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Democrats are privately admitting the deal they made with Sen. Ben Nelson on Medicaid funding for Nebraska was a major factor in souring the America people on the health care reform bill.

Senate leadership inked a deal in December to win over Nelson (D-NE), allowing him to insert pro-life language in the measure and to secure federal funding for the cost of any Medicaid expansion in what has now been dubbed the "Cornhusker kickback."

It's been the target of lawsuits and scorn from both the right and the left, and leaders in both chambers believe it ultimately will be stripped from the final measure, whenever one surfaces.

Instead of considering more dealmaking to get a final health care bill passed, Democratic sources privately acknowledge that Nelson's compromise did more harm than good. Several sources said it tops a list of problems that have hurt the health care process.

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Republican National Committee Chairman Michael Steele released a statement today regarding the White House budget proposal. Here's the full text:

"Last year, President Obama pledged his budget would usher in a 'new era of responsibility.' Instead, his binge spending agenda set record deficits and did nothing to prevent double-digit unemployment. This year, President Obama promises his budget will be a 'new foundation for prosperity,' when in reality it sets the stage for the type of economic stagnation we haven't seen since the days of Jimmy Carter. The president is attempting to sell himself as a fiscal hawk by using gimmicks like PAYGO and his so-called 'spending freeze' as fig leaves to hide his binge spending. But Americans know that President Obama's budget will double down on his liberal agenda, growing the deficit by record proportions and killing jobs by raising taxes on small businesses. Congressional Democrats will undoubtedly take their binge spending to even higher levels, while the GOP will present a common-sense budget that will reduce the deficit, grow the economy and create jobs, giving voters yet another reason to vote Republican this November and return balance and sanity to Washington."

Kentucky Senate candidate Rand Paul, a conservative activist and son of Rep. Ron Paul (R-TX), has just put out a press release officially announcing the endorsement of Sarah Palin. Paul also announced that his campaign has received a "generous contribution" from Palin's PAC.

"Governor Palin is providing tremendous leadership as the Tea Party movement and constitutional conservatives strive to take our country back," Paul said in the press release. "Sarah Palin is a giant in American politics. I am proud to receive her support."

Paul is running in the Republican primary against Secretary of State Trey Grayson, who is widely regarded to be the party establishment's favored candidate in the race.

President Obama spoke this morning about his proposed $3.8 trillion spending plan for the coming fiscal year -- a budget that projects record deficits -- while simultaneously emphasizing the need to rein in spending.

"We simply cannot continue to spend as if deficits don't have consequences, as if waste doesn't matter, as if the hard-earned tax dollars of the American people can be treated like monopoly money," Obama said.

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A 28-year-old Loyola law school student and conservative activist named Ben Wetmore has emerged as the Fifth Beatle of the Landrieu phone-tampering case.

Wetmore, who hired alleged phone tamperer James O'Keefe at the Leadership Institute a few years back to help launch conservative media outlets on college campuses, this month offered up his New Orleans house as a crash pad for O'Keefe and co-defendants Joseph Basel and Stan Dai, the New York Times reports.

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Former House Speaker Newt Gingrich told a conservative conference in New Hampshire this weekend that he wants to see a new version of the Contract With America, the document credited with helping Republicans take Congress in 1994. This time, he said, it will be written with the help of tea partiers.

According to the Union Leader, Gingrich said Dick Armey -- the former House majority leader under Gingrich and the current head of FreedomWorks -- is soliciting online suggestions from tea partiers for a new contract.

"The idea is to go out to the whole country and say, 'What would you have in a contract with America to politicians?'" he said. "It's a very interesting idea."

Gingrich and Armey were both closely involved with the original contract.

In an aggressive damage control effort launched in the wake of a barrage of negative publicity, a leading Tea Party group created by a Republican consulting firm is pushing back against what it calls "false and malicious attacks."

The Tea Party Express (TPE) yesterday sent an email to supporters slamming "attack hit pieces" by TPMmuckraker and other outlets. The recent stories, writes TPE's Lloyd Marcus under the TPE banner, amount to "a range of rumors, accusations, allegations, smears and mischaracterizations of what we at the Tea Party Express are supposedly about." Marcus, the African-American country singer who has become a prominent TPE spokesman, promises another email soon that will "debunk" the "smears."

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House Minority Leader John Boehner said Sunday that defense spending should not be exempt from President Obama's proposed spending freeze.

"I think the president's proposal on freezing non-security domestic spending is a good first step, but it's only $15 billion for each of the next three years," Boehner said on Meet The Press.

I think we can do much better than that. I don't think any agency of the federal government should be exempt from rooting out wasteful spending or unnecessary spending. And I, frankly, I would agree with it at the Pentagon. There's got to be wasteful spending there, unnecessary spending there. It all ought to be eliminated, and we should be going through this budget line by line and, and asking the question, is this spending worth having to borrow money that our kids and grandkids are going to have to pay back? That's the real question. And if we went through the budget line by line like that, I think there's a lot more spending that we could cut.

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A long-awaited internal Justice Department report will essentially clear the lawyers who crafted the legal justification for the Bush Administration's torture policies, reversing the tougher findings of a draft version of the report, according to Newsweek.

The draft version of the Office of Professional Responsibility report recommended that John Yoo and Jay Bybee -- who served in the Office of Legal Counsel and are now a law professor at Berkeley and a federal appeals court judge in Nevada, respectively -- be referred to state bar associations for potential discipline for their role in writing memos that concluded torture was justified.

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