WASHINGTON Republican Sen. Judd Gregg of New Hampshire abruptly withdrew his nomination as commerce secretary Thursday, citing "irresolvable conflicts" with President Barack Obama's handling of the economic stimulus and 2010 census.
"We are functioning from a different set of views on many critical items of policy," Gregg said in a statement released by his Senate office.
Gregg, 61, is a former New Hampshire governor who previously served in the House. He has been in the Senate since 1993 and currently serves as the top Republican on the Senate Budget Committee, where he is known as a crusader against big spending.
He was Obama's second choice to fill the Commerce portfolio.
New Mexico Gov. Bill Richardson withdrew several weeks ago in the wake of a grand jury investigation into alleged wrongdoing involving state contracts. He has not been implicated personally.
The withdrawal appeared to take the White House by surprise, with members of the president's media operation learning of Gregg's decision from reporters. An administration official said Gregg dropped out without warning for a position that he had expressed interest in just a few weeks ago.
In his statement, Gregg thanked Obama for the nomination, and said, "I especially admire his willingness to reach across the aisle."
In citing the stimulus and census, he said, "Prior to accepting this post, we had discussed these and other potential differences, but unfortunately we did not adequately focus on these concerns. We are functioning from a different set of views on many critical items of policy."
The unexpected withdrawal marked the latest setback for Obama in his attempt to build a Cabinet.
Treasury Secretary Tim Geithner was confirmed despite revelations that he had not paid some of his taxes on time, and former Senate Democratic Leader Tom Daschle withdrew as nominee as health and human services secretary in a tax controversy.
In his statement, Gregg said his withdrawal had nothing to do with the vetting into his past that Cabinet officials routinely undergo.
Gregg's reference to the stimulus underscored the partisan divide over the centerpiece of Obama's economic recovery plan. Conservatives in both houses have been relentless critics of the plan, arguing it is filled with wasteful spending and won't create enough jobs. Gregg has refrained from voting on the bill and on all other matters while his nomination was pending.
The Commerce Department has jurisdiction over the Census Bureau, and the administration recently took steps to assert greater control. Republicans have harshly criticized the decision, saying it was an attempt to politicize the once-in-a-decade event.
The outcome of the census has deep political implications, since congressional districts are drawn based on population. Many federal funds are distributed on the basis of population, as well.
Both of those factors mean there is a premium on counting as many residents as possible. Historically, the groups believed to be most undercounted are inner-city minorities, who tend to vote Democratic.
The Congressional Black Caucus and a group representing Latino elected officials had raised questions about Gregg, noting that as chairman of the Senate panel overseeing the Census Bureau budget he frequently sought to cut funds that they believe led to an undercount of minorities.
To allay concerns over Gregg, the White House initially indicated that it might take greater control over the Census Bureau. But amid GOP criticism it has since clarified that the White House will "work closely with the census director," and that the Census Bureau would not be removed from the Commerce Department.
Gregg's announcement also undid a carefully constructed chain of events.
The New Hampshire senator had agreed to join the Cabinet only if his departure from the Senate did not allow Democrats to take control of his seat.
New Hampshire Gov. John Lynch, in turn, pledged to appointed Bonnie Newman, a former interim president of the University of New Hampshire.
She, in turn, had agreed not to run for a full term in 2010, creating an open seat for Democrats to try and claim.
In a statement, Senate Republican leader Mitch McConnell of Kentucky said Gregg "made a principled decision to return and we're glad to have him. He is among the smartest, most effective legislators to serve in the Senate Democrat or Republican and a key adviser to me and to the Republican Conference. It's great to have him back."
Lynch, who spoke to Gregg several hours before the announcement, said he respected Gregg's decision to withdraw and remain in the Senate. He thanked Newman for her willingness to serve.
A day after Gregg's nomination was announced, The Associated Press reported that a former staffer was under criminal investigation for allegedly taking baseball and hockey tickets from a lobbyist in exchange for legislative favors while working for Gregg.
The former staffer, Kevin Koonce, has been identified in court papers only as "Staffer F" in the sprawling corruption probe stemming from disgraced lobbyist Jack Abramoff.
Gregg said at the time that he had been told he was neither a subject nor target of the investigation, and would cooperate fully.