January 11, 2013
If confirmed as the next head of the Treasury Department, White House Chief of Staff Jacob Lew will be tagging into an immediate three-round fight, with a long tournament ahead.
Over the coming 75 days, the White House will rely heavily on its Treasury secretary in battles over the federal government’s borrowing limit, averting massive and blunt spending cuts, and extending government funding past the end of March.
“The next three months and maybe more than that are going to be nonstop, high-pitched confrontations on fiscal policy,” said William Galston, chairman of the Brookings Institution’s Governance Studies program and a former policy adviser to President Clinton. “That’s clearly job one.”
But that’s just the beginning, experts said. As Treasury secretary, Lew would also play a key role in any attempt at comprehensive tax reform, which both Democrats and Republicans have called for, although they differ on approach. And Treasury will be crucial in creating and implementing regulations flowing from two behemoth Democratic legislative victories, the landmark Dodd-Frank financial reform and the Affordable Care Act.
If he’s confirmed in time, Lew’s first fight, and the one in which he would play perhaps the most visible role, will be over raising the nation’s debt ceiling. Unless lawmakers allow the federal government to borrow more money, the U.S. could default as soon as Feb. 15, but likely no later than March 1, according to an analysis from the Bipartisan Policy Center. Republicans insist that any increase in the debt ceiling must be matched by equal spending cuts over the next decade, but President Obama has vowed not to negotiate on the issue. Untested backup plans abound, but much of the responsibility to avert economic catastrophe falls on Lew.
“On the debt limit, assuming he is nominated, Jack really will be the point person,” said Joe Minarik, director of research at the nonpartisan Committee for Economic Development and a Clinton-era chief economist to the White House’s Office of Management and Budget.
Lew would also likely lead a broader team of administration officials in negotiating an alternative to the across-the-board spending cuts known as sequestration that are due to go into effect on March 1, Minarik said. And Lew would play a pivotal role in negotiating government funding past March 27, too, although other officials will be involved.
While he would have little time to settle in, he likely won’t need it. As Obama’s chief of staff, Lew, a longtime budget-battle veteran, has been mired in the issues central to the three looming negotiations for some time. It’s the other responsibilities of a Treasury secretary, the ones he wouldn’t focus much on until the three fights are over, that he may be less familiar with. But those issues -- tax reform; implementing Dodd-Frank, and the health care law; and managing the nation’s international economic relationships -- will include a broader cast of characters.
“When you get to Dodd-Frank and other questions surrounding finance, you’ve got much more of an orbit of different people, including [the Securities and Exchange Commission] chair, Federal Reserve Board chair, Treasury secretary, etcetera,” Minarik said. (That’s not to say it will be smooth sailing -- opponents of regulation are already preparing for a fight.)
Implementation of Dodd-Frank will include crafting regulations, such as the "Volcker Rule," which would prevent banks from trading with their own funds. Lew would also help to create rules to ensure that banks have enough cash in rainy-day reserves and that no institutions are too big to fail, said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities.
In addition, Lew would manage a range of international economic issues related to trade and currency manipulation, said Brookings’ Galston. “That’s an extremely important relationship for both parties,” he said. “[Outgoing Treasury Secretary Timothy] Geithner made multiple trips to Beijing to nurture that and sometimes to take on his Chinese hosts.”
If lawmakers get around to comprehensive tax reform, a Treasury Secretary Lew would be a crucial voice in the debate, too. Even if not, he'll be plenty busy.
January 11, 2013