Indiana Gov. Mitch Daniels Is Tough On Budgets Gov. Mitch Daniels put his state's finances in order just as other states headed for trouble. Now, some Republicans are promoting him as a possible presidential candidate.

Indiana Gov. Mitch Daniels Is Tough On Budgets

Indiana Gov. Mitch Daniels Is Tough On Budgets

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Indiana Gov. Mitch Daniels speaks in Washington on Feb. 11. Jose Luis Magana/AP hide caption

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Jose Luis Magana/AP

Indiana Gov. Mitch Daniels speaks in Washington on Feb. 11.

Jose Luis Magana/AP

More In Our Occasional Conversations With Presidential Hopefuls

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

Daniels was able to put his state's finances in order just as other states headed for trouble. Now, that's a big part of his reputation, and some Republicans are promoting him as a possible presidential candidate.

Yet as he looks back on that budget-cutting moment with NPR's Steve Inskeep, Daniels says that he also added government jobs in the child welfare system.

Mitch Daniels is a former budget director to President Bush. He won re-election as governor at the same time Indiana was carried by President Obama. Currently, he's pushing contentious conservative plans. Just last week, Democrats walked out of the Indiana state Legislature protesting a range of Daniels' plans, including government vouchers for private schools.

Read the full transcript of Steve Inskeep's interview with Gov. Mitch Daniels below.

Transcript: Gov. Mitch Daniels On Indiana And The Budget

INSKEEP: I want to ask something that a lot of people are confronting right now, as they deal with the federal deficit as well as state and local deficits that need to be closed. Are budget cuts — government budget cuts — worth it, even if they end up seriously costing a lot of jobs right now.

DANIELS: The answer is yes. And in fact, I think, if we're gonna have more jobs in this country, now and in the future, we gotta get very serious about further significant reductions in the size of government. I very much think that — and I'm hardly alone in this — that substantial reductions in the size and cost of government at all levels is a part of a recovery plan. Let's not forget that government ballooned enormously in recent years, including the first couple years of the recession. While private — while we were losing millions of private sector jobs, government employment was growing.

INSKEEP: Um hum.

DANIELS: So we can do a whole lot of retrenching, and still be at the size we were just a very short time ago. I don't know anybody who thought that, for instance, the federal government was too small in, say, 2008. And, uh, you know as a starting point, we ought to get back there and keep going.

INSKEEP: But when we're in a situation where the economy seems to be fragile and where people seem to be very worried about jobs. Just the other day, the economic numbers for the fourth quarter were revised and the reason that was given that they were revised downward was that state and local governments cut even more severely and that hurt even worse than people had thought at the time.

DANIELS: I think the most preposterous notion out there is that somehow if we borrow more money, and put more people on public payrolls, that this is in the long-term econ — or even short-term economic interests — of the country. What we need is government consuming a whole lot less of the money that is in the economy, and the private sector having it to invest in productive jobs that eventually will pay for the government we want and need.

INSKEEP: Does that mean that there would have to be, if you had your way in the world, another year, another several years, of pain on the jobs front.

DANIELS: I don't call it pain. You know, this whole idea of "pain." You know, we have the fewest state employees in Indiana now since 19 — we have fewer than we did in 1978. And yet I can prove it to you, 'cause we measure everything, that service levels are the best they've ever been in Indiana. Now we're delivering some of those services, still, through private contractors, as opposed to government. But still, the government payroll is smaller. You know actually, the — uh, if government spending prevented pain, you know, we wouldn't be having as much of it as we have now. Because we've been on an incredible binge of government spending. The pain I'm worried about is what's coming if we don't restore a more appropriate balance between the size of the public sector and the private sector.

INSKEEP: I'm glad you mentioned privatizing government jobs. Some people will know that on, I believe, your first day in office — very early in your term in office in 2005, you ended collective bargaining with public employee unions. And one of the reasons you gave for that move was that it allowed you to privatize more public functions. Why was that important to do?

DANIELS: 'Cause if there's a way to, to uh, deliver a given service as well or better at lower cost, I think you have not only an opportunity, but a duty to do that in public life. We treat this very much case by case. On that same first day, for instance, even as we were confronting a tremendous bankruptcy of state government, and getting ready to cut everything else, I kept another commitment, and we doubled the number of child service caseworkers. We had the worst record in America protecting children.

INSKEEP: It was a scandal, yeah.

DANIELS: It was, and now we're winning national awards. Now, in that case, we doubled the size of the government workforce dealing with it, cut the caseloads, and began a process of reform and improvement. So we look at it case by case. But when it is possible to hire Hoosiers in the private sector, to perform a public service, better at lower cost, I ask: why wouldn't you? What possible argument is there for not doing that?

Now, you know, I want to make a very important point to you. It's been a stipulation of every such move we've made, that we protect the worker's job... the workers at least... in the sense that, the winning bidder has always been required to hire the incumbent worker.

INSKEEP: They get first crack at the jobs.

DANIELS: They get first crack. If the — if the worker doesn't want the job, then we put them at the head of the line, find 'em another job in state government. That has always been our policy. And so it's occasionally been falsely reported there've been all kind of layoffs. Not so. Incidentally...

INSKEEP: People are formally laid off, but they have an opportunity to get another job.

DANIELS: Not even formally laid off. They are given the opportunity to leave state government, go to a private employer — which, incidentally, has been the choice in a high, high percentage of the cases.

INSKEEP: Same salary and benefits?

DANIELS: Usually better. And more upward mobility. But again, it's the employee's choice. But we always protect the workers. Um, you know, it's a simple concept, but I think overlooked too often. The job of government is to deliver necessary services as well and effectively as possible — not necessarily to deliver them through government itself.

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

DANIELS: You pick the word. I certainly believe in limited government but protecting children against injury abuse is certainly inside my sphere of things that the government should do. Then the question again becomes, alright, what's the most effective way to do that. You know, on about the seventh day, the new fellow running our corrections system called me up and said, "Did you know you're paying $1.41 a meal for food in the prisons?" I said, "No, is that a lot?" He said, "Yeah, where I came from, it was 95 cents, and the food was better." Well, the reason was Indiana had 26, I think it was, separate little kitchens, all ordering, you know, bread five loaves at a time, and you know, cooking it up themselves. We hired an Indiana firm who does this for a living and saved 14 million the first year — it's now over a hundred million dollars — and the food's better. So, again, we could not have done this, by the way, with the collective bargaining agreement that we found when we got there. And I want to stress that when we discontinued collective bargaining, it was really not about wages and benefits. My predecessors had not given Indiana state workers the right to bargain over wages, or benefits, or pensions. All they really got was the requirement to turn over dues to the union.

INSKEEP: What did they bargain over?

DANIELS: Well, there was all these work rules.

INSKEEP: Oh, okay.

DANIELS: And that's really why I took the action. You couldn't, uh, change the personnel rules. We wanted to pay — we do pay — the best workers a whole lot more, as you would in most enterprises, than the worst workers. We wanted to change technology. We wanted to be able to, uh, reorganize government — that child protection step that I took, the actual first step was to, uh, carve out of a monstrous multi-purpose bureaucracy a new Department of Child Services that had one job, and one job only - reports directly to me to protect the lives of innocent children in Indiana. We couldn't have done any of these things under the collective bargaining arrangement — you could barely move a Xerox machine from one room to the other without the union's permission.

INSKEEP: At the same time, the last time you may have made national headlines in the last few days was for telling your Republican legislature to back off on what was seen as an anti-union measure.

DANIELS: Very different now, of course. It was a private sector Right to Work bill — very, very legitimate issue, uh, and uh — as I've said many times, and, uh — but a big one. And I had two reasons. I've had exactly the same position on this from the first time the idea surfaced.

One, if you're going to suggest a change that big, you ought to not spring it suddenly on the public and the legislature. You ought to go out and develop the idea, advocate the idea, if possible, have an election and let people express their viewpoint on the idea. That's how we've made six years of big change in Indiana. This was a brand new idea out of nowhere.

Secondly, I was afraid that it would serve as a pretext for our democratic friends to throw a snit-fit and march off, as they did, to a hot tub in Illinois. And, uh, this endangers a very sweeping reform agenda that, uh, we have worked very hard to create the possibilities for. So...

INSKEEP: You want to change the education system in Indiana.

DANIELS: That's part of it — and the criminal justice system, and local government. And we want to preserve our fiscal solvency, without raising taxes. And now, all of that will be, at a minimum, a lot more difficult.

So, those were my reasons. I believe that the Right to Work issue is a perfectly appropriate one for Indiana to look at. It does cost us jobs to be in the situation we're now in. But the right way to do it is to have a full and fair airing of this, let both sides bring their facts and arguments, and then, maybe, take it to the general assembly.

INSKEEP: This is reminding me of a speech you gave earlier this month, at the Conservative Political Action Conference, at which 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 in martyrdom is for suicide bombers." What did you mean by that?

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, that are on their way.

I don't think this is a ideological debate. It's a mathematical fact that, 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 gonna mean very, very big changes, at least relative to the caliber that we've seen 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 deal with it?

DANIELS: Well, if we go as broke as we're on track to go, we will have a permanently stunted economy. The dream, the American dream of upward mobility, of a prosperous middle class, goes out the window, without question. Along with it, inevitably, I think, will go much of our liberty, because in the free-for-all over what's left over, a government will be stronger all the time. We will lose influence in the world, and ultimately, we won't be able to pay, maybe, for the national security that we need. So I think every American of whatever viewpoint shares an absolutely common interest in seeing this addressed.

And all I was saying at that particular talk was, that if you believe that — 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.

INSKEEP: You have to compromise.

DANIELS: You might. You might. I think I said at that time that — you know — I laid out as a for instance what I thought the right way forward was. Um, but if we can't get there the single best way, make me an offer, show me an alternative. Maybe I'll take the second best or third best way — as opposed to — I guess what I said right after that line was, I have no interest in standing in the wreckage of the republic and saying, "I told you so," or "You should have done it my way."

INSKEEP: How are Congress and the White House doing on that score, if compromising or unifying is what you need to do? How are they doing right now?

DANIELS: I think it's way to soon to say. And so I'm hopeful. I'm very disappointed — I can't say otherwise — that the President, I think, defaulted on this question, and, again, don't take it from me, I haven't seen a single commentator really say anything else.

INSKEEP: You mean with the budget that he put out?

DANIELS: Yeah, it was really not at all in keeping with realities that we're facing, and uh, but, fine. That doesn't mean he can't engage, uh, himself or be engaged in the kind of serious action that needs to happen.

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. In fact it was a surplus.

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

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

DANIELS: No, no, no. I say, I think this is a very lame criticism. So there was a surplus for a short time. Which budget director under President Clinton should get 100% of the credit for that? The fact is, nobody even knows who they were. Right?

INSKEEP: (laughing)

DANIELS: 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 of the Republican congress...

DANIELS: Put in any answer you want. The answer is, it wasn't the budget director. No, I mean, here's the 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.

DANIELS: Then 9-11, with all the costs that came with that, the whole new category we call Homeland Security and two wars — so, I mean, that deficit [sic] was going away and it wouldn't have mattered who was in any of those jobs. 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, 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?

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 recovery from that recession. That was lucky by the way, it's only fair to say, President Bush never proposed those tax cuts as a stimulus as we now see matter, 'cause nobody knew we had a recession starting up. But the timing was somewhat lucky.

But yeah, sure. And you know, fine, if you don't believe they had a positive economic impact, you can subtract them from what happened after, and you still had a whopping change because of two wars, the terrorist attack and the recession.

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

DANIELS: I think it'd be a catastrophic mistake. You know, we will never get out. Even if I were – if my hopes were realized about aggressive action on the entitlement programs and on the rest of the government spending, 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. I say sometimes to my Big Government friends that nobody has a bigger stake than you do in getting business roaring, because otherwise you'll never have close to the money you want to do the things you want to do. Um, so no, I think raising taxes right now in a very fragile economy, still, would be a real mistake.

INSKEEP: You also said in an interview with the Weekly Standard, that there should be a "truce" on social issues. Now, I want to stipulate that pro-life groups for example have given you very high, very high marks, and yet you spoke of a need for a truce to deal with these other fiscal issues that you find to be far more pressing, far more urgent right now. What is the practical manner in which the President of the United States can declare a truce on social issues — a president who's appointing judges all the time, for example.

DANIELS: Well it shouldn't affect judicial appointments. It was just a modest suggestion — and I don't want to have an argument with anybody about it — it was directed to folks on both sides. It's back to what we talked about a few minutes ago — that if we're going to address the single, overwhelming issue that I believe jeopardizes us all, regardless of background or viewpoint, that we ought to just concentrate on that – first things first for a little while – and I would welcome to the cause of debt reduction and economic growth anyone who's willing to help make those changes happen. And I really don't care what they think about other questions, that's all I had in mind.

INSKEEP: You're saying you wouldn't pick a fight. But if you were in the White House and it came to choosing a judge, you would choose...

DANIELS: Completely different subject. You know, strict construction of the Constitution is one of the things I feel strongest about. If you believe in the rule of law, then you don't think – and if you believe in the democratic process, you shouldn't think – that it's a great idea to have judges making it up, which has been going on. And if you look at the appointments I've made in Indiana, every single one of them – they're a diverse group – but every single one is a strict constructionist, and that was my number one criteria.

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

DANIELS: I was thinking of flipping a coin.

INSKEEP: (Laughing) I assume it will be a small coin, and not a large denomination coin.

DANIELS: Yeah, well, it could. We'll just have to see. A 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 gonna let anybody else do that. Um, at least until the general assembly session is over and now we don't know when that will be. Gotta get my, you know, our democrats out of the hot tub first. But I've continued to keep the option open. I've been encouraged to do that by people I have enormous respect for, and uh...

INSKEEP: Could you win?

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

INSKEEP: You're the guy who'll need to know, you're the guy who'll need to feel it.

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. Now, I think any sensible person knows that the odds are long at the outset against anybody — particularly somebody running against a powerful incumbent who'll have a bajillion dollars and so forth. But I would say that I do believe that there are reasons to think that a credible, honest and positive — positive is important — constructive campaign on the Republican side next time might prevail. That — both because of the, I think, overreach of this administration, which has driven away people who thought they were getting something very different in President Obama — and also because objective conditions in the country may or may not be great in 2012. I'm very worried about the economy. I really hope it roars, but I'm not sure of that. So, yeah, I think it's entirely possible that an intellectually honest and constructive campaign.

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

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

INSKEEP: Just about the last thing. We spoke with former Minnesota Governor Tim Pawlenty last month on the program, who is also considering a run for the White House, and he very frankly said, I don't have the name recognition of some other people, so I need to decide fairly soon. What's the timeframe for you?

DANIELS: Well, I don't know what the ideal timeframe is, but again, my timeframe is driven — will be driven first of all by the duty I have to the current job, and if that means that final deadlines pass, well then it just does. But that comes first — or should I say second — my family's first and so we'll just see. I'll tell ya.

INSKEEP: What's your family say?

DANIELS: That's the one question I'm not gonna get into with you, but the one thing I can tell you is that, for whatever reason, and I think it's a blessing, this campaign is starting a lot later than anybody thought it would. And so, for a long, long time now, people have been coming to me saying, we hope you'll run, and by the way, you gotta start now! And that turned out not to be true. So it's not too late even now, and maybe even for a little while longer.

INSKEEP: Are Republicans holding back because they're not sure yet that Obama can be defeated?

DANIELS: You'd have to ask them. I've told you why, in addition to not having made any, made this decision, I've told you why I'm not, but everyone may have his or her own reason for waiting.

INSKEEP: Governor, thanks very much.

DANIELS: I enjoyed it. Thanks.