White House Chief of Staff William Daley quits; budget chief Jacob Lew fills post

White House Chief of Staff William M. Daley resigned Monday, a year after taking the job, shaking up the administration’s senior management just as President Obama gears up for what is expected to be a tough reelection campaign.

Last January, Obama tapped Daley to replace Rahm Emanuel with high expectations. Daley, a former banker who also served as commerce secretary in the Clinton administration, was expected to help the White House improve relations with Wall Street as it implemented a series of financial reforms in the recession’s wake.

But Daley never seemed comfortable in the job, drawing wide criticism for his handling of the bitter and protracted legislative battles between the White House and Congress during much of 2011 that helped drag down the president’s public approval ratings.

Daley struggled to develop relations with members of both houses of Congress, and after he relinquished day-to-day operations to senior adviser Pete Rouse in the fall, his role seemed significantly reduced.

In a brief appearance at the White House on Monday, Obama announced that Daley, 63, will be replaced by budget director Jacob J. Lew, effective at the end of the month. Daley will stay in the job through the president’s State of the Union address Jan. 24 to help ease the transition.

Traditionally, the role of a White House chief of staff has included managing daily operations of the staff, weighing in on domestic and foreign policy, and helping manage relationships between the White House and Capitol Hill, Wall Street and other outside groups.

Whereas the fiery Emanuel, who had been a congressman before joining the White House and left to run for mayor of Chicago, was intimately involved in most of Obama’s decisions on politics and policy, the cooler Daley was said to have taken a more CEO-like approach to the job. Congressional Democrats complained privately that Daley acted as if they were “wasting his time,” and Senate Majority Leader Harry M. Reid (D-Nev.) never embraced him.

Eventually, Daley’s influence began to wane as Obama increasingly relied for political advice on trusted longtime aides such as senior adviser David Plouffe.

In Lew, 56, Obama has selected a longtime Washington figure who also oversaw the Office of Management and Budget in the Clinton administration from 1998 to 2001.

Lew, who resumed oversight of OMB in November 2010, has played a critical role as the administration tangled with Congress over how to tame the country’s spiraling debt and survived a showdown over a payroll tax cut that was extended last month.

Lew is taking “one of the most difficult jobs in Washington,” Obama said, with Lew at his side. “But Jack has had one of the other most difficult jobs in Washington. His economic advice was invaluable. He has my complete trust.”

Obama becomes the third consecutive president to turn to his budget director in a time of trouble. Bill Clinton appointed Leon E. Panetta in the aftermath of Republicans taking control of Congress in the 1994 midterm elections, and George W. Bush elevated Joshua Bolten after the administration was criticized for its response to Hurricane Katrina in 2005.

Yet Lew is not a political operative; the president will rely on a cast of familiar faces from his 2008 campaign to direct his reelection effort, including Plouffe, campaign director Jim Messina and campaign adviser David Axelrod.

Rather, the choice of Lew reflects the White House’s anticipation of the coming fight with Congress over how to pay for extending the payroll tax holiday, scheduled to expire at the end of February, through the year’s end. Administration officials have described that as the final “must-do” legislative initiative before the White House turns its attention more fully to the campaign.

Unlike Daley, Lew knows Capitol Hill well, having begun his Washington career in 1973 as a legislative aide and spending eight years as House Speaker Thomas P. “Tip” O’Neill Jr.’s principal domestic policy adviser.

Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, called Lew’s promotion “a superb choice” and added that few “have Jack’s level of experience and knowledge.”

Lew will remain at the budget office this month to wrap up work on the administration’s fiscal 2013 federal budget proposal, which aides said is expected to be completed in the coming weeks. Obama did not name a successor to Lew.

Daley drew criticism during the White House’s fight with congressional Republicans over debt-ceiling negotiations in the summer.

In one particularly embarrassing episode, Obama requested to speak to a joint session of Congress in September only to be rejected by House Speaker John A. Boehner (R-Ohio), who invited him instead to come a day later. The White House claimed that Daley had earlier secured Boehner’s agreement for the original date, but the speaker’s office denied that an agreement was in place.

After that, Obama switched tactics, eschewing direct negotiations with Congress in favor of a public barnstorming tour in which he contrasted his efforts to create jobs with a legislature that the president said was mired in partisan gridlock.

White House aides said that Obama will continue in that vein in the coming months as he ramps up his reelection message that the administration is fighting to improve the lives of middle-class Americans.

In his resignation letter to the president, Daley praised Obama’s leadership during a year of “great challenge for the American people,” citing his push in the fall to boost the economy through his jobs legislation.

Obama’s focus on jobs growth “shows that you will not rest until our fellow citizens recover,” Daley wrote.

Staff writers Cheryl W. Thompson, Ed O’Keefe and Paul Kane contributed to this report.

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