President Barack Obama scrambled Tuesday to regain control of his political message.

A series of tax and vetting scandals has forced one of Obama’s most important nominees to withdraw and raised questions about the new president’s central campaign pledge to change politics as usual.

In response, Obama — fearing a lingering ethics dispute would undercut his claims to moral high ground and cripple his presidency in just its second week — abruptly abandoned his nomination fight for Tom Daschle and a second major appointee who also failed to pay all her taxes.

“I screwed up,” Obama declared.

“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 near the end of a day of jarring developments, a little more than 24 hours after he had said he was “absolutely” committed to Daschle’s confirmation.

“I’m frustrated with myself, with our team. … I’m here on television saying I screwed up,” Obama said on NBC’s “Nightly News with Brian Williams.” He repeated virtually the same words in interviews with anchors on the other TV networks.

Hours earlier, the White House had announced that Daschle had asked to be removed from consideration as health and human services secretary and 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.

It was a frank admission from an Oval Office where “mistakes were made” has often been the preferred dodge.

An old story, with new actors, played out Tuesday: A new president’s team imperfectly vetted top nominees. The nominees, it turned out, had not paid taxes for household help or other services when they were private citizens. The news media and political adversaries bored in. And rather than spend more valuable time and political capital defending the appointees, the administration dropped them and moved on.

In other words, Obama isn’t perfect. This may be news to his adoring supporters, but like other presidents, Obama is going to make more mistakes over the coming months as he struggles with the economy, health care, military matters and Congress.

That’s hardly an indictment. But Obama’s rocket ride to the White House, his extraordinary speaking skills, and his smooth, I-don’t-sweat style had some people calling him “The One,” a once-in-a-generation political leader who could rise above his predecessors’ foibles.

On Tuesday, at least, Obama seemed to be trying to learn from past presidents the need to quickly cut his losses.

It was a painful bump for the new president.

At first, Obama dug in, eager to show loyalty and toughness in the face of critics. His choice for Treasury secretary — a post that oversees the Internal Revenue Service — had been required to pay $34,000 in overdue income taxes.

Obama stood by Timothy Geithner, and the Democratic-controlled Senate confirmed him after comparatively gentle questioning.

The stakes seemed higher, on both sides of the equation, for Daschle, the former Senate Democratic leader chosen by Obama to head health and human services and an overhaul of health care.

Daschle had more status and clout in Washington, but his money problems were bigger than Geithner’s, too.

Tom Daschle has withdrawn his nomination to be Health and Human Services secretary.

That’s according to a joint White House statement from President Barack Obama and his former nominee.

Obama said Tuesday he accepted the withdrawal “with sadness and regret.”

Daschle has been battling for his nomination since it was disclosed he failed to pay more than $120,000 in taxes.

He said he’s withdrawing because he’s not a leader who has the full faith of Congress and will be a distraction.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

WASHINGTON (AP) — Tom Daschle’s former Democratic colleagues were rallying to his defense after he met behind closed doors with the Senate Finance Committee to discuss problems with back taxes and potential conflicts of interest, but lawmakers promised he will face more questions.

Daschle, the former Senate Democratic leader, is President Barack Obama’s nominee to oversee the Health and Human Services Department.

Republican members of the committee avoided reporters after the committee meeting Monday, but an aide to Sen. Charles Grassley, R-Iowa, said the senator still has a lot of questions he will explore at Daschle’s confirmation hearing Feb. 10.

Those questions will focus on tax issues, such as the $128,203 in back taxes and $11,964 in interest that he paid last month, said the aide. Daschle will also be questioned about the potential conflicts of interests he would face because he accepted speaking fees from health care interests, said the aide, who asked not to be identified because the aide was not authorized to speak publicly on the matter.

Daschle also provided advice to health insurers and hospitals through his work at a law firm.

Daschle began the day apologizing for his failure to fully pay his taxes from 2005 through 2007. He capped it off that way as well after meeting with the committee behind closed doors.

“It was completely inadvertent, but that’s no excuse,” he said. “I apologize to President Obama, to my colleagues and to the American people.”

Obama said he was “absolutely” sticking with his choice for health secretary.

The White House both underscored the magnitude of the problem and tried to downplay it in the space of seven words. “Nobody’s perfect,” said press secretary Robert Gibbs. “It was a serious mistake.”

Nobody was predicting defeat for Daschle’s nomination, but it was proving an unsavory pill to swallow for senators who only last week confirmed Timothy Geithner as treasury secretary despite his own tax-payment problems. It’s an issue that strikes a nerve among lawmakers’ constituents, who are struggling with their own serious money problems.

Daschle did get warm words of support from numerous Democratic senators. Sen. Max Baucus, D-Mont., gave him an especially important endorsement, since the two men have had tussles in the past over Baucus’ handling of GOP tax-cut proposals, Medicare changes and other issues.

“His tax mistakes are regrettable,” Baucus said. “But his tax mistakes do not change his qualifications to lead on health care reform. They do not change my support for his nomination.”

Some senators laid the blame for Daschle’s tax woes on his employers rather than on Daschle. Sen. Jay Rockefeller, D-W.Va., said the friend that provided him with a chauffeur service for three years, Leo Hindery Jr., should have given Daschle a tax form that would make clear the service was to be treated as income.

In a letter released Monday, Daschle sought to explain how he overlooked taxes on income for consulting work and the use of the car service. He also deducted more in charitable contributions than he should have.

Gibbs noted Daschle’s long tenure as a senator from South Dakota and said it would be up to the Senate to weigh a “serious but corrected mistake against that three-decade career in public service.”

“We still think he’s the best person to do health care reform and shepherd a very complicated process through Congress to achieve savings and cut costs for the American people,” Gibbs said. The White House also had suggested Geithner was indispensable for the national economic revival in arguing for his confirmation despite tax problems.

Melanie Sloan, the executive director of Citizens for Responsibility and Ethics in Washington, noted the Geithner nomination in saying she suspected tax problems would not prevent Daschle from becoming the next health secretary.

“If the guy who is overseeing the IRS can get away with a tax problem, how are you going to hold up the health and human services secretary over taxes?” she asked.

The confirmation of Tom Daschle, Obama’s nominee for Secretary of Health and Human Services has hit a few snags. In the past week, various reports have surfaced detailing Daschle’s initial failure to pay taxes for certain aspects of consulting work he did after he left the Senate in 2004. That consulting was itself very lucrative for Daschle, earning him several million dollars and included work for the kinds of private health insurance interests that many critics believe impedes real reform of our health care system. (For a more detailed catalog of Daschle’s alleged indiscretions, click here).

Since Obama picked Daschle largely for his perceived ability to shepherd health care reform through Congress, this last point is especially disturbing for some. Jonathan Cohn, a writer for The New Republic with expertise on health care, says that Daschle’s connections should not be disqualifying.

Glenn Greenwald offers a much more critical and disturbing take on Daschle and his wife Linda Hall, a high profile lobbyist for some of America’s biggest defense industry contractors and aviation interests. Greenwald acknowledges that we simply do not know whether Daschle will be effective in helping to champion meaningful health care reform.

But, he cautions:

“Other than his being more extreme than most (in his questionable ethics), and the fact that he and his wife work in tandem as a public-private team, there isn’t anything particularly unusual about how Tom Daschle functions. He’s quite emblematic of the Beltway syndrome. But that’s the point: while it’s unreasonable to expect that Obama will be able to avoid all ethically questionable individuals, it seems rather unnecessary to take one of the most ethically compromised Beltway mavens and place him in charge of a massive industry, one that has been lavishing him with undeserved wealth for the past several years.”

I also don’t know whether Daschle might be effective. What I question, however, is whether there really are no other viable choices out there to lead HHS. When Clinton and Obama were slugging it out in the primaries last year, and health care reform was at or near the top of the list of concerns of Democrats, no one said then that Tom Daschle was uniquely placed to see through such an important reform. One of the consequences of the insider Beltway culture is a tendency for people inside that bubble to convince themselves that only the people they know intimately are capable of doing the job well. Tom Daschle was always viewed as a compromiser and, once he became Senate Democratic leader, a pretty weak one. Compromising in politics is, of course, necessary and therefore by no means always a bad quality. Weak leadership is, on the other hand, harder to rationalize. How that guy, after several years as a lobbyist for powerful private economic interests, has morphed into the single best person to tackle a massive and dramatic social and policy transformation is, frankly, a little beyond me.

Update:

The New York Times says Daschle should withdraw his name from consideration.

From Jack Healy at The NYTimes.com:

President-elect Barack Obama said on Thursday that he never spoke to the governor of Illinois about Mr. Obama’s replacement in the United States Senate, and that no one on his staff had been involved in any deal-making regarding Mr. Obama’s successor.

“That would be a violation of everything that this campaign has been about,” Mr. Obama said at a news conference in Chicago which was called to announce an appointment to his Cabinet.

In his first extended comments on the unfolding political scandal, Mr. Obama said he was “appalled and disappointed” by the details of a complaint filed by federal prosecutors, who have accused the governor, Rod R. Blagojevich, of trying to profit from his power to choose Mr. Obama’s successor. Mr. Obama also restated his call for the governor to resign.

“I think the public trust has been violated,” Mr. Obama said. “I hope that the governor comes to the conclusion that he can no longer effectively serve and that he does resign.”

Click here for the full report.

These officials caution that no final decision has been made on the job involving the massive department created by the Congress in the wake of the Sept. 11, 2001 terrorist attacks on the United States.

The officials agreed to discuss the situation on grounds of anonymity because of the private nature of the screening process for Obama’s Cabinet. Napolitano, who once was Arizona’s attorney general, was among the first of the Democratic governors to commit to Obama’s presidential bid.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

WASHINGTON (AP) — President-elect Barack Obama promised the voters change, but he has started his Cabinet selection process by naming several Washington insiders to top posts.

Obama is enlisting former Senate leader Tom Daschle as his health secretary. Hillary Rodham Clinton seemed more likely than ever to be his secretary of state. Clinton is deciding whether to take that post as America’s top diplomat, her associates said Wednesday.

Obama is ready to announce that his attorney general will be Eric Holder, the Justice Department’s No. 2 when Clinton’s husband was president. Rahm Emanuel, Obama’s chief of staff, is another veteran of the Clinton White House.

A few names that have bubbled up for Cabinet posts don’t have strong Clinton connections. Several news organizations reported Thursday that Arizona Gov. Janet Napolitano is Obama’s primary choice to be secretary of the Homeland Security Department. The New York Times, citing Democrats with knowledge of the process, said Napolitano was about to be offered the job. The Washington Post and The Politico Web site also reported that she was Obama’s choice.

Chicago businesswoman Penny Pritzker, who was national finance chairman for Obama’s presidential campaign, is his leading choice for commerce secretary, the Times reported. The newspaper said Pritzker was in the final stages of vetting by Obama’s transition team.

Daschle’s selection to head the Health and Human Services Department — confirmed Wednesday but not yet announced — isn’t at the same level of Cabinet prestige as the top spots at the State and Justice departments. But the health post could be more important in an Obama administration than in some others, making Daschle a key player in helping steer the president-elect’s promised health care reforms.

Daschle could push Obama for quick action on health care reform next year, if he follows his own advice.

Daschle said efforts during the Clinton administration, led by Hillary Clinton, took too long and went into too much detail, giving every interest group an opportunity to find something they didn’t like about the plan.

“The next president should act immediately to capitalize on the goodwill that greets any incoming administration. If that means attaching a health-care plan to the federal budget, so be it,” Daschle wrote in a book he released this year, “Critical: What We Can Do About the Health-Care Crisis.” “This issue is too important to be stalled by Senate protocol.”

The former South Dakota senator‘s return to the government will be a vindication of sorts. He was the Senate Democratic leader when he was defeated in 2004 by Republican John Thune, who convinced voters back home that Daschle was more concerned with Washington than with them.

In fact, Daschle stayed in the capital city after his defeat, becoming a public policy adviser and member of the legislative and public policy group at the law and lobbying firm Alston & Bird. Daschle isn’t registered as a lobbyist. He advises clients on issues including health care, financial services, taxes and trade, according to the firm’s Web site.

Health care interests, including CVS Caremark, the National Association for Home Care and Hospice, Abbott Laboratories and HealthSouth, are among the firm’s lobbying clients.

Daschle’s appointment was not formally announced, but Democratic officials said the job was his barring an unforeseen problem as Obama’s team reviews his background. One area of review will include the lobbying connections of his wife, Linda Hall Daschle, who has worked mostly on behalf of airline-related companies over the years. The officials spoke on condition of anonymity because they weren’t authorized to discuss the matter publicly.

Republicans sniped at what they saw as an unwelcome trend. Alex Conant, spokesman for the Republican National Committee, said, “Barack Obama is filling his administration with longtime Washington insiders.”

From HuffingtonPost.com:

“Former Senate Minority Leader Tom Daschle (D-S.D.) has been offered the job of Health and Human Services secretary by President-elect Barack Obama and has accepted the job, according to a Democratic source close to Daschle,” Roll Call reports.

Daschle, who served in the Senate until he lost his re-election bid in 2004, also is set to take on the position of “health care czar” in the Obama White House, ensuring that he does not get bigfooted on matters relating to health care policy, according to this source.

Click here for the full post.