Lew Leans on Portman for Republican Ties in Budget Talks

Photographer: Tom Williams/CQ Roll Call via Getty Images

U.S. Senators Max Baucus, a Democrat from Montana, left, and Rob Portman, a Republican from Ohio, talk in the Russell Building before for a bipartisan luncheon. Close

U.S. Senators Max Baucus, a Democrat from Montana, left, and Rob Portman, a Republican... Read More

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Photographer: Tom Williams/CQ Roll Call via Getty Images

U.S. Senators Max Baucus, a Democrat from Montana, left, and Rob Portman, a Republican from Ohio, talk in the Russell Building before for a bipartisan luncheon.

Republican Senator Rob Portman doesn’t have a committee chairmanship or a leadership post. One asset he wields in the politically divided capital is a direct line to a prominent Democrat: Treasury Secretary Jacob J. Lew.

Portman was the first person -- even before President Barack Obama -- to call Lew after the Senate confirmed him as Treasury secretary Feb. 27, and the bipartisan pair talked six more times during Lew’s first five months on the job. That’s more contact than Lew had with any other Republican and with any member of Congress except for Senate Finance Chairman Max Baucus, according to Lew’s calendar.

The Lew-Portman relationship, built on their shared background as White House budget directors, may be an avenue through which lawmakers can attempt to resolve their disputes over raising the federal debt ceiling and changing the tax code. Portman of Ohio may be a Republican the administration asks to support Obama’s nominee for Federal Reserve chairman.

“They’re private conversations where we’re trying to figure out common ground,” Portman said in an interview at the Capitol yesterday. “I think there’s a way for us to get through this first stage; I’m not sure the grand bargain is there.”

The administration has made Lew its voice on the debt ceiling and on its stance that the $16.7 trillion limit should be raised without conditions by mid-October. Republicans insist on attaching what House Majority Leader Eric Cantor is calling “fiscal reforms and pro-growth policies.”

Short-Term Spending

Congress also needs to adopt a short-term spending plan before the Sept. 30 end of the fiscal year or many government programs will run out of funding. House Republican leaders presented a plan to members today that would allow enactment of a short-term spending measure while forcing a mostly symbolic Senate vote on defunding Obama’s health-care law.

Lew and Portman, lawyers born 16 weeks apart in 1955, have a common resume entry -- budget director. Lew ran the Office of Management and Budget under Presidents Bill Clinton and Barack Obama. Portman led the office in 2006 and 2007 for George W. Bush.

“They are soulmates in some way here, even though they are from different political parties,” said Bill Hoagland, a former Senate Republican budget aide. “Portman is a very good and logical person for Secretary Lew to communicate with.”

On fiscal policy, Lew and Portman each reflect their parties’ divergent priorities. The Treasury secretary favors pairing higher taxes for top earners with gradual spending reductions. The senator resists tax increases and advocates slowing spending on social-insurance programs such as Medicare.

So far, neither has been able to broker a bipartisan budget agreement. Portman’s close ties to Republican leaders won him a seat on the 2011 deficit-reduction supercommittee. Within that group, he attempted and failed to reach a bipartisan compromise as that panel deadlocked.

Spending Cuts

He voted for the 2011 law that created the across-the-board spending cuts known as sequestration and for the January 2013 deal that set in place the current top tax rates. The Obama administration supported both laws.

Lew, who was White House chief of staff before going to Treasury, was a leading administration negotiator in several rounds of failed budget talks in 2011 and 2012.

Portman, 57, and Lew, 58, each left government only to return later. Lew was an executive at New York University and Citigroup Inc. (C) before joining the Obama administration. Portman worked at a law firm in Cincinnati before running for Senate in 2010; he is up for re-election in 2016.

The Treasury Department posted Lew’s calendar on the Internet Aug. 29. It’s partially redacted.

A Treasury official who wasn’t authorized to talk publicly about the pair’s conversations said Lew and Portman talk from time to time about the budget, taxes and financial regulations.

Budget Committee

Once Lew was sworn in Feb. 28, they didn’t talk until April 16, the day Lew testified at the Senate Budget Committee. Portman questioned him in that hearing about the tax code and budget deficit. Lew called Portman at 8:35 p.m. that night.

The secretary spent 40 minutes with Portman in the Capitol May 23, as Lew was shaping the administration’s response to the controversy surrounding the Internal Revenue Service’s scrutiny of Tea Party groups.

Lew, a former aide to the late House Speaker Tip O’Neill, came to Capitol Hill June 10 to meet with Portman for almost two hours in the senator’s office in the Russell building. Lew left at 7:45 p.m. after his longest one-on-one meeting with a member of Congress.

They spoke by phone on July 12, July 29 and July 30. The final two conversations came as Obama was talking publicly about a corporate tax proposal that would dedicate one-time revenue from base broadening to infrastructure spending and not rate reduction.

Portman ‘Discouraged’

Portman told reporters July 30 that he was “discouraged” by the administration’s statement.

“I thought we were making some pretty good progress, honestly, in finding a consensus about how to deal with the business side,” he said then. Lew called him less than two hours later.

Portman said yesterday that he continued to think there was room for consensus, particularly on business taxation.

“I try to keep the lines of communication open,” Portman said.

Other than Baucus and Portman, Lew didn’t talk to any other member of Congress more than three times during the period between his confirmation vote and July 31.

Among those who talked with Lew three times were House Ways and Means Chairman Dave Camp, a Michigan Republican; Senate Majority Leader Harry Reid, a Nevada Democrat; and Representative Mel Watt, a North Carolina Democrat who is the administration’s pick to run the Federal Housing Finance Agency.

‘Understand Congress’

Lew, whose experience is in budget matters more than in financial regulation, didn’t talk at all with Senate Banking Committee Chairman Tim Johnson of South Dakota or with Mike Crapo, the panel’s top Republican, according to the calendar. He also didn’t meet with House Financial Services Chairman Jeb Hensarling of Texas; he talked twice with that committee’s leading Democrat, Maxine Waters of California.

Because of his executive-branch experience, Portman could be a bridge between congressional Republicans and the White House, said Russ Sullivan, who was staff director for Senate Finance Committee Democrats until earlier this year.

“He helps Congress understand the administration and the administration understand Congress,” said Sullivan, now a partner at McGuireWoods LLP in Washington.

During the confirmation process, when others were criticizing Lew’s compensation from NYU and his Citigroup investments based in the Cayman Islands, Portman was a supporter and one of six Finance Committee Republicans to back his confirmation.

Tax Rates

When questioning Lew in public Feb. 13, Portman said he saw the potential for “consensus” on lowering U.S. tax rates and broadening the tax base.

As past holders of what Portman jokingly called “the worst job in Washington,” they speak the “same language,” which doesn’t necessarily make them “natural allies,” said Stan Collender, a former congressional budget aide who is a partner at Qorvis Communications LLC.

“It makes the conversation easier but doesn’t necessarily make an agreement more likely,” Collender said in an e-mail.

Because both are “budget geeks,” Lew may view Portman as an ally on some issues, said Mark Calabria, a former Senate Republican aide who is now director of financial regulation studies at the Cato Institute. The Washington research group is dedicated to libertarian principles.

“Lew sees Portman as potentially somebody who would break from the Republicans if need be,” Calabria said.

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Kasia Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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