Mitch Daniels sounds fiscal alarm, but Indiana Republican still debating 2012 run

April 24, 2011

No prospective Republican presidential candidate has done more to highlight the issue of debt and deficits than Indiana Gov. Mitch Daniels. He calls it the “new red menace,” an ocean of red ink that he says is every bit as dangerous as the Soviet nuclear threat during the Cold War.

His call to arms gives him a provocative though politically risky platform for a potential 2012 presidential candidacy. Daniels thinks dealing with the debt problem will require a potentially dramatic restructuring of Medicare for future recipients, revamping Medicaid to slow its spending, and altering Social Security for today’s younger workers by raising the retirement age and recalculating the cost-of-living formula.

What Daniels has long been advocating dovetails with the budget blueprint recently unveiled by House Budget Committee Chairman Paul Ryan (R-Wis.). His entry into the race could ensure that a debate between President Obama and Ryan becomes a central issue of the 2012 campaign. More than any other potential candidate, Daniels would test whether voters are ready for the kind of stiff medicine he prescribes.

But Daniels also would challenge his own party, with a message that calls for focusing on fiscal issues over social ones, for appealing seriously to voters who are not part of the conservative coalition and for being prepared to compromise with Democrats to solve the debt problem.

As he put it in a speech this year: “Should the best way be blocked . . . then someone will need to find the second-best way. Or the third, because the nation’s survival requires it. Purity in martyrdom is for suicide bombers.”

For more than a year, Daniels has been on the fence about running for president. Now, with the legislative session in Indiana ending, he says he owes it to potential supporters to make a decision. “It’s time to cut bait,” he said in an interview in his statehouse office.

His decision will come just as the campaign for the Republican nomination is about to heat up. The first debate of the cycle is set for May 5 in South Carolina, though with only a partial cast likely to be onstage.

Mitt Romney, Tim Pawlenty and several lesser-known candidates have formed presidential committees. Newt Gingrich and Mississippi Gov. Haley Barbour, who have been moving around early states, are expected to make their final decisions soon.

Businessman Donald Trump, who has leaped to the upper tier in the polls with a media blitz, will make a decision over the next month or so, as will Rep. Michele Bachmann (R-Minn.). Former Utah governor and U.S. ambassador to China Jon Huntsman Jr. will return to the country soon and indicate whether he will run. Mike Huckabee and Sarah Palin are hanging back.

Daniels has looked to others to seize the issue of the country’s fiscal problems, hoping that would give him a good reason not to run. He has examined from various angles the question of whether he should run. Can he advocate as effectively for action on the debt problem if he does not become a candidate? Does the debate touched off by Ryan’s plan and Obama’s response guarantee that the issue will be front and center in 2012 even without him? Will he set back the cause if he runs and does poorly?

Daniels has an answer only for the last question: No. “I would choose to believe that doing it and failing, which is maybe even the likely outcome, would somehow [have] advanced things,” he said.

As the time draws nearer, those who know him best see the tension rising as he weighs the political challenges and family trade-offs. “There’s a fight going on inside him that’s pretty rare,” said one adviser who asked not to be identified, in order to speak candidly.

Asked where he was in his thinking, Daniels replied with a laugh, “Oh, muddled.” Then he turned serious: “I don’t want to leave a misimpression. If we get in, we will go all out, and we know a little about how to do that. So reluctance or hesitation about running doesn’t mean we would be a reluctant candidate if we got there.”

Asked about family considerations — friends say his wife has been opposed — Daniels goes quiet. “I don’t have much more to say about that,” he said. “It’s just a very important factor.”

As he deliberates, calls come into his office, and the offices of his political advisers and friends, with words of encouragement. He has drawn praise from a number of conservative commentators. They see him as someone who can espouse conservative ideas but who believes the GOP must avoid appearing harsh or braying.

Former Florida governor Jeb Bush told a Jacksonville audience in February that, among prospective GOP candidates, Daniels was the “only one who sees the stark perils and will offer real detailed proposals.”

Democrats, too, are taking him seriously. Obama advisers see him as a credible general-election candidate, if he can survive a nomination battle. Democrats, with some encouragement from Washington, have begun to step up their criticism of him and to question whether his record will hold up to serious scrutiny.

Potential appeal

Daniels’s potential supporters see him as the anti-Obama, a 5-foot-7-inch, motorcycle-riding, balding politician who lacks the charisma Obama displayed during his 2008 campaign but who they believe has the intellectual heft and plainspoken appeal to go toe-to-toe with the president.

In reality, no one can predict how he would fare. His biography includes two terms as governor, service in the Reagan White House, and stints at the conservative Hudson Institute think tank and as an executive at Eli Lilly before joining the George W. Bush administration as budget director.

Daniels’s retail candidate skills — honed by nights spent in the homes of strangers and encounters with voters in coffee shops, fairs and flea markets along the back roads of his state — could play well in Iowa and New Hampshire. But his capacity to generate real enthusiasm across the party remains in question. He is still a blip in the polls.

In a field with many candidates who carry baggage, Daniels’s biggest burdens might be how he would run. Although he is solidly antiabortion, he has called for a truce on social issues to keep the focus on the country’s fiscal problems. That has riled social and religious conservatives and is already drawing criticism from potential rivals.

Daniels’s stock rose earlier this year after he spoke to the American Conservative Union’s annual Conservative Political Action Conference, where he delivered a sobering speech outlining the fiscal threat he sees looming.

“We cannot deter it,” he said. “There is no countervailing danger we can pose. We cannot negotiate with it, any more than with an iceberg or a great white.”

Daniels also said that night that the changes he advocates require big majorities. “We will need people who never tune in to Rush [Limbaugh] or Glenn [Beck] or Laura [Ingraham] or Sean [Hannity],” he said at CPAC, “who surf past C-SPAN to get to [ESPN’s] ‘SportsCenter.’ ”

In the debate between Ryan and Obama, Daniels knows where he stands. He called Ryan’s proposal for ending Medicare’s defined-benefit structure “exactly the right direction to head,” though he says he is open to other serious alternatives. Asked about Ryan’s proposal to convert Medicaid into a block grant with full flexibility for states, he replied, “Bring it on.” He says that means testing should be part of any solution to restructuring Social Security and Medicare.

Daniels said he was “deeply disappointed” by Obama’s recent budget speech. “At a time when we should seek to unify Americans around the big changes necessary to deal with this life-and-death issue, he was divisive and partisan,” he said. “In terms of content, it was worse than empty.”

The Bush years

Daniels’s focus will prompt questions about his service as budget director during the first 2 1 / 2 years of Bush’s presidency, as the country was beginning to move from surpluses to sizable deficits and a big increase in the national debt.

Daniels argues that the problem has ballooned dramatically under Obama, that debt and deficits today represent a far bigger share of the overall economy than in the Bush years. “We’d give anything to be within a country mile of that now,” he said.

But he also argues that the best judge of his record is as a governor who set his own priorities. “Nobody’s perfect,” he said, “but if you go look at our record, I think it’s by most measures a strong one.”

That record includes shrinking state government employment to its smallest level since the late 1970s (and to the lowest per capita of any state in the country), keeping his budget in the black through the worst of the recent recession without raising taxes, and a package of education proposals that he hopes will be enacted by the end of the month. Daniels says he’s also proud of the work he has done to improve the business climate in the state.

Democrats see his record in less glowing terms. State Rep. B. Patrick Bauer, the Democratic leader of the House, called Daniels’s approach to budgets “slash and burn.” Dan Parker, the chairman of the Indiana Democratic Party, said Daniels’s record earlier in his term on taxes — a sales tax increase that was part of a broader plan that lowered property taxes and a cigarette tax increase to fund health care for low-income families — could draw criticism from conservatives.

One questionable decision was his attempt to privatize parts of the state welfare system. Indiana turned over the processing of eligibility claims to private contractors, including IBM. After widespread complaints, Daniels and other state officials decided to terminate the contract and have instituted a hybrid system.

The result is a nasty lawsuit. IBM lawyers want to depose Daniels; he is resisting. Daniels’s critics say the details of the privatization plan, as they become better known, will raise questions about the governor’s judgment and management oversight.

In his first days in office, Daniels ended collective bargaining for state employees. Unlike what has happened in Wisconsin and Ohio this year, where Republican governors and legislators have pushed to do the same, Daniels’s decision, done by executive order, created almost no controversy.

Daniels has also avoided confrontational tactics when it suits him. This spring, when Democratic legislators, angry over a legislative proposal to make Indiana a right-to-work state, staged a walkout, Daniels successfully persuaded Republican legislators to shelve the bill. He feared that a battle with unions would jeopardize his education agenda.

Daniels still hopes other candidates will take up the banner of fiscal reform. Friends say he is now dubious that they will. That leaves him where he has been for more than a year — on the fence — but with the clock about to expire.

Dan Balz is Chief Correspondent at The Washington Post. He has served as the paper’s National Editor, Political Editor, White House correspondent and Southwest correspondent.
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