Gates expected to stay on as Obama's defense secretary

(CNN) -- Several officials close to President-elect Barack Obama's transition tell CNN that Defense Secretary Robert Gates is expected to stay on the job for at least the first year of the new administration.

One source called it "all but a done deal" that the announcement could come as early as next week.

"It's now pointing in that direction," one of the sources close to the transition said of Gates being part of Obama's national security team, which may include Sen. Hillary Clinton as secretary of state.

"It's likely to happen," a second source close to the transition said of Gates staying on.

This source noted that Gates could stay for longer than a year if he and Obama end up working well together.

Sources close to the transition have said Obama is interested in some continuity at the Pentagon because he is entering office while dealing with two wars in Iraq and Afghanistan as well as the international financial crisis.

To some, the choice demonstrates bipartisanship and conveys that Obama has the self-confidence in his leadership abilities to keep one of the more widely respected members of the Bush administration.

"We got confidence, continuity, and I still think the mission to get out of there as soon as possible will be accomplished. So I think it's a great choice," Democratic Rep. Charles Rangel told CNN's "Larry King Live."

Others say keeping Gates could delay the change that Obama promised during his campaign by prompting potential policy conflicts over missile defense funding and a speedy Iraq pullout. Watch why some think Gates shouldn't stay »

"If we don't have good civilian personnel alongside our good military personnel, we're not going to reform. It can't happen. You need the right people to make it work," former Pentagon Comptroller Dov Zakheim said.

The president-elect has made no secret of his interest in having divergent views within his Cabinet, and Gates has served in various national security roles under Republican presidents, including CIA director during former President George H.W. Bush's administration.

Gates would be joining a high-profile national security team that is also expected to include a retired four-star general.

Several sources say retired Marine Gen. Jim Jones is on track to become national security adviser within the White House.

Also Tuesday, the head of Obama's intelligence transition team said he is withdrawing his name from consideration for director of the CIA.

In a letter to Obama obtained by CNN, John Brennan cited strong criticism from people who associated his work at the CIA with controversial Bush administration policies on interrogation techniques and the war in Iraq.

Brennan defended himself against such accusations, saying, "the fact that I was not involved in the decision-making process for any of these controversial policies and actions has been ignored" by his critics.

The former senior intelligence officer said he was taking his name out of the running because he did not want to become a distraction for the new president.

"The challenges ahead of our nation are too daunting, and the role of the CIA too critical, for there to be any distraction from the vital work that lays ahead," Brennan wrote.

Brennan was a 25-year veteran of the CIA who held senior positions in both the analytical and operations sides of the agency. He ended his intelligence career by serving as the interim director of the newly created National Counter-Terrorism Center in 2004.

A number of names have been floating around Washington for CIA director. They include Rep. Jane Harman, D-California, who chaired the House Intelligence Committee; retiring Sen. Chuck Hagel, R-Nebraska, a member of the Senate Intelligence Committee; and Timothy Roemer, the former Democratic congressman from Indiana who served on both the congressional and the presidential September 11 commissions.

On the economic front, Obama pledged Tuesday to go through the federal budget "page by page, line by line" to eliminate excessive spending and get the economy back on track.

"If we are going to make the investments we need, we also have to be willing to shed the spending that we don't need," Obama said at a news conference in Chicago, Illinois.

Obama said he has selected Peter Orszag as his nominee for director of the Office of Management and Budget. Watch Obama talked about budget reform »

Orszag, the head of the Congressional Budget Office, is an expert on health care, pensions and Social Security policy. He worked at the Clinton White House as special assistant to the president at the National Economic Council and served on the Council of Economic Advisers.

The move comes a day after the president-elect announced his choices for key members of his economic team, including New York Federal Reserve President Tim Geithner as Treasury secretary and former Treasury Secretary Larry Summers as chief of the National Economic Council.

Obama said Tuesday that there will be more announcements as he fleshes out the rest of his economic team. Watch more on Obama's economic team »

He will make another economic announcement at a news conference Wednesday.

Those named to Obama's economic team have started working on crafting an economic recovery plan. The group also must figure out how best to allocate the rest of the $700 billion bailout that Congress passed in October.

Obama has said he hopes the new Congress will begin work on an aggressive economic recovery plan when it convenes in January so his administration can immediately get to work. The president-elect said Tuesday that it is important that his administration not "stumble" into office but "hit the ground running."

An economic stimulus package is central to Obama's plan. He declined Monday to speculate on how big the stimulus would need to be, saying, "We are going to do what's required to jolt this economy back into shape."

Obama also is expected to give key Cabinet positions to two of his former presidential rivals. iReport.com: Your take on Obama's Cabinet choices

New Mexico Gov. Bill Richardson is expected to be named secretary of commerce.

Vice President-elect Joe Biden announced three staff additions Tuesday.

Mike Donilon, an adviser and consultant to Biden since 1981, will serve as counselor to the vice president. Terrell McSweeny, a former attorney at O'Melveny & Myers LLP, will serve as domestic policy adviser, according to a statement from Biden's office.

Evan Ryan will serve as assistant for intergovernmental affairs and public liaison, according to a statement from Biden's office. Ryan served on the White House staff from 1994-2000 as special assistant to first lady Hillary Clinton's chief of staff and then as deputy director of scheduling.

CNN's Pam Benson, Gloria Borger, Candy Crowley, Ed Henry, Ed Hornick, Kristi Keck, Jamie McIntyre, along with CNNMoney.com's Jeanne Sahadi, contributed to this report.

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