immigration officials. | Oliver de Ros/AP Photo

FOR YOUR RADAR -- "Experts: Iran could answer U.S. sanctions with cyberattacks," by AP's Deb Riechmann: "The U.S. is bracing for cyberattacks Iran could launch in retaliation for the re-imposition of sanctions this week by President Donald Trump, cybersecurity and intelligence experts say. Concern over that cyber threat has been rising since May, when Trump pulled out of the 2015 nuclear deal, under which the U.S. and other world powers eased economic sanctions in exchange for curbs on Iran's nuclear program. The experts say the threat would intensify following Washington's move Tuesday to re-impose economic restrictions on Tehran.

"'While we have no specific threats, we have seen an increase in chatter related to Iranian threat activity over the past several weeks,' said Priscilla Moriuchi, director of strategic threat development at Recorded Future, a global real-time cyber threat intelligence company." AP

RUSSIA WATCH -- "In Africa, Mystery Murders Put Spotlight on Kremlin's Reach," by NYT's Andrew Higgins and Ivan Nechepurenko in Moscow: "The three Russian journalists ventured into the violent and rebel-plagued Central African Republic as part of a daring investigation into the Kremlin's use of mercenaries to project power into Africa, Syria and other distant lands.

"Three days later, they were dead, supposedly shot by robbers on a road many others traveled that day without incident. The journalists, Orkhan Dzhemal, Aleksandr Rastorguev and Kirill Radchenko, part of an independent Russian news media outfit, had traveled to the former French colony in central Africa, to investigate the activities of the Wagner Group, a private military force founded by a former Russian intelligence officer and linked to an associate of President Vladimir V. Putin.

"Their murder by unknown assailants not only shines a spotlight on the role of private military contractors, one of the murkiest features of Russia's effort to reclaim its status as a great power. It also illuminates Russia's campaign to return to Africa, a zone of particularly violent East-West rivalry during the Cold War that Moscow mostly withdrew from after the 1991 collapse of the Soviet Union." NYT

A message from AARP:


Will voters over 50 decide the 2018 midterm elections? Visit politico.com/thedeciders to learn more!

ALEX JONES UPDATE -- "Alex Jones Demands His Infowars Followers Rise Up and Buy More Merchandise," by NYT's Elizabeth Williamson: "Summoning the Alamo, Roman gladiators and the First Amendment, the right-wing conspiracy theorist Alex Jones is calling on his Infowars followers to rise up against anti-Trump 'sociopaths' who he says are behind the removal of his Infowars programming from most major social media platforms. ...

"Over the past several days, Apple, Facebook, YouTube and Spotify have removed most of Mr. Jones's programming from their services in a sweeping effort to rein in those who traffic in online misinformation that draws hundreds of thousands of followers and results in harassment and threats to their targets. Stitcher, LinkedIn and Pinterest have also removed Infowars content." NYT

HMM -- "GSA chief may have misled Congress about White House involvement in FBI headquarters, according to draft of inspector general report," by WaPo's Jonathan O'Connell: "The administrator of the General Services Administration, which manages the FBI headquarters project, may have misled Congress about White House involvement in the project, according to a portion of a soon-to-be published report from the agency's inspector general that was obtained by The Washington Post. Last year the GSA and the FBI scrapped a long-delayed plan to build an FBI headquarters campus in the Washington suburbs in favor of a proposal to build a smaller headquarters in downtown D.C. and relocate some staff
to Alabama, Idaho and West Virginia." WaPo

MEDIAWATCH -- "Fox News adds One America's Trey Yingst to Jerusalem bureau." The Hill
PLAYBOOKERS
BIRTHWEEK (was yesterday): Wesley Derryberry, an associate at Wilson Sonsini Goodrich and Rosati in D.C. (hat tip: Shana Mansbach)

BIRTHDAY OF THE DAY: Kylie Atwood, State Department reporter for CBS News. What she's been reading recently: "I'm reading 'In the Enemy's House: The Secret Saga of the FBI Agent and the Code Breaker Who Caught the Russian Spies,' by Howard Blum right now. It's a thrilling Cold War read that digs into the teamwork of scrutiny and espionage. It makes me think of modern day U.S.-Russia relations and the current Russia investigation, and how little we know about what's happening behind the scenes." Playbook Plus Q&A

BIRTHDAYS: Catharine Cypher, celebrating on a lake in Michigan (h/t Kellyanne Conway) ... Ron Klain, EVP and general counsel at Revolution, is 57. He's celebrating with his wife Monica in Croatia (h/ts Kurt and Miro) ... Charles Cooper, Brexit correspondent for Politico Europe ... Sunny Feldman ... U.S. Ambassador to Israel David Friedman is 6-0. He celebrated with a party thrown by his embassy staff yesterday ... WaPo's Jackson Diehl ... Virginia Heffernan ... Claire Brinberg, senior producer and political editor at ABC's "World News" with David Muir ... Sam Wilson ... Vinay Mehra, president and CFO of the Boston Globe ... Tyler Bowders ... Kate Damon ... Emily Rogers ... Kelly Jemison
Needham is 3-0 ... Michael Levin is 6-0 ... Dee Ertukel ... Jonah Seiger ... Italian Prime Minister Giuseppe Conte is 54 ... Sara Maldonado ... Will Caggiano ... Marc Ambinder (h/t Ben Chang) ... Elizabeth Brakebill McAdam ... Karen Hancox ... James Feinstein ... David Bass, president and CEO of Raptor Strategies (h/t Tim Burger) ... Josh Sternberg ... Mike Schwartz ... Teach for America's Joe Walsh is 52 ...

... Ken Cook, president of the Environmental Working Group (h/t Jon Haber) ... former FEC chairman Michael Toner, partner at Wiley Rein ... Jo Duchesne (h/t Steve) ... Hayley Matz Meadvin, a managing principal on the communications team at Precision Strategies (h/t Tom Zigo) ... Mike Dankler ... Meg Cahill ... Mike Biundo, co-founder and partner of Right On Strategies ... William Cronin ... Jonah Seiger ... Jeff Chu ... George Paul Tzamaras, senior director of communications and outreach for the American Immigration Lawyers Association, is 58 ... Lance Frank, executive director of comms at CBS News (h/t Caitlin Conant) ... former Michigan Gov. Jim Blanchard, now at DLA Piper, is 76 ...
Nuriya Janss ... John Lambert ... Mike Dankler ... Luke Londo ... Eric Brakey ... Habib Durrani ... Dan Betts ... Kristina Dei ... Samantha Brady ... Mallory Hobson ... Michael Burwick ... former Sen. John Culver (D-Iowa) is 86 ... Karen Hancox ... Dee Ertukel ... Alison Diminuco ... Jay Gersema ... Cameron Terry (h/ts Teresa Vilmain)

A message from AARP:

Democrats have been expecting Barry Goldwater's home state of Arizona to flip blue for years, yet it remains red. Will 2018 be the election cycle that tips the scales? The latest issue of POLITICO Magazine's new series "The Deciders," takes a deep dive into Maricopa County Arizona to understand the power of Hispanic voters over 50. With two crucial Arizona races in play, will it be voter turnout in this group, or identity politics that decides the day and what issues matter most to this influential voting bloc? Visit politico.com/thedeciders to read the latest editorial package.

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Jake Sherman @JakeSherman

Daniel Lippman @dlippman

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