Previewing the issues for Obama’s Treasury-secretary nominee
President Obama will nominate current White House chief of staff Jack Lew on Thursday to replace outgoing Treasury secretary Timothy Geithner, according to several news reports.
Republicans familiar with Lew, who was a key player in the debt-ceiling negotiations of 2011 as director of the Office of Management and Budget (OMB), say his nomination makes progress on tax and entitlement reform all the more unlikely in Obama’s second term.
“We’ve always viewed him as a classic big-government liberal, someone who has consistently stood in the way of efforts to deal with our debt and deficit,” a senior House GOP aide says, in an interview with National Review Online.
And unlike Geithner, whom Republicans consider sympathetic to the importance of large-scale tax reform, Lew is seen as a “roadblock” on these issues.
“Lew has many of the same bad habits the president does,” the aide says — such as a tendency to lecture and “needlessly reiterate his own position” rather than to listen, for example, as though by sheer repetition he could persuade Republicans to suddenly abandon their core economic beliefs.
During the 2011 debt-ceiling negotiations, Lew reportedly yelled at a GOP aide when Republicans suggested including Medicaid in the sequestration spending cuts.
However, there is at least some reason to believe that Lew might be amenable to certain entitlement-reform proposals that Republicans support.
As Bob Woodward recounted in The Price of Politics, Lew helped draft a series of debt-ceiling offers to House speaker John Boehner that included reforms such as a gradual increase in the Medicare eligibility age, and the use of chained CPI (an adjustment to the way Social Security cost-of-living increases are calculated that would ultimately slow their rate of growth).
Regardless, Lew will certainly face some other difficult questions during his confirmation hearing before the Senate Finance Committee, likely to be held sometime next month, after Geithner formally steps down.
As OMB director, he had the unenviable task of drafting and defending President Obama’s proposed budgets, wildly unpopular resolutions that received zero Democratic votes in each of the last three years.
Lew came under fire in 2012 for remarks he made trying to excuse the Democratic Senate’s refusal to produce a budget over the past three years. On the Sunday-show circuit in February, he attempted to blame Republicans for the Senate’s inaction (1,350 days and counting), suggesting that 60 votes were need to pass a budget. A budget resolution is one of the few types of legislation not subject to the 60-vote threshold normally required in the Senate. Republicans were alarmed that an acting OMB director was either so ignorant of the federal budget process or so willing to mislead the American people.
Lew’s remarks, and his close association with the president’s budget proposals, are likely to be a central component of the GOP opposition to his nomination.
Senator Jeff Sessions (R., Ala.), the ranking member on the Senate Budget Committee, has also taken Lew to task on multiple occasions for making misleading claims about the president’s budgets, the most recent of which projected total national debt to reach more than $26 trillion by 2021.
Lew, for instance, told CNN’s Candy Crowley in February 2011 that the president’s budget “will get us, over the next several years, to the point where we can look the American people in the eye and say we’re not adding to the debt anymore” — a claim PolitiFact rated “false.”
At times the former OMB director has embraced what might charitably be called a postmodern view of the budgeting process — for instance, he said the following in a 2011 speech: “I describe budgets as a tapestry: When it’s woven together, the picture amounts to our hopes and dreams of a nation,” he said.
Beyond his association with the president’s budgets, Lew will surely face scrutiny for his perceived, and occasionally readily admitted, lack of experience on financial issues, especially regulation.
In response to a question by Senator Bernie Sanders (I., Vt.) in 2009 about deregulation and its role in the financial collapse, Lew said: “I don’t consider myself an expert in some of these aspects of the financial industry” and would “defer to others who are more expert about the industry.”
Business Insider, which flagged the remarks in November, noted that “a Treasury Secretary definitely needs to be an expert in this issue,” and that Lew had “better be more prepared” to answer such questions if nominated for the position.
Additionally, Republicans will likely raise questions about Lew’s brief tenure at Citigroup, where he headed an investment division that made millions betting against the housing market in 2008, yet still managed to post nearly half a billion dollars in losses in the first quarter of that year.
One Wall Street insider told Business Week reporter Joshua Green that Lew ran “a third-rate division at a third-rate bank.”
Despite his sub-par performance, Lew made nearly $2 million in 2008, including a $945,000 bonus received on January 15, 2009, just four days after he filed a financial-disclosure form upon joining the Obama administration.
American taxpayers potentially funded that bonus, as Citigroup received a $45 billion bailout from the Treasury Department in late 2008.
Republican aides concede that although strong GOP opposition to Lew and other Obama cabinet nominees is likely, there is probably very little they can do to prevent confirmation.
One explained that, with a baseline of 55 Democratic votes in the Senate (including independent senator Angus King of Maine), convincing five moderate Republicans to cross over is “not a very high bar to clear.”
— Andrew Stiles is a political reporter for National Review.