OMB’s Jack Lew Could be Obama’s Magic Bullet
Policy + Politics

OMB’s Jack Lew Could be Obama’s Magic Bullet

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Jacob (Jack) Lew, President Obama’s choice to head the White House budget office, could be a magic bullet for the beleaguered administration. During the 1990s, Lew held the same position as director of the Office of Management and Budget under Clinton and is widely credited with working closely with Republican and Democratic leaders to balance the budget.

Lew, 55, who was picked to replace Peter Orszag, said Thursday that it was still too soon to be “putting on the brakes” on government spending to combat one of the worst recessions in U.S. history, but that it is imperative to begin addressing ways to slow the growth of the long-term deficit.

Testifying before the Senate Budget Committee, Lew conceded that the recovery has been painfully slow despite massive government spending and Wall Street bailouts, and that the administration is unhappy with the unemployment rate, currently at 9.6 percent. But responding to criticism in both parties of Obama’s $787 billion economic stimulus package last year, Lew said that “we were headed off the cliff” and that “the actions taken helped restore the ability for there to be a recovery.”

“If we had not responded to the very, very severe economic crisis,
we would be seeing much higher rates of unemployment.”

“None of us are satisfied with the rate of the recovery,” he said. “If we had not responded to the very, very severe economic crisis, we would indeed be seeing much worse economic circumstances with much higher rates of unemployment … I think as we look ahead, it’s a very, very significant challenge to simultaneously focus on the fact that we have to continue to encourage economic growth, we have to continue to encourage job creation, but we can’t put off for years worrying about the deficit.”

Obama’s choice is part of a gradual reorganization of the White House economic team, including the recent appointment of Austan Goolsbee to replace Christina Romer as head of the White House Council of Economic Advisers. Treasury secretary Timothy F. Geithner continues to serve as the administration’s chief spokesman on the economy, as he did yesterday on Capitol Hill in signaling a tougher line on China, as senators from both parties expressed frustration with the administration's reliance on negotiation in dealing with China's currency and trade policies. 

“The coming months may be the most critical
time in fiscal policy in recent memory.”

Underscoring the urgency of getting a new White House budget director in place amid a perpetually soaring deficit and a struggling economy, Budget Committee chairman Kent Conrad, D-N.D., scheduled a committee vote next week on Lew’s nomination, and hopes to push it through the full Senate before Congress adjourns in October for the elections. A spokesman for Senate majority leader Harry Reid, D-Nev., said it was too soon to tell whether there will be the time or the votes to take up the nomination that quickly. Lew himself warned that “the coming months may be the most critical time in fiscal policy in recent memory.”

The New York native and lawyer has a long Washington resume, dating back to his post as chief domestic policy adviser to House Speaker Thomas P. (Tip) O’Neill, D-Mass., from 1979 to 1987, and followed by a number of government jobs. He helped launch President Clinton’s AmeriCorps public service program before joining OMB in 1994, and served as the agency’s director from 1998 through the end of the Clinton administration. While out of government, Lew was executive vice president for operations at New York University and then joined Citigroup, earning $1.1 million in salary and discretionary cash compensation in 2008 as a managing director of the banking giant. After Obama took office, Lew returned to government as deputy secretary of state for management and resources, where he has worked closely with Secretary of State Hillary Rodham Clinton.

The affable, low key Lew received a warm welcome during yesterday’s confirmation hearing, with senators from both sides of the aisle praising him for his skill as a budget negotiator and strategist, and reputation for working closely with Republicans and Democrats alike. “Jack knows how to make the tough choices that will be needed to put our country back on a sound fiscal course,” Conrad said. “When he completed his service at OMB, the country had a surplus of more than $200 billion. And Jack knows how to reach across the aisle to find bipartisan agreement.”

Judd Gregg said Lew always gives lawmakers a straight answer:
“It may not be one you agree with, but it’s always a straight answer.”

Sen. Judd Gregg of New Hampshire, the ranking Republican on the committee, noted that Lew always gives lawmakers a straight answer. “It may not be one you agree with, but it’s always a straight answer.”

The only discordant note came during questioning by Sen. Bernie Sanders, an independent from Vermont, who complained that the poor and middle class may be made to suffer even more as part of the push to reduce the long-term deficit, when much of the deficit problem was born of Republican tax cuts, war spending and Wall Street bailouts. “Before we talk about the seriousness of the debt, let’s remember how we got there,” Sanders said.

Liberals are applying more heat to Obama to keep stimulus on the agenda and avert changes to Social Security. A group of more than 300 economists and left-leaning organizations released a statement Thursday calling for more state and infrastructure spending and support for public-sector jobs. The group, led by the Campaign for America's Future, says that now is akin to 1937, when the government pulled back on stimulus spending and prolonged the Great Depression. They said policymakers shouldn't sacrifice short-term growth for action on long-term deficits.

"To turn to deficit reduction now to constrict spending will not only deepen the stagnation and spread the misery, it will ironically fail to reduce the deficit," said Robert Borosage, co-director of the Campaign for America's Future. "More unemployment would reduce government income and increase government expenditures."

The economy has suffered repeated setbacks in recent months, and Lew and lawmakers agreed that the government’s $13.5 trillion national debt is on an “unsustainable” upward trajectory. The Congressional Budget Office projects that budget deficits will average nearly $1 trillion a year over the next decade. This year, the deficit is expected to reach $1.3 trillion, or the equivalent of nearly 10 percent of the gross domestic product. Obama has asked his National Commission on Fiscal Responsibility and Reform to come up with recommendations for reducing the deficit to the equivalent of 3 percent of GDP by 2015.

Lew hailed the work of the 18-member, bipartisan deficit commission and said that “I think the administration has wisely stepped back a little bit, given the commission room, and said that we're open to the commission's recommendations.”

“I think most importantly, if there could be the beginning of a bipartisan process in the commission, take that forward and use it as a basis to work together in the year to come,” he said. Lew added that Obama remains committed to seeking a congressional vote on any recommendations emerging from the commission by Dec. 1 that have the support of 14 of the 18 members.

While much of yesterday’s hearing was devoted to concerns over the economy and record deficits, the discussion briefly veered into the weeds of the budget process – as Lew compared notes with Conrad and Republican Sen. Lamar Alexander of Tennessee about a long-standing idea of switching the annual budget process to a two-year cycle. Proponents say a biannual budget would give Congress greater time to deliberate over spending priorities, make mid-course corrections, and more aggressively conduct oversight of government programs.

Alexander said there is growing bipartisan support for switching from an annual to a biannual budget. Conrad, who once opposed the idea, said he now thinks it would make sense and help to avoid budget stalemates in election years. Lew said “there are many challenges” to moving to a two-year budget cycle, but that “it’s the kind of conversation very much worth pursuing.”

Adam Graham-Silverman of The Fiscal Times contributed to this report.