Fiscal crisis delays changes in Team Obama

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The White House is making America’s high-stakes fiscal crisis its top priority after President Barack Obama’s re-election, underscoring the vital importance of averting severe year-end tax increases and spending cuts as Obama heads toward a second term.

The newly re-elected Obama is also weighing replacements for high-profile officials expected to leave his Cabinet and the White House soon. Treasury Secretary Timothy Geithner and Secretary of State Hillary Rodham Clinton both want to step down but have indicated a willingness to push their departures into next year, or at least until successors are confirmed. Defence Secretary Leon Panetta also wants to retire next year.

The President privately delved into both issues on Thursday, his first full day back in Washington following his re-election on Tuesday. The President and his team were also assessing how congressional Republicans were positioning themselves following the election before saying much publicly about his second term.

The President will make his first comments on the economy and the fiscal crisis on Friday at the White House.

In his victory speech on Tuesday night, Mr. Obama offered a call for reconciliation after a divisive campaign. But he made clear he had an agenda in mind, citing a need for changes in the tax code, as well as immigration reform and climate change.

Mr. Obama’s aides want to avoid what they believe was an overreach by President George W. Bush, who declared after narrowly winning re-election that he had “political capital” and intended to spend it. One of Mr. Bush’s first moves was to push to privatise federal Social Security pensions, a plan that was roundly rejected by Congress and the public.

The White House believes Mr. Obama has a clear mandate on one key issue — raising taxes on families making more than $250,000 a year. Mr. Obama senior adviser David Plouffe said voters “clearly chose the President’s view of making sure the wealthiest Americans are asked to do a little bit more” to help shrink the federal deficit.

The President has long advocated allowing tax cuts first passed by Mr. Bush to expire for upper-income earners. But he gave in to Republican demands in 2010 and allowed the cuts to continue, angering many Democrats.

Both parties agree that the combination of tax increases and spending cuts set to hit on January 1, the so-called fiscal cliff, could plunge the economy back into recession.

Republican House of Representatives Speaker John Boehner said on Wednesday that he wanted to compromise with the re-elected President. And he said the House would be willing to accept higher tax revenue under the right conditions as part of a more sweeping attempt to reduce deficits.

The White House wants consistency in its “fiscal cliff” negotiating team, meaning Mr. Geithner is likely to put off his departure from Treasury until Mr. Obama and legislators can reach some agreement.

White House chief of staff Jack Lew is seen as a leading candidate to replace Mr. Geithner. Mr. Lew is well-respected in Washington by both parties and served as budget director under both Mr. Obama and former President Bill Clinton.

Another person often mentioned as a possible successor to Mr. Geithner is Erskine Bowles, a White House chief of staff under Mr. Bill Clinton and the co-chief of the White House’s 2010 deficit reduction commission.

Both Mr. Lew and Mr. Bowles would bring an intimate knowledge of the intricacies of the federal budget and could be expected to take a leading role in trying to negotiate a broad budget agreement with Congress. The selection of either would signal that the administration intends to make resolution of the government’s deficit problems a priority.

At the State Department, the leading candidates to take over as the top U.S. diplomat are Democratic Senator John Kerry and Susan Rice, the U.S. ambassador to the United Nations.

But Ms. Rice has faced criticism from Republicans for providing initial accounts about the deaths of Americans in Benghazi, Libya, that later proved false. The White House has vigorously defended Ms. Rice, but the prospect of starting a second term with a contentious confirmation hearing may be unappealing.

Mr. Kerry, an early Obama backer, has long coveted the State Department job. He has travelled overseas on Mr. Obama’s behalf and even played the role of Mr. Romney during campaign debate preparations this year.

Other Cabinet Secretaries who have talked about leaving are Attorney-General Eric Holder and Transportation Secretary Ray LaHood, the only Republican in the Cabinet. Both have said they would speak with the President before making a final decision.

And if Mr. Obama taps Mr. Lew for the Treasury Department, he’ll have to add chief of staff to the list of vacancies.