Mr. Surplus to the Rescue

Maybe President Barack Obama really is serious about reducing federal deficits—his pick to head the Office of Management and Budget oversaw three straight years of surpluses when he was President Bill Clinton’s budget director.

“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,” Obama said today in announcing Lew’s nomination.

Lew served as Clinton’s budget director from 1998 to 2001. Federal revenues benefited from a booming economy until the tech bubble burst, but the surplus also was due to Lew’s role in negotiating a 1997 deal with a Republican-controlled Congress to balance the budget.

When Lew’s tenure as budget director ended in 2001, Lew “handed the next administration a record $236 billion budget surplus,” Obama said. “The day I took office, eight years later, America faced a record $1.3 trillion deficit.”

The president neglected to mention that little progress has been made to reduce that deficit, even though he praised outgoing OMB Director Peter Orszag’s efforts to identify federal programs that should be eliminated. Orszag also drafted a budget for next year that calls for freezing non-security discretionary spending for three years—a move that could save $1 trillion over the next decade.

Even with this freeze, however, budget deficits would continue for the foreseeable future unless more drastic changes are made. In order to balance the budget, the Obama administration would have to slash spending, raise taxes and reform entitlement programs like Medicare and Social Security. That may be good government, but it’s not good politics, which is why Obama appointed a commission to come up with a long-term plan to address deficits.

Obama’s selection of Lew as his budget director, however, may show that the president isn’t just giving lip service to getting the federal budget under control.

“Jack’s challenge over the next few years it to use his extraordinary skill and experience to cut down that deficit and put our nation back on a fiscally responsible path,” Obama said.

Senator Joe Lieberman, independent of Connecticut, said Lew is the right person for the job.

“Jack is a brilliant man, an effective public servant, and knows how to work with Congress—traits that will serve him well as he works to bring our unsustainable federal debt under control,” Lieberman said. “The president has made a great choice at a critical time for our nation.”

Republicans aren’t likely to be so effusive in their praise, but they probably will use Lew’s confirmation hearing to go after Obama’s policies instead of Lew himself.

Democrats may have more concerns about Lew’s background—from 2006 to 2009, Lew worked on Wall Street, as managing director and chief operating officer of Citi Global Wealth Management and then as managing director and chief operating officer of Citi Alternative Investments. Democrats may have to tone down their attacks on hedge fund managers now that one of them is about to become Obama’s budget director.

The remainder of Lew’s resume, however, fits the mold of an outstanding Democratic public servant. He currently oversees the State Department’s budget—Obama said he “had to trade a number of No. 1 draft picks” to get him away from Secretary of State Hillary Clinton. From 2001 to 2006, Lew was was executive vice president and chief operating officer at New York University. He began his Washington career as a legislative aide, and was House Speaker Tip O’Neill’s principal domestic policy adviser for eight years.

In his new job, all of Lew’s talents are going to be put to the test. If he succeeds, he will indeed be a Hall of Famer.

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Kent Hoover is the Washington bureau chief for bizjournals.