STERLING, VA - JANUARY 4: Governor-elect Terry McAuliffe, center, along with his wife, Dorothy McAuliffe, three of their children, Dori, 22, Mary, 19, and Peter, 11, attended a volunteer event at Women Giving Back, a HomeAid Northern Virginia Program in Sterling, VA. When Governor-elect McAuliffe was elected in November he and his wife made it a point to stress the importance that giving back to the community would have over the next four years. The Inaugural Committee held over 80 events across the Commonwealth on Saturday, January 4th where Virginians came together to take part in the Commonwealth Day of Service. Women Giving Back is a 100% volunteer organization that distributes clothing to women and children in crisis. (Photo by Sarah L. Voisin/The Washington Post) Gov.-elect Terry McAuliffe, center, with his family, at a volunteer event in Sterling. (Sarah L. Voisin/The Washington Post)

Terry McAuliffe will be sworn in as Virginia’s governor Saturday. The good news is that he inherits an office in a state that is undergoing an economic surge and is on the road (rhetorically speaking) to reform of its transportation and education systems. But there are dangers ahead if the affable governor (who assembled a moderate cabinet, to the dismay of liberals) follows the Democrats’ national leftward lurch. He’ll need to be more President Clinton (Bill, that is) than President Obama.

He can help himself in a few ways.

First, pass an ethics bill that includes a gift ban and enhanced disclosure requirements on campaign donations. (The state should avoid campaign dollar limits. Such limits push money to unregulated groups not subject to disclosure requirements.) Outgoing Gov. Bob McDonnell (R) gave a poignant farewell address, listing a whole raft of achievements and then apologizing and imploring Virginians not to allow his gift scandal to overshadow his accomplishments. (“I am not perfect. But I have always worked tirelessly to do my very best for Virginia. I’ve set very high standards for myself. But, as a flawed human being, I’ve sometimes fallen short of my own expectations. Choices I made were legal, and, as several reviews have shown, no person or company received any special benefits during our administration. However, I understand the adverse public impression some of my decisions have left. I have prayed fervently that the collective good we have done over the past four years will not be obscured by this ordeal.”) McAuliffe will do himself, his successors and the cause of good governance a favor by leading the way on swift passage of a bill to prevent shenanigans between elected officials and donors.

Second, McDonnell noted that he didn’t get around to tax reform. This is an issue on which McAuliffe can show his business-friendly and moderate colors, avoiding the national Democrats’ penchant for tax hikes. There is a benefit to having a flatter, simpler tax code devoid of corporate welfare.

Third, on Medicaid he should make this proposal to the legislature: If he can convince the Obama administration to block grant Medicaid, as many states have pleaded with the feds to do (so as to improve care and lower costs and the potential for fraud), legislators should agree to expand Medicaid coverage. McAuliffe can even offer to include work requirements akin to those in federal welfare reform. That, if you recall, was a triumph of conservative reforms and McAuliffe confidante Bill Clinton. If Republicans turn him down, they will look cold-hearted and insincere about entitlement reform; if they agree, it is a win for Virginia and a possible model for other states.

Finally, McAuliffe should use his leverage with the Obama team (he has some, right?) to open up the state’s plentiful energy reserves. If he’s successful, he’ll be the father of an energy and economic boom.

In short, McAuliffe can make good on his campaign promises of moderation by eschewing liberal D.C.-style governance and shaping a moderate, pro-business administration. He can make good use of his glad-handing skills and political leverage to get his state relief from federal Medicaid and energy mandates that don’t serve the state well. Think of it as the Third Way, Virginia style.