Lew in the Treasury:Obama's New Agenda

Four years ago, Barack Obama chose Tim Geithner as Treasury Secretary. Geithner is a technician who came from the central bank (he also had previously led the Federal Reserve of New York) and was at the forefront of the big-bank bailouts of 2008. Today Obama has designated Jack Lew to replace him. Until now, Lew was chief of staff at the White House. This handover, as well as the differences between the two profiles, emphasizes the change in priorities.

For much of the last four years, Geithner has had to deal with the consequences of a systemic financial collapse, including the convulsions caused by the Eurozone crisis. No U.S. Treasury Secretary had ever “invited himself” to the top of Ecofin (the Economic and Financial Affairs Council) so systematically.

57-year-old New Yorker Lew also has ties to the world of finance: He’s been general manager of “alternative investments” for the banking giant Citigroup, where he seems to have made conspicuous gains by speculating against subprime mortgages. However, when considering his long career, that position was an interlude, a parenthetical reference. Lew is mainly known as a grand political servant, a skillful manipulator in the halls of the White House and Congress during the terms of at least three presidents. Additionally, he’s often dealt with similar files: fiscal policy, taxation and public spending.

Lew was a valuable adviser to Bill Clinton in the mid-90s, when the then Democratic president faced a challenge similar to the one Obama is facing: The Republican-led Congress literally ran out of funds for the federal government, which for some weeks had to suspend all payments. In 1997, the bipartisan compromise that Clinton used to achieve a balanced budget had Lew’s “fingerprints” all over it. His appointment to the Treasury, therefore, speaks volumes about the change in agenda in Obama’s second term. The banking crisis now seems far away; even the Eurozone has ceased to be a source of major concern for Washington. The focus has shifted to the deficit and to a new round of very difficult negotiations with the right, which maintains a majority in the House.

Lew, who actually cut his teeth as a young man by working in Congress as an adviser to Democratic Speaker of the House Tip O’Neill in his stormy negotiations with Ronald Reagan, will now be the point-man for dealing with a crisis whose deadline is looming. By the end of February, or at the latest in early March, the U.S. will already have reached its legal limit for federal debt. This is a purely “technical” limit, due to the fact that the Treasury needs a new Congressional act authorizing them to exceed that threshold and to fund their borrowing requirements by issuing new securities.

Yet once again, as already happened last year, the Republicans want to use this deadline to “hijack” the Obama administration by refusing to raise the debt if this president doesn’t accept deep social spending cuts to Medicare and Social Security. Obama has already said he will not accept the blackmail. Lew, the man for impossible negotiations, is already on the mission.