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Mitch the Knife

Is America ready for a president who will cut spending? Our November cover story.

By From the November 2010 issue

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The Weaver Popcorn Company's website advertises this fact as a "kernel of truth": their business was founded -- and is still based in! -- Indiana. But CEO Mike Weaver didn't come to talk about microwave popcorn. At the moment, he is more interested in touting another Hoosier product for possible national consumption: Indiana governor Mitch Daniels.

Weaver says Daniels is usually "the smartest guy in the room" and a true "servant leader" who gets things done for Indiana. "He's also very modest," Weaver adds. "Almost to a fault." Indeed, Daniels professed surprise that he's about to be the subject of another magazine article. "Did you run out of other things to write about?" he asks. But Daniels thinks the country could use a little humility from its leaders, a sense of realism about Washington's financial and metaphysical limits.

Call it a humble domestic policy. "We are approaching a moment of Republican responsibility," Daniels avers. The central question is whether the GOP can govern as well as it can campaign against Democratic profligacy. At dinner with a group of conservative intellectuals and journalists in New York -- "I'm surprised I don't have a rash," he says of his two days in the city -- he argues that the focus must be on making the federal government fiscally sound again.

"The Democrats are better positioned to do this in a Nixon goes to China sense," Daniels says. "But that's purely theoretical. It won't happen. There's no interest." Bill Clinton isn't president anymore and the era of big government was never really over. So the challenge of balancing the budget, getting control of the national debt, and reforming the country's sagging entitlements falls to the Republicans.

The Republicans have seldom been equal to the task. Party leaders have made a serious effort to reduce federal spending exactly three times since World War II: the "Do Nothing" Congress of 1947-48, the Congress that came in with Ronald Reagan in 1981-82, and the Gingrich Congress of 1995-96. In the last two cases, the results were short-lived. In the first, the Republicans were promptly relieved of their majority by the voters in the next election.

GOP bigwigs have gotten the message. When Rep. Paul Ryan (R-WI) introduced a bold plan to tackle the entitlements crisis, few Republicans came to his aid. Most of his colleagues preferred a campaign document that largely confined its critique of federal spending to earmarks while engaging in a little demagoguery about Democratic Medicare cuts. Opposing Barack Obama is one thing. Cleaning up after him -- and fellow spendthrift George W. Bush -- is another.

THAT'S WHERE MITCH DANIELS comes in. Members of the Republican spending-cutters hall of fame include such flinty Ohioans as Robert Taft and John Kasich. Perhaps it's time to look next door to Indiana, where Daniels has one advantage over the Buckeye budget hawks: executive experience that might come in handy on the opposite end of Pennsylvania Avenue. But are the American people ready for a leader who says less is more?

Daniels started burnishing his credentials in this area before the governorship. The Princeton graduate managed Richard Lugar's 1976 Senate campaign, followed Lugar to Washington and spent eight years working in the Senate, and then became a political aide in the Reagan White House. Daniels has thus seen the inner workings of government as both an elected official and a staff member. "It's sometimes kind of intimidating to work as a staffer for a guy who has done your job, only could do it better," says former Daniels communications director Brad Rateike. "When you say something couldn't get done, he's like, 'Really?' "

Daniels worked his first magic as a budget-cutter when he returned to Indiana to become chief operating officer of the Hudson Institute. The free market think tank had fallen on hard times and Daniels was widely celebrated in conservative circles for turning things around. Introducing himself to the group at the New York dinner, current Hudson Institute president Herb London shook his head with a smile and said, "I know Governor Daniels can cut costs."

Eli Lilly & Co. plucked Daniels from the nonprofit sector and put him into the private sector in 1990, hiring him to head its corporate affairs division. He worked his way up the ranks, eventually running the company's North American operations. But government beckoned again, prompting Daniels to leave Lilly to become President Bush's budget director. In an administration known for its fiscal tomfoolery, Daniels was called "the Blade." Even the one criticism of his tenure at the Office of Management and Budget -- that he lowballed the costs of the Iraq war -- is misleading.

Daniels wasn't asked to project the cost of an eight-year occupation. His assignment was to calculate the price tag of speedy invasion with six months of war. The resultant number-crunching justified the initial Bush request of $74 billion in funding. But it wasn't Daniels's fault that there wasn't flower-throwing and a phased withdrawal afterward. By 2004, Daniels was ready to tack his budget scalpel back home and run for governor of Indiana.

Once elected, Governor Daniels started cutting right away. On his first day in office, he rescinded his Democratic predecessor's executive order allowing collective bargaining by government unions. As conservative journalist Conn Carroll later wrote, "The decision has not only cost the left's perpetual dependence machine millions in taxpayer-funded union dues, but also enabled the state to cut costs by instituting a ‘pay-for-performance' personnel system." Daniels trimmed the state payrolls by 14 percent and Indiana now has fewer state employees than it did in 1982.

Daniels eliminated a $200 million deficit and transformed it into a $1.3 billion surplus, boosting the state's bond rating and cash reserves after eight years of unbalanced budgets. He was able to cut property taxes by an average of 30 percent despite a Democratic-controlled lower house of the legislature, delivering the largest tax cut in Indiana history.

Under Daniels, all state agencies were made to cut their budgets by 10 percent and Indiana sold two-thirds of its state-owned airplanes. Most state employees didn't get pay raises in 2009 or 2010 and the governor's pay was cut. But more than 50,000 low-income Hoosiers received health coverage through a relatively free-market reform -- the Healthy Indiana Plan -- that combined health savings accounts with catastrophic insurance (though the program's health savings accounts may now run afoul of ObamaCare's new qualified coverage standards).

These statistics and professional accomplishments will count for little on the national stage unless they are connected to a broader vision of governance. "Talking about what you've done in Indiana is kind of like showing home movies," Weaver admits. "People pretend to listen but they don't really care." It is, however, a track record that suggests Daniels might be qualified to meet the challenges that lie ahead.

"ANY FAIR READING of the nation's balance sheet suggests we're in a dangerous moment," says Daniels. "If we don't act soon, we don't have a prayer." What is needed, Daniels contends, is a president who will do whatever it takes to get the country's fiscal house in order, political consequences be damned. Think Ross Perot without the resemblance to that crazy aunt in the basement.

Daniels is coy about whether he would like to be that president, but he is already beginning to cobble together the message. "Nobody wants as their legacy plundering their children and grandchildren's inheritance," he says. "I think the American people are beginning to understand that we are spending money that we don't have. The Tea Party has raised consciousness."

"Social Security needs to be protected from inflation, that's it," Daniels continues. "Who are the real enemies of Social Security and Medicare? The people who want to keep them exactly as they are right now." The responsibility to fixing these programs and restoring them to solvency, he says, is about to fall "on the party whose uniform I wear."

In that sense, though Daniels eagerly identifies as a supply-sider, he is the anti-Jack Kemp. Kemp argued that budget-cutting was a form of "root-canal politics," a model of austerity that could not compete with income redistribution the way a model of growth can. The few flaws in Daniels's fiscal record come on taxes. He refused to sign the Taxpayer Protection Pledge during his first campaign for governor in 2004. He raised the cigarette tax to help pay for his Healthy Indiana Plan and he partially offset his property tax reductions with a 1 percent increase in the sales tax (it still amounted to a substantial net tax cut). Daniels even contemplated a one-year tax increase on the wealthy to help balance the budget. "It was worse than a crime," he admits. "It was a mistake."

But this is a different era, and Daniels argues that reining in spending is as crucial for empowering individuals as paring back tax rates was during the Reagan years. "Barack Obama campaigned on the theme of 'Change you can believe in,'" he says. "I'd start with ‘Change that believes in you.' You are a child of God who can make your own decisions."

Daniels is also the antithesis of Mitt Romney, the former Massachusetts governor and putative frontrunner for the 2012 Republican nomination. Romney is famous for telling GOP constituencies what they want to hear. Daniels is gaining a reputation for delivering unwelcome news. He told the Weekly Standard, of all places, that military spending would have to be cut. "When Bush arrived we were spending $300 billion on national defense, and he thought that was plenty," Daniels said. "Now it's what, $800 billion?"

When Commentary's Jennifer Rubin invited Daniels to take a whack at the Obama administration's fecklessness on foreign policy, the governor praised peace through strength and then promised to "ask questions about the extent of our commitments" overseas. "If we go broke," Daniels argued, "no one will follow a pauper." Rubin was disappointed: "It's not clear whether [Daniels] has thought these issues through, or whether he views foreign policy as anything more than a cost-control issue."

NOTHING DANIELS HAS SAID has gotten him in more trouble with a Republican voting bloc than his proposed "truce" on hot-button moral issues. The next president, he told the Standard's Andrew Ferguson, "would have to call a truce on the so-called social issues. We're going to just have to agree to get along for a little while." Win the budget battle first, wage the culture war later. Daniels is pro-life and believes marriage is between a man and a woman, but social conservatives were outraged.

At the Values Voter Summit in Washington, D.C., speaker after speaker-all possible Republican primary opponents-not too subtly criticized Daniels's truce formulation. "Those who would have us ignore the battle being fought over life, marriage, and religious liberty have forgotten the lessons of history," said Rep. Mike Pence, the fellow Hoosier who chairs the House Republican Conference, in his speech to the Family Research Council-organized gathering. "America's darkest moments have come when economic arguments trumped moral principles."

"We must realize there's a direct correlation between the stability of families and the stability of our economy," former Arkansas governor Mike Huckabee, who had previously attacked Daniels by name in a fundraising solicitation, said in his address that day. "I'm so tired of people telling me we don't want to hear about issues of the family." Former senator Rick Santorum (R-PA) called the separation of fiscal and moral issues "a very dangerous idea," saying, "It's not just economics." Taking aim at both Daniels and Republican Haley Barbour, who was also seen as downplaying social issues, Christian right first lady Phyllis Schlafly declared, "That's not only wrong, that's dumb because we need the social conservatives as well as the fiscal conservatives to take those seats in November."

Pence finished first in the Values Voter Summit presidential straw poll, one of the early tests of social conservative activist support. Huckabee finished second. Politico pronounced Daniels the event's loser. Speaking to the people in the audience, one found that many knew little about him besides the fact that he was the guy who wanted a truce on social issues while judges impose same-sex marriage and the new health care law paves the way for taxpayer funding of abortion. "I could never vote for someone like that," says one middle-aged woman who came from Tennessee to attend.

It's a situation not unlike that faced by Phil Gramm during the 1996 presidential race. Like Daniels, the Republican senator from Texas had been a stalwart social conservative and had compiled a particularly strong pro-life voting record. Gramm took all the right positions in his official platform. But with his background as an economist, he preferred to run as a green-eyeshade government-cutter. When social conservative leaders met with Gramm to try to persuade him to talk about more than money, he demurred.

"I'm not a preacher, I can't do that," Gramm was later quoted as saying. "I'm not running for preacher, I'm running for president." The social conservatives stormed out. James Dobson fumed to reporters that he had entered the meeting planning endorse Gramm for president and now couldn't vote for him. Gramm's failure to consolidate economic and social conservatives ended up dooming his presidential campaign, and he ultimately won fewer votes than either Pat Buchanan or Steve Forbes.

GRAMM'S FATE DOES NOT necessarily have to be Daniels's. Daniels has begun to refine his social issues comments, walking back his early noncommittal response on banning taxpayer funding for groups that promote abortion abroad -- he says he'd now back reinstating the Mexico City policy -- and clarifying what he meant. "A truce is not a surrender," said Daniels. "Who are the aggressors here? Gay marriage advocates. Those who divide us on race and gender." The implication is that Daniels is offering a truce, but only if social liberals honor it too.

But it is clear where Daniels's priorities lie: fixing the federal government's balance sheet. "I'm prepared to set aside almost anything else," he says. Daniels wants to try to get "50 percent plus one" in a national election running as a cost-cutter for whom Social Security, Medicare, Medicaid, and defense are all on the table. "Damn, these are supposed to be the third rails, impossible," he continues. "But I'm optimistic it can be done. We need a new compact for young people."

The voters will get it if politicians are honest with them, Daniels insists. "People know these things," he argues. "It's crazy to send Warren Buffet a pension check." But one thing is certain: "We'll never know unless someone tries." Will Daniels try? "I sure hope so," says Weaver.

With his focus on austerity, Daniels doesn't talk like a presidential candidate. The next challenge is whether he looks enough like one. He is 5'7 and balding. He is affable but not exactly larger than life. Ferguson, who described Daniels as having "sunk into a black hole of personal magnetism and come out the other side, where the very lack of charisma becomes charismatic," paints the following picture of the 2012 presidential contest: "I see [Daniels] as he strides toward the middle of the stage to shake hands with Obama before the first debate and comes up to the president's navel. Election over."

Such descriptions astonish and confuse Daniels's fans. "I don't get why all these magazine profiles keep saying he's not charismatic," says one current aide. "Have they ever actually talked to him?" Rateike begins to guffaw just thinking about the governor. "He's one of the funniest guys I know," he says. "You may not believe me, but he has really got a lot of charisma." They all point to Daniels's common touch, his preference for sleeping on voters' couches rather than in fancy hotels, his love of Butler basketball and Harley Davidson motorcycles, his starring role on the YouTube phenomenon "MitchTV."

MIKE WEAVER REMEMBERS the exact moment he was sold on Mitch Daniels. He sent the governor an e-mail telling him he needed to break the stalemate with the Democratic majority in the state house of representatives to get anything more done. That means the Republicans needed to retake the house. For that to happen, Weaver told the governor, Daniels needed to be involved.

"At 8:43 on a Saturday morning, six minutes later, I got an e-mail back," says Weaver. "I later told my employees that they hardly ever get back to me within six minutes." As it happens, Daniels took Weaver's advice. He went out and recruited promising Republican candidates for the state legislature. The GOP now stands a decent chance of retaking the lower house and thwarting Daniels's Democratic nemesis Pat Bauer, the house Speaker who was first elected in the 1970s and bears a passing resemblance to the Dukes of  Hazzard character Boss Hogg.

In Indiana, at least, Daniels has managed to appeal to a large number of people. After a tough race in 2004, he was reelected four years later by an 18-point margin even as Obama became the first Democratic presidential candidate to carry the state since 1964. Daniels won young voters and carried 20 percent of the black vote, both groups where Republicans fared abysmally across the country that year. Daniels's approval rating is usually more than 60 percent and has reached as high as 70 percent.

"Would his appeal translate well with the national press? I don't know," Rateike admits. "But I think people are ready for substance." This is an especially common sentiment among Republicans who are tired of inarticulate presidential candidates -- George H. W. Bush, Bob Dole, George W. Bush, John McCain -- and want someone who can explain what they believe and why. Daniels is seen as someone engaged with policy details who can go beyond trite Obama-bashing and deliver a critique of federal spending that isn't limited to wisecracks about earmarks.

"If government spending prevented pain, we wouldn't have pain," Daniels says. "Obama's budget leads to disaster." According to him, the question is whether we are ready to do something about it. If Daniels runs for president, he will be asking the American people to do something they have seldom if ever done since Calvin Coolidge: elect a frugal candidate who combines government-cutting with a good-government ethic and doesn't look like a commander in chief straight out of central casting.

The above seems like a tall order. But after the country's first brush with progressive rule, Americans were ready for a little normalcy. As the bills come due, maybe another Coolidge Republican's time has come. 

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About the Author

W. James Antle III, author of the new book Devouring Freedom: Can Big Government Ever Be Stopped?, is editor of the Daily Caller News Foundation and a senior editor of The American Spectator. You can follow him on Twitter @jimantle.