State’s Jack Lew to replace Peter Orszag as OMB director

President Obama announced Tuesday that he intends to bring Deputy Secretary Jack Lew from the State Department to be his new director of the Office of Management and Budget.

In a statement, Obama said that Lew had agreed to take the job to replace outgoing OMB director Peter Orszag, who announced last month he would resign and join the Council on Foreign Relations. Lew was OMB director under President Bill Clinton from 1998 to 2001 and has been serving under Secretary of State Hillary Clinton as deputy secretary for management and resources — the guy who makes the trains run on time in Foggy Bottom.

“The experience and good judgment Jack has acquired throughout his impressive career in the public and private sector will be an extraordinary asset to this administration’s efforts to cut down the deficit and put our nation back on a fiscally responsible path,” Obama said. “As the budget director who left the next administration a $237 billion surplus when he worked for President Clinton, I have no doubt that Jack has proven himself equal to this extraordinary task.”

Secretary Clinton notified the State Department staff of the move in a note Tuesday morning.

“This news is obviously bittersweet,” she said. “While I was hoping never to have to replace Jack, the President and our country need his leadership at OMB.”

The Washington Post’s Al Kamen had reported that Clinton was strongly resisting Lew’s move from Foggy Bottom to the Old Executive Office.

One of Lew’s main jobs at OMB will be to prepare the fiscal 2012 budget. But first he will have to defend the fiscal 2011 budget, which is slowly making its way through Congress. The House Appropriations Foreign Operations Subcommittee has marked up a bill that would cut $4 billion from the administration’s $56.7 billion request for State Department and foreign operations, but it’s not clear if Congress will act on that budget this year at all.

Lew will also be in a position to implement, if he chooses, Clinton’s idea for a unified budget for all national security functions, a proposal that’s sure to face resistance from lawmakers. His top deputy for national-security budgeting will be Steve Kosiak, formerly with the Center for Strategic and Budgetary Assessments.

The administration hopes that by the time Lew takes up his post, Congress will have cleared the fiscal 2010 war supplemental bill in a way to avoid a presidential veto.

Clinton spoke in May about how Lew dealt with the State and foreign aid money during his last stint as OMB director.

“Part of the reason I brought [Lew] in is because I knew when Jack headed OMB during the Clinton administration, State would come in with their budget, and AID would come in with their budget, and OMB would always play them off of each other,” she said.

No word yet on who might replace Lew at State or what effect the move will have on the yet-to-be-seen Quadrennial Diplomacy and Development Review, which he has been heavy involved in.

Clinton also told State Department employees this morning that they could help Lew in his new role by competing in the State Department’s Securing America’s Value and Efficiency (SAVE) Award contest. If employees go to www.SaveAward.gov and submit their ideas, they can have an impact on how the State Department plans to spend its money.

“The winner of this award will be invited to the White House to present the winning idea to the President — and maybe even Jack — and the idea will also be included in the FY 2012 budget,” Clinton said.