Lew nomination to Treasury highlights Obama’s shift from finance to debt

Jack Lew’s confirmation as Treasury secretary would place a longtime Washington insider at the crux of the bruising fight over entitlements, government spending and the national debt.

It is a battle expected to dominate Obama’s second term, and the president signaled he realizes this by nominating Lew — a hardened veteran of budget fights with congressional Republicans.

{mosads}The end of Timothy Geithner’s long run at the Treasury Department would also signal a shift from the financial world crises that dominated the first years of Obama’s administration to the fiscal fights that have characterized the last two years.

The nomination is expected to be announced as early as Thursday.

Lew has experienced budget fights from perches on both ends of Pennsylvania Avenue.

He was an aide to Speaker Tip O’Neill (D-Mass.) when O’Neill hammered out a compromise on Social Security with President Reagan. And he presided over the Office of Management and Budget (OMB) under President Clinton, when the government reported a budget surplus.

Until recently, Lew had a reputation as budgetary expert with a history of deal-making. But his reputation took a hit in recent years as he butted heads with congressional Republicans during several failed efforts to break through on a broad deficit-reduction deal.

Lew reportedly rubbed House Republicans and their staff the wrong way when Obama and Speaker John Boehner (R-Ohio) first sat down to try and craft a “grand bargain” while raising the debt limit in summer 2011. When the next fiscal powwow began over avoiding the “fiscal cliff,” Geithner, who Lew would succeed, took on a more visible role.

Those frustrations could pose a challenge to Lew’s confirmation in the Senate, where the ranking Republican on the Budget Committee, Sen. Jeff Sessions (Ala.), said Wednesday he would oppose Lew’s nomination. Sessions vowed that Lew’s confirmation “must never” succeed.

“The funny thing is that Lew came in as somebody who could strike deals,” said deficit hawk Bob Bixby of the Concord Coalition. “He had brokered deals with Reagan and O’Neill and Clinton and Gingrich.

“Now Republicans are saying they can’t work with him. That wasn’t his reputation until recently. I don’t know if something has changed about Jack Lew or something changed about the Republican Party,” Bixby said.

Lew’s nomination is a signal to Republicans that Obama, who has picked fights with the GOP in recent weeks, remains emboldened both from his election win and the fiscal-cliff deal, which revealed a divided Republican Party.

Boehner has vowed to never again sit down for one-on-one haggling with the president, and Obama has vowed not to negotiate over raising the debt limit, leaving the prospects of a third crack at a major deficit deal looking grim.

Bixby said “everyone is ticked off” after the fiscal-cliff deal and Lew’s nomination is “not going to add to the warm and fuzzy feeling around” the Capitol

The nomination is also a signal to Democrats, and it’s one they may like.

GOP complaints over Lew could shore up Democratic support on Capitol Hill. Bob Woodward’s Price of Politics includes a story about about him lecturing Republicans during the 2011 debt-ceiling negotiations that Medicare cuts would hurt poor seniors.

Liberal Democrats were none too pleased to learn that cost-of-living cuts to Social Security known as “chained CPI” had been put on the table by the White House during fiscal cliff talks. The provision did not make it into the final compromise, and having a Treasury secretary that has left Republicans grumbling may calm Democrats’ concerns that major changes to entitlement programs are on the way.

Bixby said his view is that Lew still wants a deficit bargain and is willing to reform entitlements to get there, though he’ll oppose any plan that would resemble giving recipients vouchers for care.

The financial world will also read signals into the announcement.

Lew is no stranger to Wall Street; he worked at Citigroup between jobs in the Clinton and Obama administrations.

But Geithner, though he never worked for a major Wall Street bank, is much more widely thought to feel the pulse of Wall Street, because he has spent much of his career keeping an eye on it.

As head of the Federal Reserve Bank of New York, Geithner was at the forefront of the financial meltdown when it began and was brought in by Obama to steer the government through the bailout and resulting Wall Street reform efforts.

Now, the collapse of the nation’s financial sector is largely in the rear view mirror and Washington’s attention has turned to fiscal matters, which are Lew’s bread and butter.

Financial executives recognize that Lew knows the ins and outs of Washington’s operations, but they are less convinced he “gets” Wall Street, suggesting the White House may reserve a top deputy spot at Treasury for a Wall Street executive or expert to assuage those concerns.

“Treasury is highly technical position that can require intimate knowledge of the markets,” said one financial lobbyist. “The only concern would be his deep inexperience with the marketplace.”

— Erik Wasson and Bernie Becker contributed to this report.