Daley Departs as Obama Shifts Strategy to Confronting Congress

The departure of White House Chief of Staff William Daley reflects President Barack Obama’s choice to abandon a strategy of seeking accommodation with congressional Republicans and his critics in corporate America.

Daley’s resignation a year after taking the job is a “not inevitable but logical consequence” of Obama’s movement since September toward confrontation with Congress, said William Galston, who was a domestic policy adviser to former President Bill Clinton.

Jacob Lew, currently director of the Office of Management and Budget, will succeed Daley once he has completed work on the administration’s fiscal 2013 budget proposal, due to be delivered to Congress during the first week of February.

Obama turned to Daley, a former JPMorgan Chase & Co. executive and U.S. commerce secretary, in January 2011 as the president sought to improve relations with U.S. businesses and congressional Republicans following the 2010 midterm elections in which Democrats lost their House majority and saw their margin in the Senate shrink.

He was a central player in Obama’s failed attempt to reach a long-term budget deal with Republicans last July. The president’s job approval ratings plunged after the August standoff on the debt ceiling that brought the nation to the brink of default. Congressional Democrats criticized Daley for concessions such as Medicare cuts the White House offered in its attempts to achieve a grand bargain.

Speech Scheduling

Daley also took blame for a misstep in scheduling Obama’s Sept. 8 address to a joint session of Congress to announce his jobs plan. Daley spoke by telephone with House Speaker John Boehner, an Ohio Republican, prior to the White House’s announcement of a speech and then Boehner publicly requested the speech be delayed a day.

After the $447 billion jobs bill was blocked in Congress, Obama changed course.

Going into the 2012 election, the president is seeking to portray himself as champion of middle-income Americans who is confronting Wall Street and an obstructionist Congress. He signaled his new message with a Dec. 6 address in Kansas, saying the nation is at “a make-or-break moment for the middle class.”

The strategy that Daley was supposed to implement “had hit a wall,” said Galston, now a governance analyst for the Brookings Institution in Washington. “The skill set and the relationships that he brought were much less applicable to the new White House political strategy.”

Returning to Chicago

Daley, 63, informed the president of his decision to leave when he returned to Washington last week after the holidays. Obama said yesterday that he didn’t immediately accept it, and he asked Daley to think it over. In the end, Daley said he wanted to return to his hometown of Chicago, where his family has dominated local politics for decades.

“No one in my administration has had to make more important decisions more quickly than Bill,” Obama said. “There is no question that I’m going to deeply miss having Bill by my side.”

Lew, Obama said, “has my complete trust.”

The change is occurring as the White House gears up for Obama’s re-election campaign with the economy still struggling to gain steam and the unemployment rate at 8.5 percent.

Republican National Committee Chairman Reince Priebus said in a statement that Daley’s departure “makes it even more clear every decision is being made through the lens of re-election” at the White House.

Priebus said Daley had been hired to bridge a divide between Obama and U.S. business and “found himself trying to defend the indefensible” with the administration’s policies.

New Confrontation

Obama ratcheted up tension with congressional Republicans last week by installing Richard Cordray as head of the Consumer Financial Protection Bureau and three members of the National Labor Relations Board through recess appointments. Republicans had used procedural maneuvers to block Cordray’s confirmation.

Lew will be Obama’s third chief of staff. His first, Rahm Emanuel, resigned last October to begin his successful run to succeed Daley’s older brother, longtime Chicago Mayor Richard M. Daley, who retired.

Lew brings continuity as a key member of Obama’s existing team and deep relationships from a long career in Washington that can be used either to ease negotiations with Republicans or strengthen partisan unity in battle, Galston said.

Congressional Relations

“If the name of the game politically is close coordination with the Democratic congressional leadership to respond tactically to whatever the controversies are or whatever the openings happen to be, I would expect him to be quite good at that,” Galston said.

Obama named Lew as his budget office director in July 2010. Lew, 56, previously served in the State Department and was budget chief under PresidentClinton. He also has experience in Congress, having served as policy director for the late House Speaker Thomas P. “Tip” O’Neill, a Massachusetts Democrat.

Lew played a role in such bipartisan deals as the 1983 Social Security Trust fund rescue and the 1997 balanced budget deal when he was Clinton’s deputy budget director. Former Clinton budget director Alice Rivlin called Lew “a very skilled negotiator.”

“He’s quiet,” she said. “He doesn’t throw his weight around, but he gets the job done.”

Judd Gregg of New Hampshire, the former top-ranking Republican on the Senate Budget Committee, said Lew is respected by both parties as “a straight shooter.”

“He’s a partisan, but he’s a fair guy,” Gregg said.

A graduate of Harvard University and Georgetown Law School, Lew’s background also includes academia, as chief operating officer at New York University for five years, and the private sector, as managing director of Citigroup Inc.’s (C) Alternative Investments until January 2009 and chief operating officer of Citi’s Global Wealth Management before that.

To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editor responsible for this story: Steve Komarow at skomarow1@bloomberg.net

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