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Obama suffers blow over nominees
Tom DaschleTom Daschle said he did not want to distract from Mr Obama's agenda
Former Senator Tom Daschle has withdrawn his nomination as US health and human services secretary after a controversy involving unpaid taxes.
US President Barack Obama said he had accepted his nominee's withdrawal "with sadness and regret".
It was revealed last week that Mr Daschle, an early Obama backer, had failed to pay some $130,000 in taxes.
His move came only hours after Nancy Killefer, nominated as budget watchdog, also withdrew over tax issues.
The two high-profile withdrawals were the latest setbacks for Mr Obama as he seeks to form his new administration.
Ms Killefer said she did not want a personal tax issue - reportedly concerning household help - to distract from Mr Obama's plans.
Tom has made a mistake, which he has openly acknowledged. He has not excused it, nor do I
President Barack Obama
Her appointment as the first chief performance officer was intended to help cut wasteful government spending.
Announcing his withdrawal, Mr Daschle, the former Senate Democratic leader, said he would have not been able to operate "with the full faith of Congressand the American people".
He also said he did not want to "be a distraction" from Mr Obama's agenda.
In a statement, Mr Obama said: "Tom has made a mistake, which he has openly acknowledged. He has not excused it, nor do I."
The president went on: "Now we must move forward with our plan to lift this economy and put people back to work."
Mr Daschle paid about $128,000 in back taxes and $12,000 in interest last month.
The BBC's James Coomarasamy in Washington says the withdrawal of two nominees in a day appears to reveal the extent to which Mr Obama's public calls fora new era of responsibility are being undermined by the growing number of his nominees facing tax problems.
US Treasury Secretary Timothy Geithner was confirmed last week only after long arguments over his failure to pay $34,000 (£24,500) in taxes he owed untilshortly before he was nominated.
In January, New Mexico Governor Bill Richardson announced he was withdrawing from consideration as commerce secretary after an investigation was launchedinto a state contract that had been given to his campaign donors.
Republican Senator Judd Gregg was on Tuesday appointed instead, the second from his party to join Mr Obama's cabinet.