Clinton nominates Rivlin OMB head; Panetta named chief of staff; Gergen goes over to State.

WASHINGTON -- Alice Rivlin, deputy budget director, was nominated yesterday by President Clinton to head the Office of Management and Budget.

Rivlin, who must be confirmed by the Senate, would replace budget director Leon E. Panetta, who was named White House chief of staff.

In a shake-up of Clinton's personal staff that has been expected for several weeks, Panetta replaces the president's longtime friend Thomas "Mack" McLarty, who is stepping down as chief of staff to become personal counsel to the president.

Rivlin's promotion to budget director, which is expected to be easily approved by the Senate, shows the administration's continued commitment to deficit reduction, congressional sources said.

Rivlin, who is considered a hawk on reducing the deficit, became the first director of the Congressional Budget Office in 1975, a post she held until 1983. The CBO, which analyzes the federal budget and the cost of legislation for Congress, earned a reputation during Rivlin's term for taking independent stances on politically sensitive budget issues -- a reputation it still enjoys.

She served as a fellow at the Brookings Institution from 1983 until she became deputy director of the OMB when Clinton took office last year.

The OMB "will continue to be in very good hands," Clinton said when he announced the changes from the Oval Office. Panetta "will go down in history as the budget director who began to slay the deficit dragon."

Many Washington observers see Rivlin's ascendancy to the top budget post as a logical move considering her background and good working relationship with Panetta.

Observers also say that Panetta will still have a hand in budget operations, and very little will change in the OMB's relationship with Congress, congressional aides said.

The staff changes came as little surprise in the capital considering the recent troubles in the financial markets and questions about Clinton's competence in handling the many challenges facing the administration in foreign affairs.

In another move announced yesterday, presidential adviser David Gergen is shifting gears and moving to the State Department where he will serve as an adviser to Secretary of State William Christopher.

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