Jacob “Jack” Lew, Obama’s nominee to replace Peter Orszag as Director of OMB, has served at the State Department since the last time he served as Director of OMB for President Clinton. Â Regardless of whether Orszag’s departure resulted from policy differences with President Obama, it’s clear that at least some fiscal policy changes are coming.
For one thing: Jack Lew helped orchestrate the 1997 compromise between Bill Clinton and Newt Gingrich that balanced the federal budget as deputy director at OMB. Â He’s a figure from the Clinton administration, who served as Executive Director of Legislative Affairs at OMB, so he’s an experienced Congressional liaison who is used to reaching across the aisle. Â The fact that Obama is replacing one the chief architect and advocate of the stimulus plan with a Clinton appointee who presided over the first federal surpluses since 1969 means that the White House has sensed a shift in the political winds and is positioning itself to make a dent in ballooning federal deficits.
While spending cuts are generally bad news for government contractors, the areas most ripe for spending cuts are entitlements. Â As ExecutiveBiz reported earlier this year, unless major changes are made to curb spending and borrowing to cover entitlement outlays, Congress will be forced to cut defense spending. Â Douglas Elmendorf, Director of the Congressional Budget Office, wrote in January that âlooking across the whole 40-year period, the basic story of U.S. fiscal policy is fairly simple: The country financed an increase in Social Security, Medicare, and Medicaid spending by reducing defense spending relative to the size of the economy.â
Since Jack Lew presided over three years of billion-dollar surpluses in Washington, he’s a good choice to pitch politically costly measures like Social Security reform and cuts to Medicare and Medicaid to Congress. Â Since interest payments on the national debt is projected to grow from 5% of total federal outlays this year to 13% in 2015, there’s no time like the present to balance the federal budget.