The consummate insider has the president's trust. But does he have Congress? With a second term, Lew will be the man charged with avoiding the fiscal cliff and setting the fiscal path.
Jacob Lew isn't the most obvious figure to be charged with securing the Obama legacy. The purposefully low-key White House operative is content to work behind the scenes, and he always takes care to speak strictly on behalf of the president. Yet this Jewish son of middle-class parents from Queens, a stranger to President Obama's Chicago-centric universe, could help cement the way the first African-American president is remembered if Lew can cut a sweeping budget deal in the coming months.
To do that, however, he might have to give ground and trigger what critics may see as the first steps in the dismantling of the modern social-welfare state by allowing Republicans to chip away at the very ideal that has inspired and informed Lew's public service since the days he learned Washington's mores at Tip O'Neill's side.
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It's a lot to ask. But that will be Lew's job as Obama's chief of staff, a position that could expire in two months and, with it, his leverage. Should Obama win, Lew is seen as a top contender for Treasury secretary, with the biggest mark against him that he is so highly valued in his current post, Obama might prefer to keep him at the White House. Either way, the task of cutting a "grand bargain" doesn't grow any easier. If Lew can close a lame-duck compact that somehow chops the deficit, avoids the hated sequester, and largely leaves Medicare, Medicaid, and Social Security intact, Obama would be ranked with Presidents Reagan and Clinton, who cut large-scale budget deals that preserved costly entitlements. If he blows it, Lew becomes just another in a long list of aides who couldn't break the stranglehold of dysfunction that has seized the capital.
With the president's backing, Lew is determined to not let that happen. And he has no interest in repeating the mistakes of the debt-ceiling standoff. This time, there will be no chats on the Truman Balcony or glasses of Merlot for John Boehner, as took place in 2011 when the GOP House speaker and Obama tried to strike a grand bargain on the budget.
Instead, the administration plans to play hardball in the six weeks after the election. And the White House is looking not just to House Republicans for the contours of the compromise. Under Lew's direction, the administration instead will reach out to the Senate and to House Democrats to try to build a consensus before dealing too much with the tea party portion of the Republican Party.
At the center of this push will be Lew, a 30-year veteran of budget battles under Presidents Reagan and Clinton. Tall and thin, with Harry Potter-like glasses and salt-and-pepper hair, he looks like a typical Washington technocrat, an image that belies his talent for combat. "He's like a labor-union negotiator. He's not going to give you an inch if he doesn't have to," says Judd Gregg, the Republican former senator and Budget Committee chairman. "He's a true believer in the causes."
By causes, Gregg means Medicare and the rest of the social-safety net. These are the progressive ideals close to Lew's heart, friends and former colleagues say--and programs he will cut or change only in exchange for an equally big prize: in this case, the Republicans agreeing to more revenue, as Obama has called for from the campaign trail.
Lew has long been mindful of the tension inherent in his task. He has spoken publicly for years about the importance of deficit reduction. Yet he believes that budget cuts must be made with care, using a scalpel rather than a butcher's knife. "That is the only way to do it," he said in 2011 in a speech at a conference for a Jewish nonprofit organization. "I describe budgets as a tapestry: When it's woven together, the picture amounts to our hopes and dreams of a nation."
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Lew's power has grown over less than a year as Obama's chief of staff--and he already has Republicans dreading a budget confrontation with him. Even as they praise Lew for his command of the facts and deep knowledge of the budget, they complain that he's too liberal. "The biggest challenge is that the drivers of a lot of the spending are income-support programs and health care programs," one House GOP staffer says. "Those are the most difficult for him to look at."
Another aide spelled it out more bluntly, saying he doesn't appreciate Lew's negotiating style; as then-director of the Office of Management and Budget, Lew often acted behind closed doors in the summer of 2011 as if he knew what the Republicans wanted out of the conversation. The budget chief came across as presumptuous, unlike other top administration officials, this aide said.
People close to the White House dismiss these complaints as sour grapes. "You don't have to like someone to be able to cut a deal with him. I suspect that most people in the White House don't like the Republicans, too," says John Podesta, former chief of staff to President Clinton, who led the Obama and Biden transition team in 2008. "I think it's not actually that relevant."
The deficit-reduction plan that the president and Lew will most likely unveil postelection will hew closely to the proposal the White House offered in September 2011 to cut the deficit by $4.4 trillion over a decade. It would tax the rich, boost infrastructure spending, and modestly slow the growth in Medicare and other entitlements. Should Obama win, the guiding objective will be to put the issue to rest for a while so that the administration can move on to other issues such as immigration and climate change.
"It is the White House's first priority, not its main priority," says Robert Greenstein, president of the Center on Budget and Policy Priorities. "The administration does not relish the idea of having four years of pitched battles over the budget." No deficit-reduction plan would call for immediate austerity, Greenstein says. The hope is to put the country on a more sustainable path. Because of the 10-year window, the brunt of the cuts likely could occur after an Obama second term.
The six weeks following the election will be all about setting a tone and coming up with a framework the two parties could support, with the details filled in during the first half of 2013.
"The success of the next four years is built around the success of the next four months and whether the president can develop and execute policies based on the political leverage he will have from a reelection," Podesta says. "I don't think [the administration] has settled on the idea that the fiscal cliff is a fait accompli, but if the Republican leadership won't budge on the Bush high-end tax cuts, that's where we'll probably end up. The pressure is really back on them."
Lew will manage the conflict in a way similar to past budget and fiscal-policy deals--such as the one he helped cut in 1983 to save Social Security or the balanced-budget agreement of 1997 that produced a surplus. Joining him will be Rob Nabors and Gene Sperling, both senior White House officials and fellow alumni of the Clinton era. If history is any guide, Lew will approach the fiscal cliff with careful preparation, detailed explanations, and black binders full of data. During the budget negotiations led by Vice President Joe Biden in spring 2011, for example, Lew gave overviews of each program at stake before the bipartisan group would launch into a political discussion, recalls a Republican aide who attended the sessions.