Obama nominates Jacob Lew for White House budget chief post

U.S. President Barack Obama on Tuesday picked Jacob Lew, an Orthodox Jew, as the new White House budget chief, naming a policy veteran who helped return the United States to budget surpluses and who must now confront its record deficit.

	U.S. President Obama announces his nominee for Office of Management and Budget Director Jacob Lew at the White House on July 13, 2010.
	Photo by: Reuters

Obama said Lew, who served President Bill Clinton as budget head, was the right man to cut the deficit over the next few years and to "put our nation back on a fiscally responsible path."

Analysts say this will require a mixture of tax hikes and spending cuts, both politically unpopular issues to even raise in an election year, and warn it will take considerable time to reverse the country's funding gap.

"If there was a hall of fame for budget directors, then Jack Lew surely would have earned a place for his service in that role under President Clinton when he helped balance the federal budget after years of deficits," Obama said.

"Jack is the only budget director in history to preside over a budget surplus for three consecutive years," Obama said at the White House.

Clinton inherited a deficit and eight years later left office with a $237 billion surplus.

Lew was director of the Office of Management and Budget between 1998 and 2001 and is currently Deputy Secretary of State for Management and Resources.

His appointment requires Senate confirmation. Lew's nomination quickly drew support from lawmakers, including Paul Ryan, top Republican on the House of Representatives Budget Committee.

"Jack has consistently demonstrated a pragmatic approach to tackling challenges and getting things done. The grave threat posed by our looming fiscal crisis will require leaders to chart a new course," Ryan said in a statement.

Obama says he is committed to curbing a record U.S. deficit and rising debts in the medium term, but wants to maintain taxpayer supported fiscal stimulus policies to aid growth and jobs until hiring has picked back up.

Lew, a former hedge fund manager, would replace Peter Orszag, who steps down on July 30 for a position at the Council on Foreign Relations, a New York think-tank.

Orszag was seen as a budget hawk within the Obama administration, which has debated how far to go in emphasizing continued stimulus over deficit reduction.

Democrats running in the November midterm congressional elections are also keen to emphasize fiscal probity to voters weary of government bailouts, with the deficit forecast to rise to $1.56 trillion this fiscal year.

Lew's success in ending the deficit under Clinton would also mark him out as a deficit hawk, say analysts, who say he would not have taken the post if he uncomfortable with the White House's budget priorities.

"I think Jack is an absolutely terrific public servant," said James Horney, director of federal fiscal policy at the Center on Budget and Policy Priorities in Washington.

"It's hard for me to imagine a better person given the challenges that lie ahead," said Horney. "There are no easy politically popular ways to do it. I am absolutely convinced it is going to take a combination of increases in revenues ... and also reductions in spending," he said.

Obama has appointed a bipartisan commission to study ways of tackling the deficit. It is due to submit recommendations by the end of 2010, and is expected to suggest a mixture of spending cuts and higher taxes.

Brian Riedl of the conservative Heritage Foundation said Lew knew the budget would have a shorter learning curve than previous budget chiefs having done the job before.

But his chances of repeating his Clinton-era performance of rolling back the deficit were "virtually impossible."

"The 1990s budget surpluses were based on some very good luck," said Riedl, citing lower defense spending after the end of the Cold War and high tax revenues generated by strong economic growth and a dot.com-driven stock market surge.

"Those variables are responsible for virtually 100 percent of the deficit reduction in the 1990s ... I wouldn't count on history repeating itself on that. He's going to have a tough haul," said Riedl.