Obamanomics 2.0: Meet the Team Running Economic Policy in the President's Second Term

Article excerpt

"AMERICA'S POSSIBILITIES are limitless," President Barack Obama told the country during his second inaugural address. And so, one got the sense, was his agenda. In February, during his State of the Union address, Obama began to flesh out the details: tax reform, pruned-back entitlement payouts, an increase in the minimum wage, tens of billions in new infrastructure spending, perhaps even a stab at a long-elusive "grand bargain" to steady federal finances into the future.

The two speeches made it clear that Obama's second term, like his first, would focus on domestic policy, with a handful of big-ticket reform items competing for attention against a backdrop of continuous haggling over the size and shape of the federal budget. Along the way, he will rely on an economic team that has been almost completely overhauled since he first took office.

Who are the president's top wonks? At first glance, they're a bunch of ex-Clintonites steeped in Third Way centrism and deficit hawkery. But a closer look reveals something else. The keepers of Obamanomics 2.0 are above all political appointees designed to defend a status quo that has very little to do with the comparative golden years of Bill Clinton.

The Paper Deficit Hawk

In theory, Jacob "Jack" Lew is the deficit hawk's best friend in the administration. As White House budget director from 1998 through 2001, Lew presided over the Clinton surpluses. During that time, he repeatedly insisted that fiscal discipline was necessary to achieve liberal policy goals. Indeed, Lew was so adamant about the need for budget restraint that when he was nominated for the top spot at Treasury this year, some liberals quietly grumbled that he might be too concerned about the deficit.

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They don't have much to worry about. It's true that Lew spent much of his career managing highly charged budget negotiations, first as an aide to Democratic House Speaker Tip O'Neill in the early 1980s and under Clinton. But Lew has always viewed budgets as messaging first, math second. The budget, he once wrote, is "not just a collection of numbers, but an expression of our values and aspirations." Elsewhere he has described budgets as "a tapestry, the fabric, of what we believe."

It's clear enough what Lew believes about the current budget. He's a lifelong defender of the big-ticket entitlements that are the largest drivers of the nation's long-term debt, a true believer in the goodness of government who agonizes over even the tiniest program cuts, and a budgetary sleight-of-hand artist who helped the Obama administration sell fake spending cuts during the 2011 debt limit fight.

Under Clinton, Lew sold surpluses as a way to preserve the welfare state: "Fiscal discipline is essential to protect Social Security and strengthen Medicare, so that both will be there in the years ahead," he told Congress in 2000. Entitlements have long been a key issue for Lew; under O'Neill, he helped broker a bipartisan deal to reform Social Security financing in 1983. In 2012, former GOP senator (and Budget Committee chair) Judd Gregg told National Journal that Lew's top priority is shielding Medicare and the rest of the entitlement firmament from change.

The mere mention of entitlement cuts has been known to drive the reportedly even-tempered Lew into fits of rage. During the summer 2011 debt limit negotiations, he reportedly lost his cool when the subject of reducing Medicaid spending came up. "No!" he yelled on a conference call with colleagues, according to a report by Bloomberg News. "We're not doing that" Eventually, Lew reached an agreement with Republicans that raised the federal debt limit but did not cut Medicaid.

In an April 2011 budget negotiation, Lew helped buy Republican support with a package of "cuts" to spending that either never was going to happen in the first place or already was scheduled for the chopping block. …