busconews.com

by Brian Howey

WEST BADEN, Ind. – When it comes to federal budgets, deficits and debt, Mitch Daniels probably knows more about the inner workings of the U.S. colossus than any other breathing Hoosier.

So I wanted to know his take on the debt ceiling showdown that has embroiled Washington in a crisis atmosphere this week. At this writing, Congress and the Obama White House are creeping toward a haywire showdown.

Gov. Daniels cited President Obama’s “intransigence” as the biggest problem in the gathering meltdown. But the former White House budget director painted a dire scenario if the United States were to default on its obligations, as some members of his own Republican party are advocating.

The remarks were among his most detailed on the emerging crisis since he bowed out of the Republican presidential race in June. Many Republicans believe that Daniels would have been a leading voice in the nation’s budget deficits and debt crises that he described as the “red menace” when he addressed CPAC in February. He has written a book about the American fiscal house, due for release in September.

In February, Daniels told CPAC in Washington, “We cannot deter it; there is no countervailing danger we can pose. We cannot negotiate with it, any more than with an iceberg or a Great White. I refer, of course, to the debts our nation has amassed for itself over decades of indulgence. It is the new Red Menace, this time consisting of ink.”

Daniels spoke of a “morbidly obese” American government in need of “bariatric surgery.” 

Thursday morning, Daniels urged passage of House Speaker John Boehner's plan. “I hope the Indiana Congressional Delegation will support Speaker Boehner’s proposal,” he said. “The terrifying, nation-threatening debt levels caused by past and present overspending and future overpromising will not be solved by any one action or in any one year. But the Boehner plan begins in the right place, with real spending restraint and would show Americans and world markets that we do not intend to commit financial suicide. I hope Congress passes it and then begins work immediately on step two of our long march back to national solvency and economic prosperity.”

Two days before at a Statehouse news conference, he said, “Far and away the biggest problems are the intransigence of the President and his allies.” Asked by Howey Politics Indiana what his perspective on the crisis is, Daniels responded, “Everybody who honestly approaches this subject knows we have a huge problem. We cannot possibly generate the revenues to pay for it and go on borrowing 40 cents on every dollar like we’ve been doing. So the starting point, not the ending point, should be some meaningful step to reduce the blowout levels of spending we’re at today and start reducing the unaffordable commitments we’ve made for tomorrow. And so this elephant is going to have to be eaten one bite at a time. The first bite would be something that demonstrates to Americans, and by the way, the markets, that we don’t intend to spend and borrow our way over a cliff.”

Daniels added, “You’re never going to solve this problem in one great step. It’s going to take actually years of steps if you look at the arithmetic. Therefore, don’t let the perfect be enemy of the good. If you can get, as they’ve been close to with the President, if they can get a meaningful first step on spending – and of course you have to raise the debt ceiling at some point – they ought to do that and the next morning start discussing step two.”

Asked if allowing a default would be a good thing, as U.S. Rep. Todd Rokita, Indiana Treasurer Richard Mourdock, and U.S. Rep. Michele Bachmann - who is seeking the GOP presidential nomination - have all advocated, Daniels said, “I disagree with that. Their intentions are good but I don’t think they’ve thought through the potential consequences to the country.”

Mourdock is challenging U.S. Sen. Dick Lugar in the Republican primary. On May 16, Mourdock said on his campaign website, “Negotiating a deal across the political aisle to simply cut spending at any level is a folly. Numerous times in the past such deals were agreed to, but once the debt limit was raised there were no serious efforts at reducing spending. If it had worked in the past, we wouldn’t be in this current mess. Many in government again want to raise the limit on its credit card but we must say no!”

And what would those consequences be? Daniels, who served as OMB director from 2001 to 2003 under President George W. Bush, said, “A giant leap in the interest rate. Probably an end to investment in the country, which probably leads to more lost jobs. You’d probably have a big run up of commodity prices like gasoline because the world would assume that instead of doing what’s right, starting to limit our spending, we’re just going to print money. The first thing you’d see is $5 or $6 (a gallon) gas. Followed by a big increase in the interest rate for the money you’ve borrowed.”

Daniels did give some cover for Republican freshmen, noting that they weren’t there to vote for the spending that got the U.S. in this dilemma.

Daniels’ remarks will likely bring a wistful response from Hoosier Republicans and others who wanted him to seek the GOP presidential nomination in 2012. The events of July – with a deadlocked showdown in Washington between President Obama and both congressional Republicans and Democrats – would have played into Daniels’ wheelhouse, where he would have presented a message of tough love, and a roadmap to the future that would feature arduous fiscal discipline and entitlement reform.

(The columnist publishes at www.howeypolitics.com. Contact Howey at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .)