President Barack Obama had just won re-election and his top advisers were in Chicago for the victory party. As they savoured the moment, hugging one another and drinking champagne, chief of staff Jack Lew killed the buzz.
“Now, we get the fiscal cliff to deal with,” he said.
It was back to reality, Lew’s specialty. He had spent the year quarterbacking at the White House when the rest of the team was zeroed in on the campaign. Win or lose, Lew already had scheduled conference calls for the following morning and an evening meeting to prepare for the looming budget fight.
With his penchant for thinking several steps ahead, his organisational drive and his budget expertise, Lew, 57, has been Obama’s consummate aide. Now, he’s Obama’s choice for Treasury secretary, according to people familiar with the process. Lew faces the prospect of becoming a leader at a critical juncture for the nation’s economic and fiscal future.
“As chief of staff you are staff and as Treasury secretary, you are principal - Jack has to make that transition,” said Ken Duberstein, a chief of staff to former President Ronald Reagan who first met Lew in the 1980s. “It’s not the invisible hand, it is the visible hand.”
If confirmed, Lew may need to play that hand as soon as next month, when the administration squares off with Congress over the US debt ceiling. Lew’s job will be all the more difficult because his relations with House Republicans soured during the 2011 battle over the government’s borrowing limit.
Over the last three decades, when the country’s leaders have met to resolve vexing fiscal problems, Lew has had a seat in the room, albeit behind the scenes. He was an adviser to House Speaker Tip O’Neill during the 1983 Social Security overhaul, President Bill Clinton’s deputy budget chief during the tax-and-spending standoffs of the mid-1990s, and Obama’s budget director during the 2011 debt-ceiling talks.
At Treasury, he’d be at the head of the table.
He’d oversee a staff of more than 100,000 around the world and his loopy signature would be scribbled on the nation’s currency.
Lew would need to strengthen his ties to the business community - he has spent only about two and a half years of his four-decade professional career in that world - and cultivate relationships around the globe.
He’s got a big brain, not a big head.
Cultivating relations with Republicans may be even more challenging.
When he confronts them over the debt limit, he’ll also seek to avoid $US1.2 trillion in potentially crippling automatic spending cuts over the next nine years while keeping the US government running when the current funding agreement expires.
In more than a dozen interviews with current and former colleagues as well as friends, some of whom requested anonymity to speak about events that weren’t public, Lew was described as someone ready for the challenge. Lew declined to be interviewed for this story.
Lew is not one to back down, as he showed during the last fight over the debt ceiling.
During the final hours of talks in the summer of 2011, Senate Republican aides offered the White House a proposal: They wanted the Medicaid insurance program for the poor to be included in hundreds of billions of dollars of spending cuts that would be triggered if lawmakers failed to reach a broader deficit-reduction deal in the coming year.
“No!” Lew, who had barely slept in weeks, yelled into the speaker phone in his office. “We’re not doing that.”
The call abruptly ended and Medicaid wasn’t touched, yet aides were startled by the rare display of anger. Lew himself was embarrassed over the outburst, people familiar with the incident said, asking for anonymity.
For some Republicans, though, Lew’s reaction spoke to what they see as his intransigence on behalf of the president.
House Republican aides said that during those talks, Lew preferred to explain to his opponents why they were wrong instead of negotiating. House Speaker John Boehner and Majority Leader Eric Cantor even asked to negotiate instead with National Economic Council director Gene Sperling or Treasury Secretary Timothy Geithner, according to the people familiar with the discussions.
“If they could get away with it, they’d make Jack Lew a persona non grata on Capitol Hill,” Jim Manley, a former aide to Senate Majority Leader Harry Reid, said of Republicans.
Lew’s defenders say his confidence stems from knowing more about the budget than those with whom he’s negotiating and his unwillingness to capitulate on the president’s platform, particularly when Republicans resist compromise.
While Geithner, the man he will replace, came to the job with experience in US and world financial markets, Lew has been mostly steeped in the domestic budget process.
He doesn’t carry the international prestige or experience the US may need to work with Europe as it struggles through a debt crisis, or to manage trade relations with China. And administration officials have been advised by business leaders that Lew would need a strong deputy, someone to make up for the knowledge and clout that he lacks in international finance, according to people familiar with the process.
“He will have to introduce himself to the European leaders,” said Ted Truman, senior fellow at the Peterson Institute for International Economics in Washington.
“That he probably will be dealing heavily with US fiscal issues in one form or another will give him an advantage,” said Truman, a former assistant Treasury secretary for international affairs under Clinton. “He can speak with authority on that from the US standpoint.”
Lew graduated from Harvard College in 1978 and got his law degree from Georgetown University Law Center in 1983. Before Obama tapped him in 2010 to reprise his role as head of the Office of Management and Budget, Lew worked under Secretary of State Hillary Clinton as her deputy for Management and Resources, serving as the department’s chief operating officer.
Prior to that, he worked briefly in private industry - serving as managing director and chief operating officer of Citi Global Wealth Management and then at Citi Alternative Investments until 2009. After leaving Bill Clinton’s budget office in 2001, he became executive vice president and chief operating officer at New York University until 2006, overseeing budget, finance and operations.
His short stint at Citigroup doesn’t provide the same business experience as some of the other candidates Obama was considering for the Treasury job, including Evercore Partners chairman Roger Altman or American Express chief executive Kenneth Chenault.
“The business community doesn’t know him too well,” said Jim Tisch, CEO of Loews Corp who met Lew at the end of his tenure as Clinton’s budget chief. “They may not like him based on what comes out with respect to corporate taxes, but he is really smart. He’s got a lot of miles under the hood.”
Tisch, whose family has been a long-time benefactor of NYU, connected Lew with the “powers that be” at the university when he was looking for nonprofit work in the private sector because of his “enormous bandwidth,” he said.
As Obama’s chief of staff, Lew has been a hard negotiator, deliberative and prepared. He’ll often ask legislative affairs director Rob Nabors for specific answers to possible questions that may come up at meetings. Sometimes it takes five minutes to get Lew the information, and sometimes five hours.
“More often than not, the information becomes incredibly relevant to the conversation - sometimes you can’t piece that together until two steps down the road,” said Nabors, who was Lew’s deputy at OMB. “He really is playing chess at a different level.”
With the exception of the Sabbath - he’s an orthodox Jew - Lew is always on the clock. He’s also mindful of his employees. Before one conference call in November on the fiscal cliff - the more than $US600 billion in tax increases and spending cuts that were scheduled to take place at the end of the year - Lew worked to set up the time to accommodate the personal schedules of some 25 aides.
“It’s nice to be important, but more important to be nice,” Lew often says, quoting O’Neill - his former boss and mentor.
Lew’s wife lives at their Riverdale, New York, home and he commutes on weekends, catching a train on Friday to make sure he arrives before sundown. That personal sacrifice was a consideration for him as he weighed whether he wanted the Treasury job.
His daughter lives in Washington and his son, who lives in New York, just had a second child. It’s common for Lew to pull out his iPad before and after meetings to show off videos of his grandchildren.
Yet when it comes to his job, “There’s a quiet ferocity to him,” said senior adviser David Plouffe. “He knows this inside and out. He’s not just making sure that we run a good process. He’s a contributor, but not with a heavy hand.”
He held daily fiscal cliff meetings around his desk at the White House to coordinate what the political, economic and communications teams were doing.
A numbers guy and someone who has been around Washington for decades, Lew can stick to substance while gaming out the demands of Republicans and Democrats in Congress as well as the public response.
That knowledge comes from his decades of service in the nation’s capital. Lew came to Washington in 1973 and worked for the firebrand former New York Congresswoman Bella Abzug, before joining O’Neill’s team, where he eventually became a principal domestic policy adviser.
He was O’Neill’s liaison to the 1983 National Commission on Social Security Reform headed by Alan Greenspan.
O’Neill, in meetings with House minority leader Bob Michel, made clear the authority he entrusted in his 30-year-old aide, saying, “Jack’s my man,” recalled Billy Pitts, who worked for Michel.
Even then, he was a tough negotiator, doctrinaire on behalf of his boss, yet pragmatic on a final agreement and good on his word, said Pitts, now a Republican strategist.
“At times, he would denigrate his own intellect just to flush me out on where the Republicans were on an issue,” said Pitts. “He wouldn’t give much, but if Tip were to say, ‘On this area we really have to seriously negotiate,’ he would. But the boundaries were clearly set and the cards very close to the chest.”
Lew’s worldview was informed by his Jewish faith as well as the battles O’Neill waged during the Reagan era and the compromises he forged to preserve Social Security, Medicare and Medicaid against steep cuts.
He has “the ability to combine an appreciation for the larger picture and implication with a knowledge and patience for the detail,” said Ari Weiss, who worked with Lew under O’Neill. The two were housemates when they moved to Washington after responding to a notice of someone looking for a kosher roommate.
Weiss and Lew made names for themselves as two key Jewish aides to the powerful Irish-American House speaker. Lew’s parents emigrated to the US from Eastern Europe before the end of World War I and settled in New York, where Lew grew up.
“I was raised in a family that placed high importance on preserving our Jewish values and promoting our shared American values,” Lew said in a speech to the American Jewish Committee Global Forum in May.
Behind his wire-rimmed glasses, budget wonkiness and understated demeanor is someone who jokes around, slaps aides on the back to tell them they’ve done a great job and isn’t afraid to poke fun of himself, particularly when it comes to conceding his limited knowledge of pop culture.
Unlike most of the men who inhabit Obama’s inner orbit, Lew isn’t a sports guy. Aides even joked that they needed to give him a basketball tutorial before he went with Obama and UK Prime Minister David Cameron to Dayton, Ohio, in March for the first game of the men’s college tournament.
“He doesn’t have that grand savant political patina that you think most of these types of people would have,” said attorney Stan Brand, who supervised O’Neill’s interns, of which Lew was one. “He’s got a big brain, not a big head.”