Video: One-on-one with President Obama

NBC, msnbc.com and news services
updated 2/3/2009 10:21:14 PM ET 2009-02-04T03:21:14

President Barack Obama on Tuesday abruptly abandoned his nomination fight for Tom Daschle and a second major appointee who failed to pay all their taxes, telling NBC News: "I screwed up."

"I’ve got to own up to my mistake. Ultimately, it's important for this administration to send a message that there aren't two sets of rules — you know, one for prominent people and one for ordinary folks who have to pay their taxes," Obama said on NBC’s "Nightly News with Brian Williams."

The admission came little more than 24 hours after Obama had said he was "absolutely" committed to Daschle's confirmation as secretary of health and human services, a job in which he would taken the lead in the president's ambitious plans for the nation's health care system.

"I'm frustrated with myself, with our team. ... I'm here on television saying I screwed up," Obama said on NBC. He repeated virtually the same words in interviews with other TV anchors.

Hours earlier, the White House had announced that Daschle had asked to be removed from consideration and that Nancy Killefer had made the same request concerning what was to be her groundbreaking appointment as a chief performance officer to make the entire government run better.

Worried about 'a distraction'
Daschle said in a brief letter to Obama that he refused to "be a distraction" from the new president's drive for health care reform. Obama said neither he nor Daschle excused the former Senate Democratic leader's tax errors but that he accepted his friend's decision "with sadness and regret."

Personal tax problems had been piling up for the new administration. Last week, the Senate confirmed Timothy Geithner as treasury secretary, but only after days of controversy over the fact that the man who would oversee the Internal Revenue Service had only belatedly paid $34,000 in income taxes.

Bill Richardson bowed out, too, though his difficulties didn't involve personal taxes. The New Mexico governor, who was Obama's first choice for commerce secretary, withdrew amid a grand jury investigation into a state contract awarded to his political donors.

Video: ‘Daschle had become a distraction’ Questions about Daschle's failure to fully pay his taxes from 2005 through 2007 had been increasing since they came to light last Friday. Daschle overlooked taxes on income for consulting work and personal use of a car and driver, and also deducted more in charitable contributions than he should have. To resolve it, he paid $128,203 in back taxes and $11,964 in interest last month.

Daschle, chosen to lead the administration's push for sweeping health care reform, also was facing questions about potential conflicts of interests related to speaking fees he accepted from health care interests and about the advice he provided to health insurers and hospitals through his work at a law firm.

The car and driver were lent by Leo Hindery, head of a firm called InterMedia Advisors and former chief executive of the Global Crossing telecom company. Hindery is a longtime friend of Daschle and a veteran Democratic Party donor.

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Tax lien on Killefer
Killefer, an executive with consulting giant McKinsey & Co., had been chosen by Obama to serve in two roles: as the first chief performance officer in a White House and as a deputy director at the Office of Management and Budget.

When Obama announced Killefer to much fanfare in early January, The Associated Press reported that the District of Columbia government had filed a $946.69 tax lien on her home in 2005 for failure to pay unemployment compensation tax on household help. She resolved the tax error five months after the lien was filed. Since then, administration officials had refused to say whether her tax problems extended beyond that one issue.

Video: Daschle 'emotional' By Tuesday, the tax questions had reached critical mass.

“Today was an embarrassment for us,” Obama said on NBC. He said he was “angry,” “disappointed” and “frustrated with myself” over the Daschle episode.

But the president claimed credit for appointing hundreds of “top notch” executive branch officials who have no tax problems.

“It’s important not to paint (with) a broad brush here, because overall not only have we gotten in place a functioning government in record time, but overall the quality of these people is outstanding.”

Still, the dual-withdrawal fiasco is “something I have to take responsibility for,” Obama told Williams.

“I appointed these folks. I think they are outstanding people. I think Tom Daschle, as an example, could have led this health care effort, a difficult effort, better than just about anybody. But as he acknowledged, it was a mistake. I don’t think it was intentional on his part, but it was a serious mistake. He owned up to it and ultimately made a decision that we couldn’t afford the distraction.”

Heeding The New York Times
Daschle told NBC News that a chiding New York Times editorial played a role in his decision to exit.

In an emotional phone call with NBC's Andrea Mitchell, Daschle said he had phoned Obama on Tuesday morning after reading the New York Times editorial calling on him to withdraw.

The editorial described Daschle's ability to move "cozily between government and industry" as a cloud over any role he might play in changing the nation's medical insurance system.

"I read the New York Times," Daschle told Mitchell, adding: "I can't pass health care if it's too much of a distraction ... so I called the president this morning."

White House press secretary Robert Gibbs said the choice to step aside was Daschle's alone and the former senator "did not get a signal" from the White House to do so. Daschle and Obama spoke Tuesday, and the president was surprised at the news, said White House senior adviser David Axelrod.

Surprised Democrats
Democratic lawmakers were surprised, too — and disappointed. Axelrod rushed to Capitol Hill to soothe frayed nerves.

Video: Daschle 'emotional' "I was a little stunned. I thought he was going to get confirmed," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, the panel that would have voted on Daschle's nomination. "It's regrettable."

Obama, Vice President Joe Biden and Daschle's former Democratic colleagues had leapt to the former Democratic leader's defense. And it seemed that the clubby way that senators treat one of their own was likely to help Daschle survive the controversy.

But particularly after the divisive Geithner debate and vote, it apparently became too bitter a pill. Tax issues are easy for the public to understand, and also particularly easy to resent in wealthy officials at a time of widespread economic crisis.

They also created an opening for a drumbeat of criticism from Republicans and on newspaper editorial pages that Obama was engaging in a double standard: proclaiming his administration to be more ethical, responsible and special interest-free than his predecessors' and yet carving out exceptions almost daily.

GOP Sen. John Ensign of Nevada said Daschle was going to be faced with tough questions from committee members, among them how the wealth he amassed from a lobbying firm — while not technically registered as a lobbyist — "passes the smell test."

"I think he saved the president from being embarrassed next week in a public hearing," Ensign said.

Loss for Obama's agenda
But even while Obama aimed to stave off potentially crippling problems in one corner with the withdrawals, he created some new ones.

Obama has promised that moving toward universal health care coverage is one of the pillars of first 100 days agenda — a heavy lift that many believed Daschle, with his long experience in Washington, was uniquely qualified for. Daschle was going to wear two hats for Obama, as White House health czar on top of the post leading the Health and Human Services Department.

"We're going to do health care reform," Senate Majority Leader Harry Reid, D-Nev., said flatly after the nomination withdrawal. But others reacted differently.

"It really sets us back a step," said Sen. Dick Durbin, D-Ill. "Because he was such a talent. I mean he understood Congress, serving in the House and Senate he certainly had the confidence of the president."

Among those considered for the post before it went to Daschle was Howard Dean, the physician-turned-politician who ran for president in 2004 and recently left as head of the Democratic National Committee. Other possible replacements include Kansas Gov. Kathleen Sebelius, Pennsylvania Gov. Ed Rendell, and Ohio Gov. Ted Strickland.

The Associated Press contributed to this report.

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