Jacob Lew Nominated To Head OMB

The search for Peter Orszag’s successor at the Office of Management and Budget is over, as the White House announced Tuesday morning that President Obama has picked Jack Lew, who held the same job during the Clinton administration.

In announcing his decision, Obama said: “The experience and good judgment Jack has acquired throughout his impressive career in the public and private sector will be an extraordinary asset to this administration’s efforts to cut down the deficit and put our nation back on a fiscally responsible path. As the budget director who left the next administration a $237 billion surplus when he worked for President Clinton, I have no doubt that Jack has proven himself equal to this extraordinary task. I am grateful he has agreed to serve in this critical role, and I look forward to working with him in the weeks and months ahead.”

Later, Obama introduced Lew to reporters at the White House, and stressed that Lew was the only budget director in history to preside over three consecutive budget surpluses, before Republican George W. Bush took control in 2001.

“If there was a Hall of Fame for budget directors, then Jack Lew surely would have earned a place for his service in that role under President Clinton when he helped balance the federal budget after years of deficits,” Obama said. “When Jack left that post at the end of the Clinton administration, he handed the next administration a record $236 billion budget surplus. The day I took office eight years later, America faced a record $1.3 trillion deficit. Jack’s challenge over the next few years is to use his extraordinary skill and experience to cut down that deficit and put our nation back on a fiscally responsible path.”

In selecting Lew to return to OMB, Obama has chosen a consummate budget professional and master of legislative detail who once served as chief policy adviser to the late House Speaker Thomas P. “Tip” O’Neill Jr., D-Mass. Robert Reischauer, president of the Urban Institute and a former Congressional Budget Office director, said Lew was a “terrific choice” because “Jack meets all of the criteria for being an effective OMB director at a time of fiscal stress.”

“He knows and has worked on these issues for decades, he has strong ties with people on Capitol Hill from both sides of the aisle, he knows and worked effectively with many of the players on the Obama economic team because of his experience during the Clinton years, and he knows OMB and how it works,” Reischauer said.

But Lew faces a grueling challenge – the exact mirror image of his last tenure at OMB. Back then, tax revenues were flooding in so fast that surpluses were piling up even though Congress and the White House were ignoring pay-as-you-go restrictions. Now, the administration faces trillion-dollar deficit projections in the coming years. Obama has pledged to slash the deficit to 3 percent of gross domestic product by 2015, and his fiscal commission may recommend painful policy changes that would be difficult to get through Congress. Reischauer said the challenge is not just the size of the deficit but deciding on the magnitude and timing of belt-tightening. “We’re at a juncture where we’re going to have shift gears from fast forward to reverse, and that’s going to both technically and politically extremely difficult – deciding whether, when or how much.”

Lew’s low-key style would provide a contrast to Orszag, whose personal relationships often made their way into Washington gossip columns. Although he operated largely behind the scenes in the Clinton administration as a special assistant to the president and then deputy director of OMB before being tapped as budget director, Lew was credited with helping launch Clinton’s national service program and providing critical technical and political advice during the talks that led to the historic balanced budget deal with the Republican congressional leadership in the spring of 1997. In the final frenetic negotiations before the White House and Republican leaders announced their agreement May 2, Lew was the one who scoured the language for political minefields and unwelcome last-minute changes by the Republicans.

Between 1998 and 2001, Lew led the Clinton administration’s budget team and served as a member of the National Security Council. During his tenure at OMB, the federal budget operated at a surplus for three consecutive years. As special assistant to President Clinton from 1993 to 1994, Lew helped design Americorps, the national service program. Lew was described by colleagues and associates at the time as a smart, somewhat nerdy technocrat and legislative craftsman with a passion for the federal food stamp program and other social welfare policies that can better the lives of the poor. He is widely respected by centrists and liberals alike.

Lew currently is a senior adviser to Hillary Clinton at the State Department, where he is deputy secretary for management and resources. He was well received when he was selected for that post, where he is in charge of overhauling the foreign service and foreign aid bureaucracies. He initiated a Quadrennial Diplomacy and Development Review to set a plan for the department. It is modeled on a similar review at the Pentagon and its results are expected this fall. Prior to that, he was chief of operations at New York University and then chief operating officer at Citi Alternative.

Lew, 54, is highly regarded in government circles for his management style and deep knowledge of the budget, but he was something of a dark horse candidate in the sweepstakes to replace Orszag, who plans to step down at the end of July. A Harvard graduate who holds a law degree from Georgetown University, Lew was the fourth budget director to serve in the Clinton administration, after Leon E. Panetta, Alice Rivlin and Franklin Raines.

A Jew whose father emigrated from Poland, Lew considered community cohesion to be a central part of religious faith, according to author Steven Waldman, who wrote about Lew’s role in the passage of Clinton’s national service legislation in 1993. Lew would regularly take his two children to nursing homes to visit seniors who had been congregants in his synagogue.

As O’Neill’s domestic policy adviser starting in 1979, Lew was involved throughout the speaker’s often stormy relations with the Reagan administration. He emerged as an honest broker during the intense talks that led to passage of Social Security reforms in 1983. As the talks reached a critical point, Lew was asked by congressional leaders to call President Ronald Reagan and then-House Ways and Means Committee Chairman Dan Rostenkowski, D-Ill., at a golf tournament to brief them on the emerging deal.

The departing Orszag, a Princeton-educated economist and a former director of the Congressional Budget Office, was more than the president’s chief bean counter. He was also a central member of Obama’s brain trust and an architect of his health care reform effort. Even though the federal deficit was ballooning at the time he arrived in the White House, mostly because of the financial crisis, Orszag argued that extending insurance to millions of uninsured Americans was a necessary component to controlling long-run health care costs and ultimately to stabilizing federal budgets in the future.

But Orzag was also an adamant advocate of measures to address the long-term deficit, including entitlement reform to slow the rate of growth of health care spending, which occasionally put him at odds with Lawrence Summers and some of Obama’s other economic advisers, who were more concerned economic recovery and stimulus.

With his formidable background as an economist, Orszag could often dominate internal administration economic debates. It remains to be seen the role that Lew, a lawyer, will carve out for himself in these larger White House economic debates. Senate Budget Committee Chairman Kent Conrad, D-N.D., called Lew a “superb choice,” adding that “Not only has he already served in this critical post, but he brings with him a wide array of public and private sector experience. He knows how to make the tough choices. And he knows how to reach across the aisle to find bipartisan solutions.”

The two leading candidates to take over OMB had been Gene Sperling, a senior Treasury Department aide who held several positions in the Clinton Administration, and Laura Tyson, a Berkeley economist who also served under Clinton. Both have outstanding resumes. Sperling worked on eight budgets during the Clinton years, and earned a reputation as a workhorse and keen student of policy and politics. Tyson is a highly regarded economist who knows her way around Washington and could give the administration a public voice with authority.