The U.S. Senate on Wednesday confirmed Jack Lew as President Barack Obama’s new Treasury secretary, putting the former White House chief of staff in the middle of political brawls over the government’s budget.
The vote was 71 to 26 in favor of the nomination. A total of 25 Republicans and independent Bernie Sanders of Vermont voted against Lew’s confirmation.
Lew’s most pressing task will be to find a compromise to lessen the economic blow from US$85 billion in government spending cuts set to kick in today.
But two more deadlines will quickly follow. Funds for most government operations expire March 27, and the U.S. Government is expected to hit its legal borrowing limit May 19, setting the stage for a default unless an agreement can be secured to raise the debt ceiling again.
Lew was Obama’s chief of staff before the president named him to succeed Timothy Geithner at the Treasury, and has spent much of his career in Washington in public service. He was previously White House budget director under Obama and former President Bill Clinton.
“As my chief of staff, Jack was by my side as we confronted our nation’s toughest challenges,” Obama said after the Senate vote. “His reputation as a master of fiscal issues who can work with leaders on both sides of the aisle has already helped him succeed in some of the toughest jobs in Washington.”
Lew is expected to take the lead in difficult talks with Congress on how to trim the U.S. budget deficit and keep a lid on the US$16.6 trillion national debt.
Lew began his government service in the 1980s as an aide to House Speaker Tip O’Neill. He brings nearly three decades of government service to the job, including two stints as White House budget director.
Lew, 57, led talks with Congress in 2011 that averted a U.S. debt default. At the time, he antagonized Republicans and even some Democrats with his unwavering defense of government-run benefit programs.
His status as an Obama confidant may give him more authority in representing the administration during fiscal talks. But his close relationship with the White House has also raised some skepticism.
“He’s got a political staff mentality, not an august, independent personality of leadership,” said Senator Jeff Sessions, the top Republican on the Senate Budget Committee, who had pressed lawmakers to vote against Lew.
During the confirmation process, Lew also had to confront questions about his investment in the Cayman Islands tax haven and a nearly US$1 million bonus he received from Citigroup in 2009, just before the bank got a taxpayer-funded bailout.
Senator Max Baucus of Montana, the Democrat who chairs the Finance Committee, had wondered if Lew had sufficient gravitas to be the chief U.S. economic spokesman during a committee hearing last month.
But he later endorsed Lew for the post, commending his commitment to bipartisanship.
“If confirmed, we’ll be entrusting Mr. Lew to oversee America’s economic policy,” Baucus said before the Senate vote. “It is a great responsibility, one I believe Mr. Lew will live up to.”
Lawmakers in both parties praised Lew when he said revamping the byzantine U.S. tax code would be a top priority. But prospects for achieving tax reform are clouded by Washington’s constant fiscal fights.
But Republican Senator Jeff Sessions, who opposed the nomination, said Lew as budget director was the architect of the Obama’s administration’s failed efforts to get soaring deficits under control.
In a statement issued after the vote, Obama said, “At this critical time for our economy and our country, there is no one more qualified for this position than Jack. ... His reputation as a master of fiscal issues who can work with leaders on both sides of the aisle has already helped him succeed in some of the toughest jobs in Washington.”
During his confirmation hearing, Lew signaled no major economic policy changes. He advocated a balanced approach to reducing the long-term budget deficit through spending cuts and additional tax revenue.
He said he would be open to reforms to Medicare, but he didn’t spell out any details. Lew also said he would work with the committee on a rewriting of the tax code.
Beyond the budget, Lew is expected to stick closely to the positions Geithner struck on Europe’s debt crisis, the U.S. relationship with China and the administration’s defense of the Dodd-Frank financial overhaul law that the banking industry has fought to weaken.
Some Republicans voted against Lew because they were not satisfied with his answers about his previous employment with Citigroup, including a brief time when he was chief operating officer for an investment unit in 2008. The unit has been criticized for making risky investments that imploded during the financial crisis.
Republican Senator Charles Grassley opposed Lew’s nomination. He cited questions about his time at Citi, as well as Lew’s compensation while working as chief operating officer at New York University. He berated Lew for not disclosing more details about a US$1.4 million loan he received during that time.
“Mr. Lew’s eagerness and skill in obtaining bonuses, severance payments, housing allowances and other perks raises concerns about whether he appreciates who pays the bills,” Grassley said.
One potential weakness for Lew: His relative inexperience with financial markets and international economic crises — areas that had played to Geithner’s background. Analysts think Lew will keep pressuring Europe to deal aggressively with its budget and debt issues. But they think that will consume less of his time given that Europe’s debt crisis now poses less of a threat to the global economy.
On trade, Lew is expected to keep prodding China. The U.S. trade gap with the world’s second-largest economy hit another record high last year. He has pledged to press China to further loosen its currency restrictions. Lawmakers have complained China keeps the value of the yuan artificially low to boost its exports, hurting American manufacturers. No breakthrough is expected, though.
Lew also will need to calm investors who have grown concerned about possible currency wars after Japan’s new government sought to lower the value of the yen as a way to boost exports and its weak economy. A weaker yen makes Japanese goods cheaper overseas and foreign goods costlier in Japan.
And Lew will need to defend the Dodd-Frank Act, which overhauled financial regulation after the 2008 crisis. Since the law was passed in 2010, Wall Street has fought to weaken many of its stricter regulations.
Other delicate tasks for Lew include implementing new financial regulations and finding a way to wind down government-controlled mortgage finance giants Fannie Mae and Freddie Mac, which have drawn almost US$190 billion from the Treasury.
(SD-Agencies)
