Obama administration shaken by nominee withdrawals

Senate delays approval of $800-billion package as several nominated secretaries reveal tax issues; two key nominees withdraw candidacies.

Obama 248.88  (photo credit: AP)
Obama 248.88
(photo credit: AP)
President Barack Obama's fledgling administration was shaken by heavy political blows Tuesday when two top nominees withdrew under the cloud of tax problems. Tom Daschle, the former Senate majority leader, who had battled in recent days to save his nomination as Health and Human Services secretary after revealing he failed to pay more than $120,000 in taxes, said he was stepping aside to avoid being a distraction. His move came less than three hours after Nancy Killefer withdrew her candidacy to be the nation's first chief performance officer for the federal government, explaining in a letter to Obama that she feared her own tax issues "could be used to create . . . distraction and delay." Tuesday's messy political developments threatened to blunt Obama's effort to take his economic message directly to the American people through a series of interviews with every national television network. Obama increasingly has run up against the stark realities of Washington politics as he spent the early days of his administration trying to stiffen ethics requirements for his administration and struggled with congressional Republicans to win bipartisan support for stimulus spending and tax cuts to pull the country out of its worst economic swoon in 80 years. The president had said as recently as Monday that he "absolutely" stood behind Daschle. But under growing criticism about the tax lapse, Daschle apparently decided Tuesday morning that his problems were presenting an unneeded distraction for Obama. When Killefer's selection was announced by Obama on Jan. 7, The Associated Press disclosed that in 2005 the Washington D.C. local government had filed a $946.69 tax lien on her home for failure to pay unemployment compensation tax on household help. She resolved the issue five months after the lien was filed. The administration had only recently finished sweating out Senate approval for Treasury Secretary Timothy Geithner, who had faced embarrassing disclosures about his failure to pay taxes on a portion of his income when he worked for the International Monetary Fund. Obama is pressing Congress to quickly pass $800-plus billion spending and tax cut measures to put a floor under the US economy's downward spiral. Sandwiched between the withdrawals and the afternoon television interviews, Obama took the highly unusual step of nominating a third Republican to his Cabinet - Sen. Judd Gregg as commerce secretary. Presidents rarely rely as heavily on figures from the opposition party to fill government slots. Obama used the Gregg announcement at the White House to warn against allowing the "same partisan gridlock" to bog down quick action on the stimulus initiative. The new president campaigned for the presidency and took office promising to yank Washington out of decades of bitter bipartisanship but has struggled on the stimulus measure despite his unprecedented courting of the opposition party even before he was inaugurated. Republicans want to reshape his massive stimulus plan - budgeted at $819 billion as it passed the House of Representatives and rising to nearly $900 billion under debate in the Senate. While issuing praise of the highly popular president's call for quick stimulus action, Republicans have been attacking their Democratic congressional colleagues for what they say is loading the measure down with pet projects and failing to provide larger tax cuts _ the perennial Republican prescription for economic troubles. Obama bore down on fellow Democratic congressional leaders at a White House meeting late Monday and planned to talk economics with party rank-and-file at House and Senate retreats later in the week. Despite the heavy political weather surrounding Daschle and Killefer, there was welcome news when another Cabinet choice, Eric Holder, was confirmed by the Senate late Monday and sworn in Tuesday as the first African-American US attorney general. Holder's nomination initially had been viewed as problematic because of questions over his role in controversial pardons when he was the No. 2 Justice Department official under President Bill Clinton. Now Holder will be the country's chief law enforcement official as head of the Justice Department. Holder easily overcame some Republican objections over what they considered his insufficient commitment to fight terror and his support for gun control, but even his critics agreed that Holder was well-qualified for the post. The political scrum over Obama's stimulus measure took place as the Commerce Department reported that personal spending fell for the sixth straight month in December by 1 percent. Analysts had predicted a decline of 0.9 percent. Incomes also dipped, and the personal savings rate shot higher, a sign that consumers remain extremely nervous about the economy. Also Monday, the president predicted some of America's troubled banks still could fail, despite a $700 billion financial bailout program, half of which has already been spent by the former Bush administration. The bailout program is separate from the Obama administration's stimulus plan. Top Senate Democrats plan to add a big increase in highway and mass transit funding to the recovery program Tuesday, even as others in the president's party hope to trim the cost of the plan. Republicans were pressing to lower mortgage costs to try to jolt the housing market out of its slump.