The Governor Who Cut His State Down to Size

From Neil King, Jr at The Wall Street Journal:

Associated Press

Indiana's Mitch Daniels espouses radical cuts to Social Security; would Americans go along for the ride?

CULVER, Indiana—Pundits say he's too short, at 5-foot-7, and lacks the requisite pizzazz to be elected president.

Indiana Gov. Mitch Daniels believes he faces a taller challenge as he ponders a White House run: Could voters warm to his message that the country is doomed unless it slashes its debt and radically revamps the popular Social Security and Medicare programs?

In any other year, a campaign platform that gloomy would render a politician toxic. Today, with concerns over the nation's fiscal health on the rise, the Indiana Republican's wonkish bravado is making some think he is a good fit for the moment.

Gov. Mitch Daniels is tireless on the stump. But like many of his potential opponents, he's keeping coy on whether he'll make a run for the White House in 2012. WSJ's Neil King reports.

If the time is indeed right for Mr. Daniels's get-tough message, the angry budget standoffs in states such as Wisconsin, Ohio and New Jersey are also shining a new light on his credentials as a messenger. Mr. Daniels rescinded collective-bargaining rights for state employees six years ago—long before Wisconsin Gov. Scott Walker caused a firestorm by putting the same issue on the table.

Mr. Daniels also cut spending, trimmed the state work force to its smallest in decades, and turned a yawning deficit into a surplus, with only scattered outbursts of popular anger along the way.

He has emerged from all this with high marks from voters, and a profile that sets him apart from the other Republicans mulling a possible 2012 run. An array of conservatives, including former Vice President Dick Cheney and former Florida Gov. Jeb Bush, would like to see him enter the 2012 race.

He's the only potential candidate "who sees the stark perils and will offer real detailed proposals," Mr. Bush said last week in praising Mr. Daniels before a Florida business group. Republican Gov. Chris Christie of New Jersey on Thursday heaped almost identical praise on his Indiana counterpart.

Other potential 2012 hopefuls, along with both parties in Washington, are dancing gingerly around the question of ballooning federal entitlements, concerned that voters might rebel at the idea of benefit cuts. Mr. Daniels shows no such restraint. Social Security? Jack up the retirement age and end it altogether for wealthier Americans, he says. Medicare? Turn it into a voucher system and let people buy their own health insurance.

Mr. Daniels has even waded into one of the most fear-inspiring subjects in politics—health-care rationing—by suggesting the government put limits on end-of-life care.

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Associated Press

Gov. Daniels was congratulated after his State of the State address in January; a possible presidential contender, he focuses the U.S. debt problem.

The 61-year-old former adviser to Presidents Ronald Reagan and George W. Bush says he is still pondering whether "to jump off the highest cliff in politics" and make a run for the White House. He is a dark horse, tied for seventh among possible Republican candidates in a recent Gallup poll. If others "step out boldly" with plans to revamp the entitlement programs, he says, "I will probably be for them."

So far, he says, none has.

Former Minnesota Gov. Tim Pawlenty favors inching up the retirement age for Social Security and limiting inflation-based benefit increases for the affluent. Mitt Romney, the former Massachusetts governor, offers various ways to fix Social Security and Medicare in his book "No Apology," but has shown no sign he intends to make them the center of any campaign. Former House Speaker Newt Gingrich has floated reams of ideas, but his advisers say a Gingrich campaign would focus on a different subject, reviving the economy and creating jobs.

The presumed Democratic candidate, President Barack Obama, has avoided tackling the cost of entitlements, saying both parties should move ahead in unison.

Mr. Daniels's brashness was on display in Washington recently at the annual Conservative Political Action Conference, or CPAC. While other possible 2012 candidates lashed President Obama for his proposed budget or interventions in the economy, Mr. Daniels took a different path. He spoke of an impending debt crisis as "the new Red Menace" and said it was time to bid "an affectionate thank-you to the major social-welfare programs of the last century."

Could he build a national campaign on an issue long regarded as the touch-it-and-you-die third rail of American politics?

Harping on deficits and changes to entitlements, Mr. Daniels concedes, isn't usually a winning strategy. "It's hard to name anyone who has won on that theme," he says.

The Pew Research Center found this month that even at a time of rising concern over deficit spending, only 12% of Americans, and just a fifth of Republicans, favored cutting Social Security or Medicare.

None of that has kept Mr. Daniels from dealing up his own solutions.

Digging into a plate of fried perch on a recent two-day tour of northwestern Indiana, Mr. Daniels said the time had come "to grab every third rail there is, all the things that people say, 'Well, you just can't do that politically.'"

He then merrily laid out his ideas for drastically changing the current social safety net, while insisting he is "wide open" to all other ideas. "If it takes the second or third or fourth best approach, I'm for that, too," he said. "We just need to so something, now."

Mr. Daniels lobbed other grenades during his recent swing through Washington. He told health-care reporters the government must find ways to control the spiraling costs of end-of-life care. The U.S. can't afford "absolutely everything that modern technology makes possible for absolutely everyone till absolutely the very last day," he said.

Some fiscal and social conservatives blast the Indiana governor as too quick to brush aside social issues like abortion or gays in the military in his quest to fix budgets. Several groups protested when CPAC picked him to deliver the gathering's Ronald Reagan address.

Mr. Daniels got his start in politics as an intern in Indianapolis to then-Mayor Richard Lugar, whom he followed as an aide when Mr. Lugar won a Senate seat in 1976.

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A lawyer by training, Mr. Daniels was a political adviser to President Reagan, ran the conservative Hudson Institute think tank, became an executive at drug company Eli Lilly & Co. and returned to government in 2001 as White House director of management and budget under President Bush.

His decision to run for governor of Indiana in 2004 surprised friends who saw him as more the consummate aide and policy wonk than glad-handing politician. What one friend calls his "stature gap"—he is short, slight and balding—didn't help.

He turned out to be a spirited campaigner, crisscrossing the state in an RV emblazed "My Man Mitch." To save money, he slept in strangers' houses, a practice of "mooching," as he calls it, that he has stuck with ever since. On his recent trip, his driver dropped him off at a farmer's house miles from the nearest town; Mr. Daniels arrived well after dinner and left at dawn.

Elected governor, he created a new budget office on his first day in office, and moved to decertify the state-employee unions the next day, a step that made it possible to trim the state's work force and reward workers for performance instead of seniority. Unlike the current furor in the more heavily unionized Wisconsin, it caused only limited friction.

What did provoke ire were two moves the governor thought would be more anodyne. He pushed through uniform adoption of Daylight Savings Time, in place of a county-by-county patchwork, and he leased the Indiana Turnpike to a Spanish-Australian consortium for 75 years.

After two years in office, he had an approval rating of just 37%, tied with President Bush. In 2006, his party lost control of the Indiana House.

"It was humbling," Mr. Daniels says. "But I tell you this, we never took a poll to determine what we were for."

His efforts to trim government ended up boosting his image. He sold thousands of state-owned cars and cut the state work force to levels not seen since the 1970s. In a region awash in government red ink, he turned an inherited $600 million deficit into a $370 million surplus the next year. He has rebuilt the state's reserve funds, which now top $800 million.

He revamped a sluggish Bureau of Motor Vehicles so people could get new plates or driver's licenses in a matter of minutes, still one of his most popular moves. When he dropped by a BMV office in Lafayette recently, a woman pushing a baby carriage rushed to embrace him.

"Hello, Mitch," she gushed, telling him "I got everything I needed in 10 minutes."

In 2008, when Mr. Obama became the first Democratic presidential contender since Lyndon Johnson to carry Indiana, Mr. Daniels was easily re-elected, taking all but 13 of 92 counties.

Term limits mean he can't run again in 2012. Now in the thick of his last major two-year budgetary session, he has a reputation in Indiana as an iconoclastic and sometimes contrary conservative—winning praise even from some on the left and taking occasional shots at the tea-party movement. "The whole thing needs to evolve," he says, criticizing the tea-party groups for "an inability to get specific."

Greg Fettig, co-founder of one such group, the Hoosier Patriots, thinks it's the governor who needs to evolve. "I don't think he understands at all what we are doing," he says. "We can get specific on anything he wants."

Nor does Mr. Daniels hesitate to lavish praise, when he feels like it, on the Democratic administration. "What I want in education is almost completely aligned with what President Obama wants," Mr. Daniels says, noting the administration's support for charter schools and merit-based pay for teachers.

He talks more often with Obama Education Secretary Arne Duncan, he says, "than with any cabinet secretary during my entire time in the Bush White House."

Mr. Daniels seeks to replace the state's existing teacher tenure system with one based on performance standards. Effective teachers would earn more, while ineffective ones could lose their jobs. Low-income families could use taxpayer money to send their kids to private schools—a voucher system that education experts say would be the most sweeping of its kind. Indiana Democrats and the state's teachers union vow to fight the legislation, but with Republicans controlling the legislature, some version of it is expected to pass.

Mr. Daniels's political foes criticize him for being stubborn and impervious to outside opinion. "He needs to be reminded sometimes that Indiana isn't just a laboratory where he can toy with his fabulous ideas," says State Senate Democratic Leader Vi Simpson.

Some conservatives say his reputation as a ferocious deficit fighter is only half the story. Mr. Daniels was, after all, George W. Bush's budget director when the government saw a surplus turn into years of deficit spending and when Mr. Bush launched his Medicare Part D drug subsidy plan, which now costs more than $60 billion a year. It was the largest expansion of entitlements for the elderly in decades.

Other conservatives ding him for boosting the state cigarette tax and sales tax and for proposing a one-year income-tax increase on the wealthy. As part of a larger overhaul, he pushed down property taxes, reducing people's overall tax burden. "Mitch's challenge is he's being overshadowed by newer governors like Chris Christie who are willing to slash spending without touching taxes," said Grover Norquist, a budget hawk who runs Americans for Tax Reform.

More recently, Mr. Daniels took flak for not supporting a contentious "right to work" bill forbidding labor contracts that require all workers to be union members or pay dues. It died this week in the Indiana legislature.

During his swing through the state, Mr. Daniels touted his education efforts as he visited small-town newspapers and dropped by diners and schools. But just as often, he cited another development. Over the past decade, Michigan lost residents and Illinois and Ohio barely kept even, while Indiana's population rose 6.6%, according to the 2010 census.

"We grew faster than any state between Iowa and Maine," Mr. Daniels told the editorial board of the Lafayette Journal & Courier, a factoid he repeated at a number of other stops.

Unemployment in Indiana, at 9.5%, runs above the national average of 9%. But there are signs of a turnaround. Private-sector job growth last year was nearly twice the national average, and 10th best in the country.

When asked about a presidential run, Mr. Daniels often laughs and brushes the query aside. He is focused on Indiana and the current legislative session, he says. Or, he says, it's a question his wife and four daughters will help decide. (His wife, he says, isn't at all supportive of another campaign.)

Mr. Daniels is convinced that as president, he would know how to fix the country's debt and swelling entitlements. He's less sure he has the stomach for pursuing the job.

"A friend of mine said to me, 'Mitch, you have a fatal flaw as a candidate.' And I said, 'I have a lot of them. Which one did you have in mind?' And he said, 'You can live without it.'"

Write to Neil King Jr. at neil.king@wsj.com