Jacob Lew returns to work on fixing nation's finances, again

By Lori Montgomery
Washington Post Staff Writer
Saturday, February 26, 2011; A12

At 27, Jacob J. Lew helped save Social Security. At 41, he helped cut a deal to balance the federal budget. During the Clinton administration, he became the only White House budget director in a generation to banish deficit spending.

In a city suddenly crawling with would-be deficit-busters, even some Republicans recognize Lew as the real deal.

"You guys did an absolutely magnificent job of managing the nation's fiscal affairs," Rep. Tom McClintock (R-Calif.) gushed when Lew, in his second stint as White House budget director, appeared last week before the House Budget Committee. "It's true it was a Republican Congress, but give credit where credit is due. You guys did a great job."

Now President Obama has asked Lew to work that magic again. During a news conference defending his own deficit-ridden spending blueprint, Obama called for bipartisan talks to fix the nation's finances, pointing to the Social Security deal of 1983, the balanced budget deal of 1997 and last year's tax deal as models for bipartisan action. Lew is the only senior member of the White House team who was involved in all three.

So it's worth listening when Lew talks about what's needed to unite the parties behind an ambitious deficit-reduction plan. And, frankly, the news is not good.

What past deals had in common, Lew said in an interview, was broad consensus about the scope of the problem and strong leaders committed to solving it. Today? Party leaders can't agree on a stopgap spending bill for the next seven months, much less a grand vision for the future of the tax code and Social Security.

The government will shut down Friday unless a compromise emerges. And after last week's free-for-all in the House, where conservatives forced reluctant Republican leaders to double proposed spending cuts, Obama administration officials say it's not clear that Speaker John A. Boehner (R-Ohio) could unite his caucus behind anything.

"They have a lot to learn about themselves," Lew said of the House GOP leadership, which is confronting an unusually large and independent-minded freshman class. "We can't yet know where they're really going."

With showdowns looming over spending and the $14 trillion national debt, Lew is a key player on a retooled White House team stocked with veteran dealmakers whose primary mission is to work with Republicans to make progress on the fiscal and economic issues driving the political debate in Congress and nationwide. Lew declared himself an "optimist" about his prospects.

But, he said, "We're heading into a more difficult and much more complicated conversation" than the talks that produced deals of the past - "because the size of the problem is so great, and the distance between the parties is pretty great as well."

The new White House team is dominated by old hands from the Clinton administration who have been through all this before. Bill Clinton weathered a bitter battle over spending and two government shutdowns before cutting a balanced-budget deal with a Republican Congress in 1997, the year after he won reelection.

Lew and Gene B. Sperling are both back at their old jobs, Lew as director of the Office of Management and Budget and Sperling as the president's chief economic adviser. Clinton's top domestic policy aide, Bruce Reed, just signed on as Vice President Biden's chief of staff, fresh off a stint as executive director of Obama's fiscal commission. Rob Nabors, a Lew protege from the Clinton budget office, heads Obama's legislative shop. The list goes on, right up to Obama's new chief of staff, the former Clinton Commerce secretary William M. Daley.

As a group, they are viewed by people in both parties as pragmatists with a track record of inspiring trust on both sides of the aisle. Lew, in particular, seems to have few enemies, not much ego and a reputation for focusing on the demands of the deal.

"He's very sharp," said Rep. Dave Camp (R-Mich.), the new chairman of the tax-writing House Ways and Means Committee, who worked with Lew during a successful bipartisan negotiation to cut taxes in December. "You feel like you're reaching him when you talk to him. I think he gets the art of the possible."

Former Clinton budget director Alice Rivlin called Lew a "really good behind-the-scenes negotiator," who played an outsize role in the Clinton administration's dealings in Congress even before he took over as OMB director in 1998. "A lot of the heavy lifting on the Hill fell to Jack."

Though tall and dark like his predecessor, former budget director Peter Orszag, Lew, 55, shares none of Orszag's cowboy-booted, marathon-running swagger. A lawyer by training, Lew exudes a calm geniality. In his book about the 1997 budget deal, Clinton legislative director John Hilley wrote that Lew has "a good personality for negotiating: knowledgeable, fair, and tough when he needed to be."

The son of a Polish Jew who immigrated to the United States in 1916, learned English in the New York public schools and made his living as a book dealer and lawyer, Lew graduated magna cum laude from Harvard University, earned a law degree from Georgetown University and went straight to work in government, starting as a legislative aide to the liberal firebrand Bella Abzug of New York.

He rapidly ascended to the speaker's office, becoming Tip O'Neill's domestic policy adviser in 1979. During intense talks with the Reagan White House to avert a looming crisis in the Social Security trust fund, Lew said his job was to carry messages and "send accurate signals about what was acceptable" to each side. When the deal was finally struck, Lew made the call to Pebble Beach to brief O'Neill and Ways and Means Chairman Dan Rostenkowski and to coordinate the announcement with the White House - one of the few times Lew, who observes the Orthodox Jewish sabbath, recalls using the telephone on a Saturday.

Lew said he was proudest of the decision to tax Social Security benefits and plow the revenue back into the trust fund, a key piece of a complex deal that also included a gradual increase in the retirement age. The tax "could easily have been seen by Democrats as an unacceptable benefit cut," Lew said. "But we spent months and months talking about it so it never got into that category of things where, if you accepted it, you would be betraying a principle."

When Clinton took the White House, he chose Lew as the special assistant who helped design the AmeriCorps public service program, now on the chopping block in the House. From there, Lew moved to the budget office, serving under first Rivlin and then Franklin D. Raines before rising to the director's job. During the 1997 budget talks, Lew said his role was to help build the broad frame of an agreement that included tax increases and deep cuts to Medicare spending, then sit down with senior Republican aides to work out the details.

Both deals, Lew said, were propelled by unique circumstances. In 1983, policymakers were facing a deadline when Social Security would have run out of cash to make full payments to retirees. In 1997, Republican Speaker Newt Gingrich was looking for political redemption by cutting a bipartisan budget deal after two politically damaging years during which the Republican-controlled Congress forced government shutdowns over spending.

"In both cases, the parties got to the point where they could work together," he said.

Contrast that with the current climate. Democrats are already drawing the line against Social Security cuts, while House leaders refuse to consider the tax increases that Democrats - and some Republicans - say will be required to save a nation awash in red ink.

Meanwhile, House Republicans say Obama has done little to build trust. In addition to drafting a budget request that wouldn't significantly cut spending until 2013, Obama has so far declined to send Congress a pair of trade agreements with Panama and Colombia, negotiated by President George W. Bush and stalled for years by Democrats.

Lew acknowledges the challenge. Progress "is not impossible," he said. But "this is not a short process."

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