OMB nominee Lew warns of 'critical' fiscal period

By Ed O'Keefe
Washington Post Staff Writer
Thursday, September 16, 2010; 11:43 PM

President Obama's nominee to serve as budget chief urged lawmakers Thursday to avoid scoring short-term political points as they explore ways to create jobs and pay down the federal deficit.

Jacob J. Lew, tapped to lead the Office of Management and Budget, also said the coming months might be the most critical time for fiscal policy in recent years.

"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 encourage job creation, but we can't put off for years worrying about the deficit," Lew told the Senate Budget Committee. "We have to be able to think about both at the same time. I think that the key challenge is for us to begin to take actions which won't have an effect today or tomorrow."

Lew, who served as OMB director during Bill Clinton's administration, said budget surpluses like those in the late 1990s and the early part of the next decade won't be possible again without strict fiscal discipline. He also said Clinton reluctantly adhered to "pay as you go" rules.

"That meant saying no to a lot of things that we would have liked to have done," Lew said. He added that the current lack of fiscal discipline is affecting the private sector.

"I think that we're now in a place where the size of the deficit and the lack of serious conversation about how to reduce it causes a great deal of unease and uncertainty, which I take as one of the reasons why businesses across the country are sitting on an awful lot of resources stashed," Lew said.

During the Clinton years, Lew pushed for a biennial federal budget process, and he voiced support for a two-year cycle again Tuesday.

"In the many years it's been discussed, I've never seen a consensus form around it, but I think it's a conversation very much worth pursuing, because the effective implementation of programs is both a challenge at OMB and Congress that we all need to pay attention to," Lew said in response to a question.

Senators of both parties agreed with Lew, citing the stalled budgetmaking process in recent years.

Lew, 55, currently serves as the State Department's deputy secretary for management and was once an aide to then-House Speaker Thomas P. "Tip" O'Neill Jr. (D-Mass.).

Senators fondly recalled Lew's years as a congressional aide, signaling an easy confirmation. Budget Committee Chairman Kent Conrad (D-N.D.) said the panel plans to vote on Lew early next week.

Lew is one of a handful of Executive Branch nominees that require the approval of two Senate committees. At an afternoon hearing of the Senate Homeland Security and Governmental Affairs Committee, he cited information technology procurement, government contracting reform and performance management as among the most important management issues facing the Obama administration.

Lew demurred when asked whether the government should freeze the salaries of civilian federal workers, suggesting that it might be necessary to spend more to recruit and hire outside contractors whose positions are being brought in-house by federal agencies.

Members of both parties on the government affairs panel pledged their support. Sen. Susan Collins (R-Maine) remarked: "The last time Mr. Lew served as OMB director, a Democrat president worked with a Republican Congress to balance the federal budget. I hope this is a case where history repeats itself."

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