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On his first day in office back in 2005, Indiana Governor Mitch Daniels signed an order ending collective bargaining with public employee unions. He says it freed him to turn over some state jobs to private contractors.

Governor MITCH DANIELS (Republican, Indiana): The job of government is to deliver necessary services as well and effectively as possible - not necessarily to deliver them through government itself.

INSKEEP: Daniels put his state's finances in order just as other states were heading for trouble. That's a big part of his reputation now, and some Republicans are promoting Daniels as a possible presidential candidate. Yet as he looks back on that budget-cutting moment, Daniels argues that he also added government jobs in the child welfare system.

What does that say about your political philosophy, that you would do those two things simultaneously - end collective bargaining with unions and move toward privatization at the same time that you're hiring more child welfare workers? Are you a pragmatist? What's the word for it?

Gov. DANIELS: You pick the word. I certainly believe in limited government, but protecting children against injury or abuse is certainly inside my sphere of things that government should do. Then the question again becomes: all right, what's the most effective way to do that?

INSKEEP: Mitch Daniels is a former budget director for President Bush. As governor, he's pushing contentious conservative plans right now. Indiana Democrats walked out of the state legislature last week, protesting a range of Daniels' plans, including government vouchers for private schools.

Yet Daniels also set aside a plan to weaken private sector unions, and when he spoke at a meeting of conservative activists this month, Mitch Daniels again sounded pragmatic.

You told conservative activists first that you needed to build large majorities for what you wanted to do - not just win - and also said to them - I believe I'm getting the quote correct - purity and martyrdom is for suicide bombers. What did you mean by that?

Gov. DANIELS: I was talking at that time about what I believe is the single biggest and really transcendent problem facing the country, which is the threat posed by the debts we have amassed and that are on their way. I don't think this is an ideological debate. It's a mathematical fact to me - love to be shown that I'm wrong - that the nation will not survive in the form we've known it if we don't address this.

And that's going to mean very, very big changes, at least relative to the caliber that we see in Washington.

INSKEEP: You're basically saying we're going to blow our credit or someone's going to move in and take over. That's basically what you're saying, if we don't...

Gov. DANIELS: Well, if we go as broke as we're on track to go, we will have a permanently stunted economy. If you believe that our republic literally hangs on our addressing this issue, then we're going to want to try to unify and gather together as many people as we can to make this change of that dimension. And to do that means by definition you'll have folks who don't agree on everything.

I guess what I said right after that line was I have no interest in standing in the wreckage of the American republic saying I told you so or you should have done it my way.

INSKEEP: Some Democrats - in fact many people - may ask if you bear some responsibility for the scale of the deficits. You're laughing. You know what the question is. Let me just lay it out. You were part of the Bush administration, the budget director, when the Bush tax cuts were passed and there were not corresponding spending cuts. The deficit got larger.

Gov. DANIELS: Yeah...

INSKEEP: In fact, there was a surplus...

Gov. DANIELS: Yeah, I think it's about the lamest of all there's a whole lot of reasons, you know, I think...

INSKEEP: Maybe it's not the only reason, but...

Gov. DANIELS: No, no, no, no. I think it's - I say - I think it's(ph) very lame criticism. You know, so there was a surplus for a short time. Which budget director under President Clinton should get 100 percent of the credit for that? The fact is, nobody even knows who they were, right? It was it was the president and a Republican Congress and the Reagan peace dividend and a bubble economy, we later learned, that produced that surplus...

INSKEEP: The Clinton administration, Clinton tax increases, budget cuts for the Republicans Congress...

Gov. DANIELS: Put in anything you want. The answer is it wasn't the budget director. Now, I mean here's the true fair thing. Look, I was proud to serve in that administration, but that surplus was going away and it wouldn't have mattered who was president, let alone in the supporting role of budget director. We had the collapse of the bubble, the recession...

INSKEEP: After 9/11...

Gov. DANIELS: Then 9/11, with all the costs that came with that, the whole new category we call homeland security, and two wars. But you know, if somebody wants to know what my outlook is or what sort of actions I would take about deficits, don't look at two and a half years when I had very limited influence and no vote. Look at six years when I've had - as governor - when I've had a reasonably large role in the fiscal outcomes of Indiana.

INSKEEP: Would you not have would you not have approved of those tax cuts?

Gov. DANIELS: I did approve of the tax cuts. And by the way, they were widely credited - and still are, by honest people - with the shallowness and the swiftness of the recovery from that recession. It was lucky, by the way - only fair to say - President Bush never proposed those tax cuts as a stimulus, as we now say matter, because nobody knew we had a recession starting up.

INSKEEP: Is the problem grave enough now that those tax cuts should be allowed to expire? They've now been extended through 2012.

Gov. DANIELS: I think it would be a catastrophic mistake. You know, we will never get out of the corner we're in without a long period of really strong economic growth. This is something, again, that people from left to right should agree on.

INSKEEP: How will you decide whether to run for the White House in 2012?

Gov. DANIELS: I think I'm flipping a coin.

(Soundbite of laughter)

INSKEEP: I assume it'll be a small coin and not a large denomination.

Gov. DANIELS: Yeah. Well, it could - we'll just have to see. Decision could get made for me. I am completely attentive right now to my work in Indiana. I'm not traveling anywhere. I'm not lifting a finger. I'm not going to let anybody else do that, at least until the general assembly session is over. Now we don't know when that will be.

But I've continued to keep the option open. I've been encouraged to do that by people I have enormous respect for. And...

INSKEEP: Could you win?

Gov. DANIELS: Well, you ought to ask some political sage that question.

INSKEEP: Well, you're the guy who will need to know. You're the guy...

Gov. DANIELS: Well, I would say this: I wouldn't ask I wouldn't ask others to help me in such an undertaking if I didn't think there was a chance. But I would say that I do believe that there are reasons to think that a credible and honest and positive - positive's important - campaign on the Republican side next time might prevail. An intellectually honest and constructive campaign...

INSKEEP: Constructive, meaning you can't just say Obama's terrible. You have to...

Gov. DANIELS: That's absolutely right. I think one that steps up to the duty of saying to Americans, listen, folks, wish it were otherwise but we've got the following great big problems and we're going to have to do some great big different things so that we don't disserve the young people of America who are right right now are on track to be handed a terribly raw deal.

INSKEEP: Governor, thanks very much.

Gov. DANIELS: I enjoyed it. Thanks.

(Soundbite of music)

INSKEEP: Mitch Daniels is governor of Indiana. We spoke with him over the weekend at the meeting of the National Governors Association here in Washington. You can find a transcript of his full remarks at NPR.org along with a link to our recent conversation with another presidential possibility, Minnesota's former governor, Tim Pawlenty.

(Soundbite of music)

INSKEEP: It's NPR News.

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