President Bush's sharp-tongued budget director, Mitchell E. Daniels Jr., announced his resignation yesterday to prepare for what administration officials called a likely run for Indiana governor in 2004.
The widely anticipated departure of Daniels, who will step down in 30 days, will deprive the White House -- and Washington -- of a diminutive but feisty political warrior who appeared to delight in sending barbs to Capitol Hill and who joked he should be called "the Pinata" because of criticism that came in the other direction.
It had been expected that Daniels's departure from the Office of Management and Budget would lead to the elevation of Clay Johnson, a Bush friend and former White House personnel director who was recently installed as Daniels's deputy for management. But Daniels cast doubt on that notion on CNBC's "Capital Report," saying that "Clay's strong interest" is in seeing "that the federal government is better managed."
A Bush administration official, who asked not to be identified, said two senators have told the White House they would oppose Johnson taking over at the OMB. Other possible replacements are Rep. Rob Portman (R-Ohio), former representative John R. Kasich (R-Ohio), NASA Administrator Sean O'Keefe and congressional budget aide G. William Hoagland.
"Mitch told me that he wants to go back home to the state of Indiana and perhaps pursue a run for political office," Bush said yesterday, praising Daniels as "a really good watchdog of the taxpayers' money."
The 54-year-old former aide to Ronald Reagan infuriated lawmakers in both parties with his incessant criticism of their spending habits. He scolded Congress for strapping "Lilliputian do's and don'ts" on federal agencies and said New Yorkers were involved in "a little money-grubbing game" for pursuing $20 billion to recover from the Sept. 11, 2001, attacks. He suggested a motto for lawmakers: "Don't just stand there, spend something." And he was criticized for dismissing saving the Social Security surplus by saying, "All the dollars are fungible."
Fights over federal spending moved Daniels to song on more than one occasion. He complained that spending programs never end, saying: "I've been humming an old country song favorite recently: 'How Can I Miss You If You Won't Go Away?' " And he accused opponents of attending "the Debby Boone School of Public Policy, where the school song is 'It Can't Be Wrong If It Feels So Right.' "
Daniels's actions won him the enmity of those who handle the purse strings in Congress. Sen. Ted Stevens (Alaska), the top Republican on the Senate Appropriations Committee, said, "The president is ill-served" by Daniels. He said the White House budget office was consumed with "blind adherence" to a bottom-line number "without regard to the needs of the country at all." Sen. Robert C. Byrd (W.Va.), the top Democrat on the same panel, called Daniels "Little Caesar" and "big mouth." That led Sen. Trent Lott (R-Miss.) to send Daniels a delivery of Little Caesars pizzas with pork toppings.
Daniels, dubbed "the Blade" by Bush for his adherence to spending restraints, said Bush "might instead have chosen 'Pinata' because I think some folks think if they can knock my head off, all the goodies in town will fall out."
For all his stated devotion to spending restraint, Daniels presided over a large expansion in federal spending. The federal budget swung from surplus to deficit on his watch because of antiterrorism spending, the recession and tax cuts. "By OMB's own estimates, Daniels has presided over an era which has seen a projected $5.6 trillion surplus in 2001 turn into a $2.2 trillion projected deficit today," said David Sirota, Democratic spokesman for the House Appropriations Committee. "In short, Mitch Daniels is the clown that turned our fiscal house upside down."
Trent Duffy, a Daniels spokesman, said there would have been a deficit even without Bush's 2001 tax cut after government revenue declined for two years straight for the first time in 40 years. As for Daniels, Duffy said, "I suspect that he won't miss the soaring and thoughtful rhetoric of the Washington circus too terribly much."
Unlike other members of Bush's economic team, Daniels's departure shows every sign of being voluntary. Others -- former Treasury secretary Paul H. O'Neill and economic adviser Lawrence B. Lindsey -- were pushed out. With the departure earlier this year of R. Glenn Hubbard as chairman of the Council of Economic Advisers, most of the key players on Bush's economic team have turned over.
The timing of Daniels's announcement raised the possibility that he would leave before Congress acted on Bush's latest tax cut plan. White House press secretary Ari Fleischer said he expects Congress will complete work on the tax cut before Daniels departs.
Daniels, a former Eli Lilly and Co. pharmaceuticals executive, has been commuting to Indiana on weekends to see his wife and daughters. He is expected to vie for the GOP gubernatorial nomination with former representative David McIntosh in his bid to succeed Democrat Frank O'Bannon, who is barred from a third term.