President Obama recently said he would love to hire a top executive into his administration. But for the job of Treasury secretary, he didn’t pick a corporate executive, a famous economist or a former politician — he has decided to tap a trusted adviser, White House Chief of Staff Jacob Lew, an expert on the nation’s ongoing budget wars.
Obama on Thursday plans to nominate Lew to take over from Treasury Secretary Timothy F. Geithner, the president’s longest-serving economic adviser, a White House official said. The selection, to be announced at 1:30 p.m., signals that Obama’s second term will not initially focus on big new ideas to create jobs or expand government investment in the economy.
Rather, it will involve a sustained conflict with congressional Republicans over the nation’s finances. The government is likely to face a deadline to raise the $16.4 trillion federal debt ceiling no later than March 1 — as well as a series of deep and automatic spending cuts known as sequestration set to begin around the same time.
These upcoming battleswill once again pit Democrats’ economic vision against that of Republicans. Democrats say they want to raise taxes on the wealthy to shrink the deficit but reduce government spending sparingly so as to preserve funding for domestic priorities such as education. Republicans oppose new taxes, saying they would crimp economic growth, and favor deep cuts to spending.
Lew, 57, is a veteran of these fights. He was formerly the budget director for Obama and President Bill Clinton. He has been negotiating compromises over taxes and spending since the 1980s, when he was a top aide to then-House Speaker Thomas P. “Tip” O’Neill Jr. (D-Mass.).
“Jack Lew is a great budget man taking over Treasury at exactly the moment that budget and tax issues have become the dominant economic issue in Washington,” said Austan Goolsbee, a former chairman of Obama’s Council of Economic Advisers.
Some Democrats say that although Lew may be the best choice at the moment, the White House must address unemployment and keep pushing for measures to create jobs.
“Jack Lew is the guy you’d want there for upcoming fiscal deals, but it’s also very important to have folks on the team who will push the Keynesian, or jobs, imperative from the inside, even if that means a temporarily larger budget deficit,” said Jared Bernstein, a former White House economic adviser.
“Though they’ve been winning the arguments, the White House has been too stuck on the Republicans’ side of the field, basically arguing deficits and austerity measures,” he said. “They need to shake that up somehow.”
Lew’s nomination will allow Geithner, who has been seeking to leave Treasury since 2011, to finally step down. In 2011, Obama pleaded with him to keep his post, given the European financial crisis and continual fiscal battles, and he agreed to stay through the end of this month. Geithner, who came in amid a financial crisis and deep recession, leaves Lew an economy experiencing a steady, but not robust, recovery.
Deputy Treasury Secretary Neal Wolin, who had been planning to leave around the same time as Geithner, will stay on at the White House’s request to help with the transition.
Ideologically, Lew is a deficit hawk, and he thinks Obama should be pursuing an aggressive effort to slow the growth of the federal debt. But he has deep roots in Democratic politics, and in previous negotiations he has passionately resisted efforts to slice the social safety net, particularly Medicaid, the health insurance program for the poor.
The nomination is subject to confirmation by the Senate, where many Republicans say they found Lew to be uncompromising during negotiations over the budget in 2011. House Speaker John A. Boehner (R-Ohio) has complained bitterly about him, while a GOP congressional aide said Wednesday that Lew “is more interested in convincing Republicans of the wisdom of his position than seeking common ground.”
But despite the criticism, there was no groundswell of opposition to him Wednesday, and there did not appear to be any significant barriers to a relatively seamless confirmation.
Lew’s supporters note that he has been successfully forging bipartisan budget deals for decades — including, in the 1990s, when he helped craft an agreement that led to surpluses for three years.
“Jack Lew’s record has and continues to be stellar,” White House press secretary Jay Carney said on Wednesday. “He is that rare person in Washington who has been here for years, who has done some very hard things and brokered some serious bipartisan agreements and done it in a way that has earned the admiration of those he has worked with.”
Although Lew’s immediate tasks would be fiscal, he also would have to confront a broader range of challenges, some outside his area of expertise.
He would be the administration's leading spokesman for the economy, at a time when unemployment remains stubbornly high and there is little talk about how to create jobs. After the election, Obama made proposals to do so — including spending more to rebuild roads and bridges and extending a payroll tax cut that had been boosting incomes — but they quickly disappeared in the face of GOP opposition.
As Treasury secretary, Lew also would oversee a council of the nation’s financial regulators charged with flagging risks to the economy and overseeing the issuance of rules governing financial markets. He would have a hand in devising a new system for financing mortgages, which has been the purview of the federal government since the financial crisis exploded in 2008.
Overseas, he would play in role in trying to help Europe’s economy emerge from a financial crisis that has buffeted it for more than two years. He would be a key participant in efforts to manage relations with China, India and other emerging economic powers, and he would oversee the enforcement of laws to prevent terrorists from accessing the global financial system.
“Jack’s a great choice,” said Lawrence H. Summers, a former Treasury secretary and top Obama economic adviser. “Few Treasury secretaries have had as much experience at as high a level of economic policy as Jack Lew, and there are none who have established a greater reputation for thoughtfulness, trustworthiness and decency.”
By nominating Lew, Obama is in line to choose a new chief of staff. Denis McDonough, a deputy national security adviser, is among the leading candidates, as is Ron Klain, a former chief of staff to Vice President Biden.
Lew’s nomination is the latest as Obama rounds out his second-term team. This week, he nominated former senator Chuck Hagel (R-Neb.) as his next defense secretary and counterterrorism adviser John O. Brennan as CIA director. The president must fill several other Cabinet-level jobs, including commerce secretary and budget director.
Lew was not part of Obama’s inner circle when he joined the administration, first as the No. 2 official in the State Department, where he managed day-to-day operations and also was responsible for international economic policy. But he became increasingly central to the White House’s activities. “He has the supreme confidence of the president,” said Roger Altman, an investment banker who was deputy Treasury secretary under Bill Clinton.
Lew, a native of New York, graduated from Harvard College and Georgetown’s law school. He was a senior official at New York University and a top executive at Citigroup during the George W. Bush administration.
He took up the budget director post in 2010, replacing Peter Orszag, and then took over for William Daley as chief of staff last January.