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Obama taps chief of staff to lead Treasury

Trusted adviser is veteran of budget fights

The Washington Post, AP

President Barack Obama recently said he would love to hire a top executive into his administration. But for the job of Treasury secretary, he tapped a trusted adviser, White House Chief of Staff Jack Lew, an expert on America’s ongoing budget wars.

Obama chose Lew to take over from Treasury Secretary Timothy Geithner, the president’s longest-serving economic adviser, according to two people familiar with the pick.

The composition of Obama’s second-term Cabinet also became clearer in other ways Wednesday, with Labor Secretary Hilda Solis resigning and three other members of the president’s team deciding to stay on.

Solis, a former California congresswoman and one of the highest-ranking Hispanics in the Cabinet, said she was departing after leading the department during the economic storms of the first term. She was the first Hispanic labor secretary.

A White House official said three Cabinet members — Attorney General Eric Holder, Health and Human Services Secretary Kathleen Sebelius and Veterans Affairs Secretary Eric Shinseki — would stay on as the second term begins. It would ensure diversity among the president’s leadership team — Holder is black, Sebelius is a woman and Shinseki is of Japanese descent.

The only current Republican in the Cabinet, Transportation Secretary Ray LaHood, has not indicated whether he will leave the administration.

The selection of Lew 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 deep and automatic spending cuts known as sequestration beginning around the same time.

These battles will once again pit Democrats’ economic vision against that of Republicans. Democrats 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 House Speaker Tip O’Neill.

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, though 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 Boehner 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.”

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.

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 a 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 also would oversee the enforcement of laws to prevent terrorists from accessing the global financial system.

By nominating Lew, Obama will have 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 Joe Biden.