WASHINGTON - President Obama acknowledged Tuesday that he had "screwed up" in trying to exempt some candidates for positions in his administration from strict ethics standards and accepted the withdrawal of two top nominees, including former Senate Majority Leader Tom Daschle, the first major setback of his young presidency.
Obama officials had sought a seamless transition, nominating most of his Cabinet at record pace and taking office ready to implement a raft of new policies. His reversal Tuesday suggested that speed may have come at a cost, and that Obama, despite the popularity he enjoyed upon taking office and the massive challenges facing the nation, will not be spared from the same kind of scrutiny his predecessors have faced.
In jettisoning one of his closest allies, Obama appeared eager to make a course correction after days of criticism that his administration was failing to abide by its own stated ethical standards and questions about his ability to bring change to the capital.
"Did I screw up in this situation? Absolutely. I'm willing to take my lumps," Obama told NBC's Brian Williams, one of five interviews he conducted Tuesday. In interview after interview, Obama said there are "not two sets of rules" for people -- and said that average taxpayers deserve to have public officials who pay their taxes on time.
Daschle's exit from consideration to lead the Department of Health and Human Services after a firestorm over his failure to pay $146,000 in taxes on time came as a shock to the president's supporters in Washington: just a day earlier, Obama had pledged his full support for the former Senate leader who was widely expected to be confirmed.
Daschle had offered to step down over the weekend, but officials said Obama had urged him to fight for confirmation. But by Tuesday morning, with the political pressure showing no signs of easing, Daschle told Obama he believed he had become a distraction and would not have been able to lead a reform of the nation's health care system "with the full faith of the Congress and the American people."
Just hours earlier, Obama's nominee for the newly created position of Chief Performance Officer, Nancy Killefer, also stepped aside amid questions about a $967 tax lien that had been placed on her Washington, D.C. home in 2005 after she failed to pay unemployment compensation taxes on household help.
A crisis in confidence
Daschle's withdrawal also jolted the administration's confidence in its own decision making, serving as a rebuke to Obama officials who had brushed aside the idea that personal tax issues would reach a boiling point.
And perhaps most significantly, the move threatened Obama's plans to overhaul the health care system, a central policy initiative and one so important that Obama had given Daschle a perch both at the Department of Health and Human Services and within the White House itself, as health czar. Daschle withdrew from both posts Tuesday, and advisers said they did not yet know whether the next nominee would serve in dual roles, a measure of the disarray the controversy had caused.
Among the people mentioned as possible candidates for the job of health secretary are Gov. Kathleen Sebelius of Kansas, a former state insurance commissioner; former Gov. John Kitzhaber of Oregon, a doctor; and Gov. Jennifer Granholm of Michigan. All are Democrats.
Key lawmakers were caught off-guard by the reversal. Sen. Max Baucus, D-Mont., chairman of the Finance Committee, who offered his firm support to Daschle after a 75-minute meeting on Monday, said he was told just 15 minutes before the news broke. "Based on that meeting, I'm a little surprised by Senator Daschle's decision," he said.
Sen. Olympia Snowe of Maine, a key Republican on the committee, said she went home Monday night expecting the confirmation process to go forward and Daschle to eventually be sworn in as the new health secretary.
Before the news broke, a number of Senate Republicans began speaking out against Daschle's nomination. After holding back criticism for almost four days, some Republicans broke their silence after learning that the Killefer was withdrawing her nomination for what appeared to be a smaller tax dispute.
"He didn't really have a choice," said Sen. John Cornyn, R-Texas. He said the Daschle controversy had become "Geithner on steroids," referring to the $43,000 in back taxes the Treasury secretary paid before his confirmation vote.
The ordeal also raised questions about how thoroughly Obama transition officials had vetted their nominees.
Tax questions were posed in vetting
Officials said that myriad tax questions had been posed to Daschle, Killefer and Treasury Secretary Timothy Geithner. But the problems were largely dismissed as less important than the qualifications of the nominees for the massive tasks they were expected to confront once in office, the officials said.
"We knew [Daschle would] get punched around on this and that he had made a painful mistake," said John Podesta, who co-chaired Obama's transition. "But we believed he could be confirmed and that he was -- and I still believe this -- the right guy for the job of leading the department and finally getting health care reform across the finish line."
Potential picks had to answer 63-item questionnaires, which an army of lawyers scoured. There were nine questions about taxes, including: "Do you have any expectation that you will be the subject of any tax, financial or other audit or inquiry?"
Daschle did not reveal his tax issue in the questions, said a Washington lawyer who helped vet candidates. "It really is something you find out about in doing an interview ... You just have to ask the questions," the lawyer said.
Clay Johnson III, who ran former President George W. Bush's transition, said he is surprised to see three of Obama's nominees weighed down by tax troubles, considering that paying -- or not paying -- taxes has long been the top concern for vetters. "It's huge," Johnson said. "Do you pay your taxes? ... It is something that is checked religiously."
The New York Times contributed to this report.