Obama picks Lew for Treasury as fiscal issues loom
For 30 years, Jack Lew has had a hand in some of the biggest economic deals negotiated in Washington. What awaits him if he's confirmed as treasury secretary could far exceed any challenge of the past - a triple-decked potential crisis that will test his experience the moment he opens his office door on the third floor of the Treasury Building
Lew, nominated for the job Thursday by President Barack Obama, has honed his skills in the trenches of fiscal policy, helping forge major deals encompassing Social Security and budgets for the likes of former Speaker Tip O'Neill and President Bill Clinton.
Obama highlighted that experience in announcing Lew's selection, an unmistakable nod to the fast-approaching deadlines to raise the government borrowing limit, avert deep and immediate spending cuts and extend government operations.
"I trust his judgment," Obama said. "I value his friendship. I know very few people with greater integrity."
Flanked by Lew and outgoing Treasury Secretary Timothy Geithner in the White House's ornate East Room, Obama in effect underscored the nation's changing economic landscape. In Geithner, Obama had a longtime international finance specialist with the Treasury and the Federal Reserve who took office in 2009 at the height of the nation's banking crisis. In Lew, currently the White House chief of staff, he has a premier budget expert and close ally as the government plunges into its next struggle over debts and deficits.
Of the three looming events that would confront him if confirmed none has the potential for more economic damage than the debt ceiling. Failure to increase it from its current $16.4 trillion would force the government to default on its debts, an unprecedented event. Republicans have demanded spending cuts in exchange for raising the debt ceiling. Obama has vowed not to negotiate over the nation's ability to pay its obligations.
It's the kind of standoff that doesn't simply require budget knowledge, but also negotiating skill. Obama praised Lew for exemplifying both.
"Over the years, he's built a reputation as a master of policy who can work with members of both parties and forge principled compromises," Obama said.
But House Republican officials who negotiated with Obama's team over a debt ceiling deal in the summer of 2011 described Lew as unyielding, saying he displayed a greater desire to persuade than to negotiate and to use what they considered budget gimmicks to show cuts in spending.
According to notes kept by a Republican official during a White House meeting on July 13, 2011, Lew justified his accounting math as longtime Washington practice. "We're not doing that anymore," House Speaker John Boehner replied.
Reaction to Lew's appointment fell along predictable partisan lines.
Senate Majority Leader Harry Reid, D-Nev., called his selection an "outstanding choice" and praised Lew as a "selfless public servant." The Democratic chairman of the Senate Banking Committee, Tim Johnson of South Dakota, called him "a well-respected, longtime public servant with impressive expertise on budgetary and fiscal issues."
And while Obama credited Lew's time as budget director under President Clinton when the nation's budget was in surplus, Republicans pointedly noted that he has been Obama's budget director and chief of staff during a time of $1 trillion deficits.
"The American people deserve to know not only that this nominee is qualified for the job, but also what policies the White House supports to get federal spending under control," said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.
One liberal senator, Independent Bernie Sanders of Vermont, announced he would not vote for Lew, even though he predicted he would be confirmed. He criticized Lew's role in budget negotiations where the White House agreed to consider changes in Social Security cost-of-living increases and reductions in Medicare spending.
And Lew's selection was attacked in an editorial Thursday in the Wall Street Journal, which said, "Mr. Lew's nomination will disappoint those (mostly naive CEOs) who were hoping for a second-term agenda more hospitable to business and private economic growth. ... Mr. Lew is a Washington lifer whose expertise is politics."
Initial reactions from the business and financial sectors, however, were far more positive.
"One of the realities of Mr. Lew's appointment is the challenges we face in the country right now - the cliffs we have in front of us," said Thomas Donohue, the president and CEO of the U.S. Chamber of Commerce. "I think Jack is a very experienced fellow on the issues of debt, deficits and budgets."
Donohue called Lew a "skilled operative," a "vigorous and strong person" and a "tough dude."
Rob Nichols, the president and CEO of the Financial Services Forum, a major banking industry group, said: "Given his experience in the government and private sector, Mr. Lew is well-suited for the job especially at a time when Washington must come together to address our debt situation and put our nation on a long-term fiscally sustainable path."
Lew's nomination is the fourth major personnel change in the administration since Obama's re-election. Obama tapped Sen. John Kerry, D-Mass., to become secretary of state, former Republican Sen. Chuck Hagel of Nebraska as defense secretary and White House counterterrorism adviser John Brennan for the CIA's top job.
Geithner is expected to remain at Treasury through Jan. 25.
While Lew does not have the extensive Wall Street experience of past treasury secretaries, many analysts said that his experience dealing with budget issues should make up for that.
"He knows the federal budget in gory detail and he has a lot of experience working with Congress," said Mark Zandi, chief economist at Moody's Analytics. "Those are two big plusses for any treasury secretary. The next couple of years will be about getting our fiscal house in order and there is no better person to do that than Mr. Lew."
Lew, an Orthodox Jew who eschews work on Saturdays, is the picture of a policy bookworm with his glasses and neatly parted shock of hair. It's a look that has defined him since his days working for Tip O'Neill in room H-209 in the Capitol, sitting next to Chris Matthews, then a top O'Neill aide and now the garrulous MSNBC television host.
Matthews, a fan of Lew's, marveled that Lew's looks and his "Maginot Line hairline" remained the same from their days on the Hill.
"I watched that part this morning, and it hasn't changed," he said.
Now 57, Lew was in his mid- to late-20s while working for O'Neill and had a hand in negotiations between the speaker and President Ronald Reagan that led to a bipartisan agreement to extend the solvency of Social Security.
"Very young guy, just a smart guy," Matthews recalled Thursday. "I looked like the door keeper, he was the smart guy in the corner."
Associated Press writer Martin Crutsinger contributed to this report.
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