Others states' fights bring focus to Daniels

Gov. Mitch Daniels has spent years talking about issues that typically make voters' eyes glaze over: Cutting spending. Balancing budgets. Shrinking government.

The priorities haven't changed much in Daniels' six years as governor. But suddenly voters are paying attention.

Budget showdowns in Wisconsin, Ohio and New Jersey are drawing fresh, national attention to issues Daniels has long promoted. And politicians like Wisconsin Gov. Scott Walker and New Jersey Gov. Chris Christie are getting the headlines.

"Mitch was clearly one of the first guys to do this stuff," said Grover Norquist of the conservative Americans for Tax Reform. "But now you see that it wasn't weird, it's not odd, it's perfectly mainstream."

The headline-grabbing battles in New Jersey and Wisconsin come after government spending became a top issue in the 2010 midterm elections and voters sent Republicans who promised to cut spending to Congress and statehouses across the country.

"He's the quarterback of a national mission. He's their leader," state Rep. Patrick Bauer, the leader of Indiana's House Democrats, said of Daniels.

With his signature issue at the top of the domestic political agenda, the man who earned the nickname "The Blade" while serving as President George W. Bush's budget director is expected to make a decision on a presidential bid this spring.

"Historically, arguing for less spending and balancing budgets may have been the right thing for the state or the country, but not good politics," Daniels told The Associated Press. "But I sincerely believe this may have changed."

If Daniels does run, though, he will have to explain how he can take an approach that worked in the statehouse - he cut social services, privatized a major state highway and slashed state worker rolls - and sell it to a nation that relies on many of his top budget targets. It's not clear whether Daniels' stances on issues like Social Security and Medicare, both of which he has said need significant changes, could win popular support either. They certainly haven't in the past.

"Fiscally there is no reason that you couldn't make the fundamental change the way we did here" on the federal level, Daniels said. "You need to elect a sufficient number of like-minded congressmen to do it."

Daniels has seen the limits of the federal government up close. After getting his start in Washington working as an aide to Sen. Richard Lugar, R-Ind., Daniels served as an aide to President Ronald Reagan, left Washington to become an executive at drug company Eli Lilly and Co., then returned as budget director for Bush.

During Daniels' 29-month tenure as budget director, he watched a $236 billion annual surplus turn into a growing $400 billion deficit. He drew barbs when he estimated the potential cost of the Iraq war would top out at $50 billion to $60 billion while criticizing a report by Bush economist Larry Lindsey, who estimated the war's cost could reach $200 billion. The cost of the war has soared beyond both estimates.

Colleagues, though, recall that Daniels was every bit the balanced budget zealot that he is now. He just lacked the power to do anything about it.

Douglas Holtz-Eakin worked with Daniels in the Bush White House when Holtz-Eakin served as chief economist on the President's Council of Economic Advisors. He recalled Daniels earning public upbraiding from several members of Congress after Daniels was quoted as saying of Congress, "Their motto is, `Don't just stand there, spend something.'"

"No one who works for a president or with Congress ever gets things exactly as they want them," Holtz-Eakin said. "But Mitch was exactly like he is now. He is very plainspoken, thoughtful but firm in his views. You don't have to guess what they are."

Daniels was elected governor of Indiana in 2004. Once in office, he tackled his fiscal agenda in earnest. He created the state's first budget office and, by executive order, eliminated bargaining rights for state employee unions. Unlike Walker, who has faced lengthy protests and a walkout by Wisconsin's Democratic senators for attempting to do the same, Daniels' move received minimal fuss from the public.

Starting with a $600 million deficit, he trimmed enough from the budget to give the state a $370 million surplus a year later. As revenues plummeted during the recession, Daniels slashed $1.5 billion from the $27 billion budget, leading to cuts in education and layoffs of state employees. Today the state has a surplus of more than $800 million. Daniels cut the state work force to near historic lows, and won praise for streamlining the state's much-maligned Bureau of Motor Vehicles.

Daniels' admirers clearly believe his approach can be exported.

"The huge problems that the country faces right now - as well as a lot of states - falls right into the governor's sweet spot," said Murray Clark, a former chairman of the Indiana Republican Party and Daniels' campaign chairman in 2004.

But Daniels has his share of critics both inside and outside his party. Tea party groups say they are leery of the "truce" he called on social issues so that both parties can focus on the budget crisis, and of his willingness to compromise with Democrats.

"We take it into consideration the whole picture and right now there is a lot of unhappiness because of his lack of leadership on some issues," said Monica Boyer, a leading tea party activist in Indiana. "So we're watching very closely."

Boyer cited Daniels' unwillingness to push a so-called right to work law, which prohibits making membership or payment of union dues a condition of employment.

And Democrats say Daniels' cuts and changes barely hide a human toll - and that he gets more credit than he deserves.

"He balanced a budget with a billion dollars of stimulus money. A lot of that was supposed to got job creation and education, but I guess he was able to say he balanced a budget," Bauer said.

Some taxes have gone up under Daniels' watch.

In 2007, Daniels signed into law a bill to increase cigarette taxes from 55.5 cents a pack to 99.5 cents a pack to increase revenue for health care. A 2008 law raised the state sales tax from 6 percent to 7 percent to offset limits it placed on property taxes.

It's clear that if Daniels makes the presidential race, his focus will be on the deficit.

In a speech to the Conservative Political Action Committee Conference last month, Daniels referred to the budget deficit as the "new Red Menace." Daniels clearly believes the American people are receptive to his message.

"People say you can't do it politically," Daniels said. "I'm arguing that maybe now you can. Maybe not historically, but maybe now the problem is so huge, so obvious, the facts are so clear. ... I think the appeal has to be made to people of all political persuasions. This threatens us all."

---

Jackson reported from Washington.