Posted by: John Gilmore | September 16, 2006

‘We are the Initiators’ – Indiana Governor Mitch Daniels

I don’t know much about Mitch Daniels. I have included an article below on the Indiana Governor because he appears to be one (of a very few) of our political leaders who understands economic issues. As I read this article, Mr. Daniels also appears to be someone who understands what the role of government should be. Let’s take a look at some of his beliefs and actions.

The first item in this article that caught my attention was the magnitude of his recent re-election victory.

“Amid a Democratic wave, the Republican beat his opponent by 18 percentage points and received more votes than anyone who had ever run in the state. He swept 79 of 92 counties, nearly 60% of independents and 25% of Democratic voters. His approval rating is near 70%. “

In a state that voted for Obama – Mr. Daniels beat his Democratic opponent by 18 percentage points and received more votes than anyone who has ever ran for Governor in the state of Indiana. His approval rating is hovering around 70%. Those are amazing numbers.

So – you have to ask – why is Mitch Daniels so popular with the people of Indiana? The answer becomes very clear.

“At a time when the GOP has done so much wrong, strategists are asking what Mr. Daniels is doing right. Hoosiers would point to his tough fiscal discipline and his overhaul of state government.”

Mr. Daniels popularity should not be a mystery to anyone after reading this article. Let’s review Mr. Daniel’s record on ‘fiscal discipline’ and ‘overhauling state government’.

“The 60-year-old won in 2004 by promising to achieve one goal. “Every successful enterprise has a very clear strategic purpose. . . . So, we said, all right, the strategic purpose of our administration is to raise the net disposable income of Hoosiers,” which has fallen dramatically in recent decades. “Everything else is just a means to that end.”


Mr. Daniels’s first step toward that goal was cleaning up a state balance sheet that 16 years of Democratic rule had left in bad shape. He turned what was a $700 million hole into a $1 billion surplus, making Indiana one of a handful of states that today remain in the black.”

Step number 1 – live within your means. We’re learning that the old political mantra of ‘tax and spend’ doesn’t work forever. Eventually – you must pay what you owe or default. If you don’t have it – don’t spend it. How much time and money is spent by our various governments dealing with financing? The interest (usury) payments required for continued deficit spending will eventually destroy the finances of any individual, corporation or government – see California and our Federal government.

Mr. Daniels sums up this very complex process.

‘How? “Well, prepare to be dazzled,” he says, with his trademark dry wit. “The answer is that we spent less money than we took in.”’

This also means that you make tough decisions and decide what your priorities are. Our government was not created to please everyone with handouts.

‘He’s earned high marks for his willingness to spar with his own party (this year’s budget went into special session after he refused to let the GOP-run Senate spend away the surplus), and for his fight against pork. With the help of a power called “allotment”—the right not to spend money appropriated by the legislature—Mr. Daniels trimmed $800 million from state government in fiscal 2009. Allotment had in the past “been used very sparingly,” says Mr. Daniels, smiling. “We don’t use it sparingly.”

If you want your government to be fiscally responsible – then run it like a business where revenue and expenses are constantly evaluated. You focus on your responsibilities as government (security, education, infrastructure, etc.), cut what is not needed and open up contracts for bid so that you receive the best market price for services. What you don’t do – is make expensive promises to win votes, give your ‘supporters’ contracts at higher prices, spend money this year so that you don’t lose it in next year’s budget, expand welfare programs with no idea how to pay for them, expect the gravy train to continue forever, etc. etc.

I read in the Atlanta Journal-Constitution last week where the Atlanta City Council voted for a large pension increase for city workers in 2001 and again in 2005 – with no idea how they were going to pay for the increases. I’m sure the city council won accolades at the time. What’s happening now? The large pension increases are now crushing the city budget. Big surprise. This is a typical scenario for most of our governments in the U.S. – make big, expensive promises and then pass the financial catastrophe to someone else – see California and our Federal government.

How are we going to pay for Social Security past 2010 when we will begin paying out more than we’re taking in? No one has any idea. Poor – short sighted – fiscal planning is a trademark of government – and the American people are finally tired of it.

What are Mr. Daniels priorities?

‘He axed $190 million renegotiating state contracts, bid out services, cut $250 million in unnecessary spending, and dropped 5,000 government positions. Austere as his budgets have been, they have directed more money to “priorities” like 800 new child-protection case workers, 250 more state troopers, and education spending.’

Amen brother. Priorities are child protection, security and education. How much was saved by renegotiating contracts and bidding out government services?

Again – you must set priorities – and then stick to them. You can’t do everything for everyone.

“You can invest in things, even with modest revenue growth, so long as you are willing to do a lot less of things that are a lot less important,” he says.

What about healthcare?

In 2006, Mr. Daniels gave all state employees the option of switching to health plans with health-savings accounts. A year later, he signed bipartisan legislation creating the Healthy Indiana Plan, which puts those same HSAs at the center of a plan covering 130,000 uninsured. Participants contribute to their account based on income; the state picks up the rest, up to $1,100 per adult, after which private insurance kicks in.

“It’s subsidized, yes,” says Mr. Daniels, but it’s “designed to make sure everybody, with a few exceptions, has skin in the game.” It also “doesn’t expose taxpayers to the catastrophe in Tennessee or Massachusetts of an entitlement program.” More than half of the state’s employees have switched to the HSA plan, and Healthy Indiana is fully subscribed.

Mr. Daniels has found the key that helps control healthcare costs – everyone has skin in the game. Personally, I signed up for an HSA plan with my company because I like to be able to control what I spend and I also like the ability to spend my money on preventive healthcare. If everyone is forced to manage what they spend or be penalized (individuals, governments, private insurance) – guess what happens? Everyone spends less.

In a system where people have no control over their healthcare choices and no idea what their healthcare actually costs – costs skyrocket.

I think we can summarize everything with the following quote.

“Spend as little as you can consistent with necessary public service, leave the rest in private hands, and you get more jobs in the end.” Indiana, with its business-friendly tax environment, has attracted $8 billion in foreign investment in the past two years.

The key word here is ‘necessary’. Government should only spend what is necessary. Most politicians today have no idea what this means. We’re about to find out how much this ignorance is going to cost us. It may just cost us the sovereignty of the United States.

So – from a financial standpoint – it’s easy to see why Mr. Daniels is popular. I believe the people of Indiana (and the rest of our nation) are finally realizing that ever increasing government spending is not a great long term plan. More and more people are voting for leaders who they consider to be fiscally responsible. We don’t want a bridge that will benefit 50 people – we want a government that can manage a budget. The days of pork and earmarks are coming to a close.

Not surprisingly – if you reduce taxes and therefore, reduce the size of government – you give people more freedom. Increase taxes (at the county, state & federal levels) and you reduce the amount of economic freedom of individuals and corporations (disposable income decreases). Ever increasing taxes means that instead of leaving the decision of how to spend money with individuals and corporations – a larger and larger percentage of spending is given to the government. Eventually, the government becomes so large that individuals and corporations can no longer support the government (see the fall of the Roman Empire). Government does not create wealth – it destroys it.

Less taxes = less government = more freedom.

More taxes = bigger government = less freedom.

Where is our Federal government headed? (see the fall of the Roman Empire)

He uses the example of smaller government. “Our principle goal is not to cut government spending for the sake of cutting government spending. . . . If the goal is ‘what can we do, or do more quickly, or stop doing, to make it more likely the next job comes to Indiana,’ well, of course that means squeezing tax dollars, it means keeping taxes down. I just don’t tend to present it as an ideological imperative, but rather the smart things to do if we are trying to be a more prosperous, free state.”

This is not higher mathematics.

I don’t agree with everything Mr. Daniels has done. I firmly believe that government should maintain our infrastructure. Privatizing toll roads may sound like a good idea to gain additional revenue for government – but I think it fails for a couple of reasons. What happens if the company running the toll road doesn’t keep up with repairs? What if they decide to increase toll fees by a large percentage? If this is a main highway with few alternative routes – you’ve got a problem.

Levying additional taxes on those considered wealthy is a bad idea. Eventually, it kills innovation and risk taking. Why work hard and take risks to gain a better life if it might be taken away someday? Again, on the surface it sounds good – which is why our current President advocates additional taxes on the wealthy to pay for his increased spending plans.

We should all keep in mind that although a state can, for a time, balance its budget – there is nothing Mr. Daniels or anyone else can do to overcome our monetary system. Eventually, it will consume us all.

To truly be a free people – we must remove the Federal Reserve – institute a sustainable monetary system that is not based on fiat currency – and significantly reduce taxes and the size of our government.

This is the way of freedom.

jg – October 1, 2009
________________________________
‘We Are the Initiators’

Wall St. Journal

By KIMBERLEY A. STRASSEL

Indianapolis

‘You’ll be the first to know,” laughs Mitch Daniels. But “don’t hang around the phone.”

The Indiana governor is answering a question he gets asked a lot these days. Will he run for president? He keeps saying no, but the collapse of such GOP notables as Sarah Palin and Mark Sanford has people looking north. Mr. Daniels is today something rare indeed: a popular Republican.

President Barack Obama eked out an upset in Indiana last year, but Mr. Daniels’s re-election was almost as notable. Amid a Democratic wave, the Republican beat his opponent by 18 percentage points and received more votes than anyone who had ever run in the state. He swept 79 of 92 counties, nearly 60% of independents and 25% of Democratic voters. His approval rating is near 70%.

At a time when the GOP has done so much wrong, strategists are asking what Mr. Daniels is doing right. Hoosiers would point to his tough fiscal discipline and his overhaul of state government. The governor summed up his approach in a Washington speech earlier this year, saying that a conservatism “that will be credible in the years ahead will be active, will be forward-looking, constructive, intimately connected with the lives of average citizens, and friendly.”

If this sounds a bit fuzzy and Midwestern, a colleague of Mr. Daniels puts it more concisely: “It’s the old formula: ideas and a big tent. Mitch’s success has been in aggressively pushing conservative reform, but not alienating folks along the way.” Whether Mr. Daniels’s particular brand of reform politics would work nationally—and whether he is the guy to do it—are big questions. But for now, he’s in the spotlight.

***

“We are the initiators, we are always in motion.”

“Activism works, and we have to drive the agenda.”

“There is nothing inconsistent about having a conservative outlook and being vigorous.”

These statements fly at me within 10 minutes of a two-hour interview in Mr. Daniels’s cavernous office. Sitting in his shirt sleeves, the governor looks easygoing but earnest. Mr. Daniels’s career has included working for Sen. Dick Lugar (R., Ind.), as an adviser to Ronald Reagan, a think-tank head (The Hudson Institute), a pharmaceutical executive, and budget director for George W. Bush. His fervor for cutting waste in that last post earned him a nickname from President Bush: The Blade.

The 60-year-old won in 2004 by promising to achieve one goal. “Every successful enterprise has a very clear strategic purpose. . . . So, we said, all right, the strategic purpose of our administration is to raise the net disposable income of Hoosiers,” which has fallen dramatically in recent decades. “Everything else is just a means to that end.”

Mr. Daniels’s first step toward that goal was cleaning up a state balance sheet that 16 years of Democratic rule had left in bad shape. He turned what was a $700 million hole into a $1 billion surplus, making Indiana one of a handful of states that today remain in the black.

How? “Well, prepared to be dazzled,” he says, with his trademark dry wit. “The answer is that we spent less money than we took in.”

This underplays the governor’s high-profile budget fights with a spendthrift legislature—fights that he won—which allowed him to halve the state’s rate of spending growth to 2.8% from 5.9% annually. That restraint has allowed Mr. Daniels to forgo the recent tax hikes of most states.

His approach works well in a state where, as Mr. Daniels puts it, “fiscal prudence never went out of style.” He’s earned high marks for his willingness to spar with his own party (this year’s budget went into special session after he refused to let the GOP-run Senate spend away the surplus), and for his fight against pork. With the help of a power called “allotment”—the right not to spend money appropriated by the legislature—Mr. Daniels trimmed $800 million from state government in fiscal 2009. Allotment had in the past “been used very sparingly,” says Mr. Daniels, smiling. “We don’t use it sparingly.”

He also hasn’t spared state government. He axed $190 million renegotiating state contracts, bid out services, cut $250 million in unnecessary spending, and dropped 5,000 government positions. Austere as his budgets have been, they have directed more money to “priorities” like 800 new child-protection case workers, 250 more state troopers, and education spending. This approach has allowed the governor to deflect Democratic gripes that he is gutting the state in a recession. “You can invest in things, even with modest revenue growth, so long as you are willing to do a lot less of things that are a lot less important,” he says.

Perhaps most appreciated was the governor’s overhaul of the Bureau of Motor Vehicles. It’s gone from one of the worst in the country—a place, he says, “where people would take a copy of ‘Crime and Punishment’”—to one of the best, with an “average visit time of seven minutes and 36 seconds.”

In 2006, Mr. Daniels gave all state employees the option of switching to health plans with health-savings accounts. A year later, he signed bipartisan legislation creating the Healthy Indiana Plan, which puts those same HSAs at the center of a plan covering 130,000 uninsured. Participants contribute to their account based on income; the state picks up the rest, up to $1,100 per adult, after which private insurance kicks in.

“It’s subsidized, yes,” says Mr. Daniels, but it’s “designed to make sure everybody, with a few exceptions, has skin in the game.” It also “doesn’t expose taxpayers to the catastrophe in Tennessee or Massachusetts of an entitlement program.” More than half of the state’s employees have switched to the HSA plan, and Healthy Indiana is fully subscribed.

All this, says Mr. Daniels, serves as a necessary “foundation” for the state to attract jobs and fulfill that goal of raising Hoosier income. “Spend as little as you can consistent with necessary public service, leave the rest in private hands, and you get more jobs in the end.” Indiana, with its business-friendly tax environment, has attracted $8 billion in foreign investment in the past two years.

Policy is one thing; selling it another. And Mr. Daniels knows how to sell. Relatively unknown in the state before his 2004 run, he toured all 92 counties—at least twice—in an RV. He bypassed hotels, staying in Hoosier homes. He debuted “Mitch TV,” a reality show that pictured, warts and all, the candidate meeting wary Indiana voters.

“We have, I think, tried to face a Republican reality, which is the stereotype that Republicans are disconnected from the lives of average people. It’s unfair. It’s untrue. A Democrat can be a blue-blood billionaire who wouldn’t recognize a working family if his limousine ran over one, but still, they benefit from the presumption that their hearts are in the right place, and we bear the opposite burden,” he says.

Mr. Daniels still stays overnight with locals and invites citizens to tour the state with him as he rides one of his two Harleys (“one is painted like the state flag, the other is just bad and black”).

He’s also studiously avoided ideological debate. Most would say that “what we’ve done was animated by conservative principles,” he says. “But I leave the labels out. I rarely mention party names, ours or theirs. I don’t use the i-word [ideology] or the c-word [conservative]. I don’t use the p-word [privatization]. Because I don’t think most people think in those categories.”

He uses the example of smaller government. “Our principle goal is not to cut government spending for the sake of cutting government spending. . . . If the goal is ‘what can we do, or do more quickly, or stop doing, to make it more likely the next job comes to Indiana,’ well, of course that means squeezing tax dollars, it means keeping taxes down. I just don’t tend to present it as an ideological imperative, but rather the smart things to do if we are trying to be a more prosperous, free state.”

He’s been just as circumspect on flashpoint social debates. “My record is, far as I know, unimpeachable. It’s just not what we’ve emphasized.”

Mr. Daniels’s tendency to say what’s on his mind is a double-edged sword. In a commencement speech this spring at Butler University, the governor lambasted his generation as “self-centered, self-absorbed, self-indulgent, and all too often just plain selfish.” Many admired his candor, but the words sparked an uproar.

Controversy over some of his big reforms also serves as a warning of how a bad rollout of even a good idea can spiral out of control. Mr. Daniels was dogged for years by anger over his early decision to privatize the Indiana toll road. Critics accused the state of selling off valuable assets, leaving Mr. Daniels to scramble to claim the deal provided necessary revenue for public works.

His reluctance to tout ideology has also left some conservatives skeptical of what he believes. The governor paid for his health plan with a cigarette-tax hike that offended some purists, though Mr. Daniels is unrepentant: “I’m from the Reagan school. You want less of something, tax it more.”

He’s been at more pains to explain his first-year proposal for a one-year surtax on wealthy Hoosiers to pay off the state’s debt. He was blocked by state GOP legislators. “As the Frenchman said, worse than a crime is a mistake,” he says with a rueful smile. He explains that he was “in a hurry” to get the fiscal situation under control.

“I always had the following chronology in mind: Stop the deficits. Pay back the debt. Build up a reserve. Cut taxes.” He nonetheless insists “I know my supply-side catechism,” and he argues that because the tax was one-time, designed to expire when the legislature was out of session, that it would not have had a long-term effect. “A one-time tax does not get figured into people’s investment decisions,” he says.

In the end, Indiana closed its budget hole with a tax amnesty program. And Mr. Daniels points out that last year the state enacted reform that cut property taxes an average of 30%. But were he ever to go national, he’d still have some reassuring to do.

He’s clearly thought a lot about the national scene, even if he continues to insist he won’t run. “I do sometimes get a little frustrated that my fellow Republicans miss opportunities,” and also that the national party “forfeited our birthright” on fiscal discipline.

But he’s uncertain that his approach is transferable. “This business of our advancing ideas . . . and not spending a lot of time arguing the philosophy—that’s a luxury you have in state or local office that’s harder if you are running for federal office where you are, appropriately, dragged into all the litmus tests and the yes-nos.”

He muses about whether the financial crisis has prepared the nation for a candidate willing to run on a “grown-up” discussion about the coming entitlement bomb. “We all know that it’s been a given in our politics that nobody wins elections railing about deficits. And maybe those things are as true as they’ve ever been,” he says. “But maybe there is a different dynamic. When people start saving at 6%. When there’s been a learning moment about spending too much and borrowing too much and people see Washington making that mistake . . . maybe it could be that a majority could be assembled for a fundamental restructuring.”

I ask him again why he wouldn’t want to be the guy to do it. His answer is sincere enough: “I’ve said all along that I’d like to leave a less cynical state. I really would. I really would like for people to say, whether they agreed or not, ‘there was a group of people who told us what was good for the state, who went and did it, or tried to do it, and who weren’t just on the make for another office.’”

The governor then launches into a list of all the things he’s still got to do in Indiana—education reform, more work to keep the budget from going red, more of this and more of that. Whether the nation ever hears from Mr. Daniels, Hoosiers can bet they will.

—Ms. Strassel writes the Journal’s Potomac Watch column.

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