Nominee to lead Treasury values social safety net
When Jack Lew became President Obama’s budget director, he removed from his new office a portrait of Alexander Hamilton, the nation’s first Treasury secretary and the father of American finance, and put up paintings of New York City by jobless artists who had been hired into the New Deal’s public works program.
That small gesture, say people who know Lew, speaks volumes about the mind-set of the man Obama has nominated to serve as the 76th Treasury secretary — a sustained focus on protecting the nation’s social safety net over three decades of budget battles in which programs that support the poor and jobless have been targets for cuts.
The experience is unusual for a Treasury secretary, a position traditionally occupied by someone with more of a background in financial markets or corporate America. It has also opened Lew, 57, to criticism from both ends of the political spectrum. Some conservatives say he has a blind obsession with providing government benefits, without care for the nation’s overall finances. Some liberals say he has too often forfeited his principles in search of bipartisan deals.
Yet his history suggests that while Lew aggressively advocates on behalf of programs that protect the poor, he has also been willing to make unpopular compromises out of a belief that the nation must have its financial books in order.
“What makes Jack, ‘Jack,’ and not a caricature of a big government liberal who believes that all spending is good is that he also believes you also need to make sure that every dollar is spent as effectively as possible,” said Kenneth Baer, a former senior adviser to Lew at the Office of Management and Budget. “He has a hard head and a soft heart. He has had to make very hard decisions, especially in the last couple of years when you have limited resources.”
In the budget negotiations of 2011, both sides of Lew’s approach to dealing with the nation’s financial challenges were vividly on display.
Near the end of negotiations over ways to trim the deficit in 2011, Lew was on the phone with a top aide to Senate Minority Leader Mitch McConnell (R-Ky.). The aide introduced the idea of targeting Medicaid, the health insurance program for the poor, for deep spending cuts. The proposal prompted Lew, usually calm and restrained, to become angry.
“No! No! No!” Lew shouted over the telephone, exasperated that a proposal to cut a low-
income program was being introduced at the last minute, according to Republicans and Democrats familiar with the call, which was first reported in Bob Woodward’s book, “The Price of Politics.”
Instead, the mechanism Lew helped design to ensure deficit savings — an automated series of spending cuts known as the sequester that is set to take effect in early March without further action by Congress — spared Medicaid and most other low-income programs. White House officials take pride in that point today — even as other cuts that were agreed upon bring much domestic spending to historic lows.
“Jack’s background seems to have taught him that federal budgets are codifications of our values,” said Ron Pollack, who has worked with Lew as executive director of Families USA, a group that advocates for public health-care coverage. “An apparent high priority value for him, like the president, is the most economically vulnerable families should not be forced to shoulder unbearable burdens.”
But some Republicans see Lew’s commitment to Medicaid and other parts of the social safety net as a weakness. They say Lew has been point man for an administration uninterested in cutting spending deeply enough to slow borrowing.
”They’ve resisted spending reductions at every turn. They had whole programs like Medicaid and food stamps and others that had no spending reductions at all,” said Sen. Jeff Sessions (R-Ala.), a ranking member of the Senate Budget Committee and an opponent of Lew’s nomination.
Although opposed to significant changes in low-income programs, Lew has been willing to put on the table other Democratic sacred cows, including Medicare and Social Security. In the context of a broad deficit-reduction deal, Lew, like Obama, has been in favor of trading a cut in Social Security benefits and a gradual increase in the Medicare eligibility age for substantial tax hikes on the wealthy.
Lew, who has spent decades negotiating bipartisan budget agreements with Republicans, believed in 2011 that the proposals would heighten the chance of a deal that could have positive long-term effects on the economy and only a small impact on seniors, according to people familiar with his thinking.
“Jack Lew is one who agrees we have a long-term fiscal problem we have to address and he is willing to make hard choices on spending,” said Bob Greenstein, president of the left-leaning Center on Budget and Policy Priorities, who disagreed with the idea of raising the Medicare eligibility age.
Some liberals were outraged that Lew and the administration were willing to make such cuts.
“My understanding is that he has not been unsympathetic to either raising the age of Medicare eligibility or [changes to Social Security], which I think is just a horrendous attack on senior citizens and veterans and working people,” said Sen. Bernard Sanders (Vt.), an independent who caucuses with Democrats and has come out against Lew’s nomination. “That’s not the way you do deficit reduction.”
No senators other than Sessions and Sanders have come out against Lew’s nomination, and no major barriers seem to stand in the way of him being confirmed by the Senate.
Lew, who is married and has two grown children, developed his political outlook while growing up in Forest Hills, N.Y. At age 12, he handed out fliers for the campaign of Eugene McCarthy, who ran against President Lyndon B. Johnson on an anti-war platform in 1968.
He went to Carleton College in Minnesota, where he had the late Paul Wellstone, a liberal lion, as a professor and then left school to join the office of Rep. Bella Abzug (D-N.Y.), a crusader for women’s rights.
“Where he literally comes from and where he comes from ideologically is the same place — Queens, New York City, from the outer borough neighborhoods where scores of people were immigrants and were striving to get ahead,” Baer said.
But in his mid-20s, Lew, who later finished college at Harvard and got a law degree at Georgetown, saw how ideological principles collided with political and economic realities.
As a top adviser to House Speaker Thomas P. “Tip” O’Neill Jr. (D-Mass.), Lew was part of the team that did something many Democrats didn’t want to do — reform Social Security. When he was just 27, he helped oversee passage of legislation stabilizing Social Security for a generation, by gradually raising the eligibility age to 67 and increasing payroll taxes.
But even as he supported those changes, Lew also successfully fought deep cuts to low-income programs advocated by the Reagan administration.
In the Clinton administration, Lew helped create the AmeriCorps community service initiative and later worked on Hillary Rodham Clinton’s failed health-care plan.
Tapped as Clinton’s budget director, Lew faced a budget battle with Republicans, much as he does now. And while the eventual deal was friendly to GOP goals — it included tax cuts and spending cuts — Lew and colleagues stood firm against slashing programs for the poor. In fact, they expanded them.
“During the 1997 budget agreement, Jack was a central player on protecting Medicaid,” said John Podesta, who was Clinton’s chief of staff. “He was also able to help expand health insurance for 5 million kids and protect tax benefits that went to the working poor.”
During the Bush years, Lew worked for New York University in an operations role and then was at the massive bank Citigroup during some of its worst moments — an experience that has led critics to question whether Obama should be nominating someone with a Wall Street background for such a critical role.
Under Obama, he first worked as the deputy secretary of the State Department before becoming budget director in 2010. His supporters say that as Treasury secretary, he will be trusted to give the president a balanced perspective.
In the latest “fiscal cliff” talks, Obama tapped Lew to help lead a discussion with business leaders in the White House, pressing the executives to support a big deal to stabilize the debt.
Sylvia Mathews Burwell, who was Lew’s deputy at OMB and is now president of the Walmart Foundation, said that while Lew’s predecessors excelled in specific areas, Lew combines features.
“If you were to look at Bob Rubin on a scale of 1 to 10, you’d put him on a 10 on financial services experience. If you looked at Lloyd Bentsen on a scale of 1 to 10, you’d put him at 10 on experience politically,” she said. “I would put Jack as 10 on the scale of composite — meaning combining a set of skills.”