**President Obama
*Washington Post reports that Obama told Democratic senators yesterday that he is open to the idea of taxing health care benefits, an idea he slammed in the election. "White House officials moved quickly to clarify that taxing the health insurance provided by businesses is not Obama's first choice, but aides refused to rule out the possibility."

*The president also "affirmed his support for the creation of a government-sponsored health insurance plan, but he acknowledged that such a plan would sharply reduce the chances for Republican support of legislation to overhaul the health care system," the New York Times says, citing Democratic senators.

*Obama called the next few months a "make-or-break period" for health-care legislation, "ratcheting up pressure on lawmakers," Bloomberg reports. He wants legislation drafted before Congress leaves for the August recess.

*Tom Daschle, once the choice for HHS Secretary, said yesterday that the chances of reform being achieved are 50/50. "I'd like to think it was better than that. But . . . having had all the experiences over time that I've had in Congress, I would say it's no better than 50/50," he said at the National Press Club.

*USA Today on Obama's efforts to reach out to the Muslim world ahead of tomorrow's speech in Cairo. "The setting of his speech -- the capital of a country that calls itself a democracy but is run as a police state -- speaks to the complexities before him. In many Muslim nations, from Lebanon to Afghanistan, where Obama's words also will be heard, extremists are gaining ground.

*AP on the Saudi Arabia stop: "The president was talking to Abdullah about a host of thorny problems, from Arab-Israeli peace efforts to Iran's nuclear program. The Saudis have voiced growing concern in private that an Iranian bomb could unleash a nuclear arms race in the region. The surge in oil prices also was on the agenda."

*Not only was Obama the focus of an hour-long special last night, but he made a cameo on "The Tonight Show," taking a question from Brian Williams about Conan O'Brien. "This is something we discussed several times in the Oval Office, how to manage this transition between Leno and Conan. And I think he's up to the task. But I just want him to know that there is not going to any bailout coming out from Washington if he screws it up."

**Rep. McHugh (R-N.Y.) for Army Secretary fallout
*"All at once, Obama has selected a nominee who burnishes his bipartisan credentials, opened up a seat prime for Democratic pickup and drained the GOP reservoir of one of the few remaining Northeastern moderates. ... And with McHugh's appointment, Obama has managed to cut New York's ever-shrinking GOP House delegation by one-third. The state delegation now includes just two Republicans in its 29-member contingent -- down from 10 as recently as 2004," Politico's Mahtesian writes.

*Off to the races: "The expected departure of Rep. John McHugh (R-N.Y.) to the Obama administration has set off two races to replace him, one in his New York district, the other on his Washington-based Congressional committee. McHugh had barely accepted the White House's nomination for secretary of the Army on Tuesday before three members of the House Armed Services Committee began campaigning to replace him as the ranking member of the panel," Roll Call reports.

**Sotomayor
*Quinnipiac: "American voters say 55 - 36 percent that affirmative action should be abolished, and disagree 71 - 19 percent with Supreme Court nominee Sonia Sotomayer's ruling in the New Haven firefighters' case."

*The Hill speaks with a GOP senator who "acknowledged her confirmation is all but a foregone conclusion," but "noted that the GOP will focus on Sotomayor's temperament while on the 2nd Circuit Court of Appeals and said if she lets her temper flare during confirmation hearings, it would erode GOP support."

*She "has been called an 'anti-gun radical' by some gun rights activists for joining an opinion this year that said the Second Amendment does not prevent state and local governments from restricting arms ownership. But yesterday a panel of conservative luminaries on the U.S. Court of Appeals for the 7th Circuit reached the same conclusion," Washington Post reports.

*Politico has the White House talking points on the nomination. The memo "cites a 1998 New York Times story in which a conservative lawyer is quoted calling Sotomayor 'exactly what conservatives want: a nonactivist judge who does not apply her own views but is bound by the law.'"

**Congress
*Roll Call: "House and Senate Democrats are headed into a legislative minefield over the next two months as they look to cram some of their most controversial agenda items into just eight weeks of work."

*Obama's request for $2 billion more in the war spending bill, it "could soon exceed $100 billion, adding to the risks of an already tense fight in the House over the addition of new financing for the International Monetary Fund," Politico reports.

*"Speaker Nancy Pelosi (D-Calif.) has quickly taken charge of moving climate change legislation through the House, which will be one of the toughest challenges of her political career," The Hill reports.

**Campaign Stuff
*Big news in Georgia, where former Gov. Roy Barnes (D) says he'll run for the office again. The AJC: "Barnes, 61, enters a field already occupied by three Democrats -- Attorney General Thurbert Baker, House Minority Leader DuBose Porter, and David Poythress, former commander of the Georgia National Guard. Six Republicans are in the contest. Despite a huge financial advantage, Barnes was defeated in 2002 by Sonny Perdue."

*Be sure to read our coverage of the New Jersey primary from last night.

*Philly Inquirer: "Both Lonegan and Christie romanced conservative voters, but in the end the pragmatists decided Christie could best face Corzine. Turnout was light statewide.

*The Star-Ledger: "Christie's victory sets the stage for what could be the most competitive gubernatorial race in more than a decade, as he takes on incumbent Gov. Jon Corzine in November. Corzine faced only token opposition in the Democratic primary, but is already hobbled by plummeting job approval ratings, as well as a state budget hammered by a continuing recession that has forced deep, unpopular spending cuts, state worker furloughs and a scaling back of property tax rebates."

*Next week it's Virginia's turn, and CNN's Hamby looks at how turnout will effect the outcome. If African Americans come to the polls in large numbers, "Terry McAuliffe could very well be the beneficiary and move on to face Republican Bob McDonnell in the general election, a race that will be fraught with national implications. But if many of those voters stay home, McAuliffe's lively and unconventional bid for the governorship might come to an end."

*Pawlenty '12: The Minnesota governor acknowledged plans to visit Washington later this week as he announced he wouldn't seek a third term. He'll address a gathering of College Republicans, and said he has been in contact with national Republicans "a lot," the Star Tribune reports.

--Mike Memoli and Kyle Trygstad