The deficit-reduction plan that the president and Lew will most likely unveil postelection will hew closely to the proposal the White House offered in September 2011 to cut the deficit by $4.4 trillion over a decade. It would tax the rich, boost infrastructure spending, and modestly slow the growth in Medicare and other entitlements. Should Obama win, the guiding objective will be to put the issue to rest for a while so that the administration can move on to other issues such as immigration and climate change.
“It is the White House’s first priority, not its main priority,” says Robert Greenstein, president of the Center on Budget and Policy Priorities. “The administration does not relish the idea of having four years of pitched battles over the budget.” No deficit-reduction plan would call for immediate austerity, Greenstein says. The hope is to put the country on a more sustainable path. Because of the 10-year window, the brunt of the cuts likely could occur after an Obama second term.
The six weeks following the election will be all about setting a tone and coming up with a framework the two parties could support, with the details filled in during the first half of 2013.
“The success of the next four years is built around the success of the next four months and whether the president can develop and execute policies based on the political leverage he will have from a reelection,” Podesta says. “I don’t think [the administration] has settled on the idea that the fiscal cliff is a fait accompli, but if the Republican leadership won’t budge on the Bush high-end tax cuts, that’s where we’ll probably end up. The pressure is really back on them.”
Lew will manage the conflict in a way similar to past budget and fiscal-policy deals—such as the one he helped cut in 1983 to save Social Security or the balanced-budget agreement of 1997 that produced a surplus. Joining him will be Rob Nabors and Gene Sperling, both senior White House officials and fellow alumni of the Clinton era. If history is any guide, Lew will approach the fiscal cliff with careful preparation, detailed explanations, and black binders full of data. During the budget negotiations led by Vice President Joe Biden in spring 2011, for example, Lew gave overviews of each program at stake before the bipartisan group would launch into a political discussion, recalls a Republican aide who attended the sessions.
Lew brings the binders in case he needs to marshal a data point, and he speaks in the same calm, even-tempered tone that he uses on TV. Congressional aides say that he is the most cautious in making sure he speaks for the president, never himself, in these sessions. It’s a way of talking that’s unique to professional Washington: speaking strictly in the third person, laying out what one’s boss desires.
Postelection, the stakes for Lew are huge. The annual deficit has exceeded $1 trillion for the past four years, economic growth is tepid, and unemployment is stubbornly high. Further prolonged gridlock on the debt could prompt another downgrade of the U.S. credit rating, and the long-term economic consequences of failing to solve the budget problem could eventually be severe. By contrast, when Lew was budget director under Bill Clinton during the late 1990s, the economy was booming. Clinton left office with a budget surplus of $236 billion. The climate in Washington has changed, too. The ideological chasm between Republicans and Democrats has widened, making compromise more difficult.
The basic problem and largest obstacle in Lew’s path is that neither party in 2013 may be willing to take the hard votes needed to reach a budget deal or, for that matter, overhaul the tax code. “At the end of the day, what is misunderstood about this whole area is that no one really wants to vote to do what you have to do to balance the budget,” says former House Majority Leader Richard Gephardt. “Politically, it’s toxic. It’s the toughest thing you’ll ever do in public life.”
Lew declined to speak on the record for this story, but interviews with 42 friends, lawmakers, congressional staffers, and former colleagues paint a picture of a longtime Washington hand and budget savant who takes comfort in his family and his deep Jewish faith. He holds great sway within the White House, and if Obama wins reelection, Lew will play a major role in deciding the way the country grapples with the budget, social programs, and the deficit for years to come, all the while avoiding the limelight as best he can.
THE POWER OF THE PROCESS
Although Lew now occupies an oversized office down the hall from the president, his first major job in Washington was as a staffer for the influential Democratic House Speaker Thomas (Tip) O’Neill, known for coining the famous political axiom, “All politics is local.”
By the time Lew took the position in 1979, O’Neill was already a larger-than-life power broker known for his brass-tacks political maneuvering; his commitment to the social-safety net, shaped by coming of age in Boston during the Great Depression; and his ability to cut deals across the aisle (to say nothing of his collegiality with members of both parties during cocktail hour).