Daniels reforms stand test of time
INDIANAPOLIS — The mammoth NFL gridiron sprawling out across this city's southern flank has long been called "the house that Peyton Manning built," a tribute to the Hall of Fame Colts quarterback. But it was a man who stood nearly a foot shorter and, perhaps, 75 pounds lighter, who really was responsible for building Lucas Oil Stadium.
Gov. Mitch Daniels had campaigned on a 70-plus point agenda when he defeated Gov. Joe Kernan in 2004. By the time he took office, the capital city was at loggerheads with the Colts, the NFL, and the General Assembly over building a new stadium. There was no funding mechanism in place. The team, it appeared, would be headed to Los Angeles.
Mayor Bart Peterson and his team approached the new governor. "They came to see me, asking if could we pull it off, could we do it," Daniels told Howey Politics Indiana in a February interview. "Having looked at it, we thought it was in the broad public interest. It's always important to point out to people that 90-plus percent of the events were not Colts games. We wouldn't have built a stadium just for the football team, much as I love the Colts. But it was the convention business and the almost year-round revenue that made it a real good idea."
The Daniels team focused at first on a 2% restaurant tax, but the city already had a 1% tax and a 2% difference with its neighboring counties was deemed unacceptable. "So that's why we decided to talk to the surrounding counties," Daniels said. "We finally worked out a proposal where after it was paid and we knew this would be more than enough to cover it, they would share in the overage."
Two audacious strategies emerged. The first was to convene county officials from the doughnut counties to make a pitch from out of left field. The second would be to use the new governor's nascent political capital to make the sale, sans Peterson and General Assembly leaders.
"In one of the most interesting moments in the entire eight years, I invited the county-elected officials, commissioners, county counselors from the doughnut to a confidential meeting at the Governor's Residence," Daniels said.
Gov. Eric Holcomb, who was Daniels’ deputy chief of staff at the time, told HPI in January, "We were there. We got criticized for breaking the Open Door Law because we had every county commissioner there and politely pointed out every single commissioner was a Republican."
Daniels explained, "It happened that they were all Republicans at that time. That was crucial, because then the meeting could be held in confidence and not in public. This thing would never have happened; you'd have no stadium, no convention expansion and no Colts, probably, if that meeting had been held out in the open. Anyway, we had that meeting. We showed them a lot of data, how many people from their counties worked downtown, worked in hospitality, how many hotel rooms in their county filled up during conventions or even games. And then we said, 'Go to separate corners here, and tell us whether you can help us with this.'
"All but one county did," Daniels explained.
That set the stage for the rookie governor to make the case for a tax increase in the doughnut counties to pay for a downtown Indianapolis NFL stadium. Daniels showed up at a Golden Corral in Shelbyville, the Hamilton County Council chambers, as well as stops in Greenfield, Lebanon and the three other counties.
In Lebanon, Daniels politely accepted a question from a Boone County man wearing a green “My Man Bitch” tee shirt and earnestly answered. It was the kind of moment that would have made other governor handlers cringe and steadfastly avoid. Gov. Atlas just shrugged.
The Greenfield Daily Reporter’s headline read “Don’t force-feed food tax, citizens warn governor,” and its lead story began “A vocal group of Hancock County residents told Gov. Mitch Daniels Monday they object to a 1% food and beverage tax being shoved down their throats.”
Appearing before a standing-room-only crowd in the Hamilton County Council chambers (complete with the motto in gold letters: “That government is best that governs least”) after he made his case, the capacity throng rose to give him a standing ovation. The anti-stadium crowd was, in this writer’s estimation, about a quarter. In Shelbyville, when a man asked the 80 people gathered whether they supported the tax and stadium, the result was virtually unanimous against it.
After Daniels appeared in Noblesville, Hamilton County Council President John Hiatt said he had initial misgivings about the proposal, saying feedback from the public had been 50-50. "I was on the fence before tonight, but I'll probably vote for it," he told the Noblesville Daily Times. Commissioner Christine Altman agreed. "He opened it up to all the questions, he addressed all the issues, and I was just very impressed," she said.
When it was all said and done, all but Shelby County approved of the plan. Lucas Oil Stadium was built (with the state in control), with the Colts (and Peyton Manning) staying put. "The point is, after all the consternation, on the back side of that we had a great venue, a new convention center, all that new business and we had a Super Bowl, and we kept the Colts," Daniels said. "And, believe me, without that process, that doesn't happen. I've told people over the years, here's one of the untold stories."
In the June 9, 2005, edition of HPI, this was the observation: "The people loved this governor coming to their hometowns to sell and defend something that would have been unfathomable in times gone by. Many of them didn’t agree with him on the tax hikes. But few were rolling their eyes or spewing under their breath as they left. The press found this to be a spectacle, a Republican governor going to seven base counties selling tax hikes he agreed to after legislative Republicans cut off the options. There is no doubt the governor has some real gonads. But it was striking that legislative leaders who brought this spectacle on were missing. It wasn’t too long ago that legislative leaders would have leaped at the chance of sharing the limelight with their governor. Perhaps they thought the doughnut kitchen during Gov. Daniels’ salad days would be too damn hot."
Daniels always had a savvy grip on history, and he reached for it often, whether it was Lincoln’s “mystic cords of memory” or China’s Chou En-Lai being asked if the French Revolution was a success. “Too soon to tell,” the Communist leader said.
It's been a decade since Daniels exited the Statehouse. As we did in 2006 with the legacy of Gov. Evan Bayh, in 2013 with Gov. Frank O'Bannon and last week with Gov. Joe Kernan, it's time to reassess the 49th governor's legacy.
In the Nov. 27, 2012, edition of HPI, it was observed: “By definition, the word ‘transformation’ is a thorough or dramatic change in form or appearance. In a political or policy context, the word is often used in association with war, revolution or economic crisis. And in the Hoosier experience, the word clashes with 196 years of stereotype: We are a conservative people, cautious, suspicious, resistant to change. Interrupting this history in key moments has been the transformational governor, almost always thrust into that role by the churning events of the day. As Hoosiers at the turn of this century, we have witnessed such a governor in Mitch Daniels Jr. Whether you regard him as a hero or adversary, few Hoosiers will dispute the notion that his eight years at the Indiana Statehouse have been impactful and have altered the trajectory of the state at a time when just about everything is changing on a global scale.”
HPI counts nine other Hoosier governors that fit the description of "transformational." These include Govs. James Whitcomb and Joseph Wright in the middle of Indiana’s first century, with the bankruptcies of public works projects gone awry, prompting a new Constitution in 1851; the Civil War governor, Oliver P. Morton; Gov. James Putnam, who commenced the state's highway system in 1917; Gov. Henry G. Leslie, who in 1928 had to clean up after the scandalous Ku Klux Klan takeover; and two governors – Thomas A. Marshall in 1909 and Paul McNutt in 1933 – who attempted to come to terms with the sprawl of bureaucracy over decades and challenged the status quo with a reform agenda. Marshall would go on to become vice president; McNutt would head the World War II era War Manpower Commission for President Franklin D. Roosevelt. In the television age, Govs. Doc Bowen (property tax reform) and Robert Orr (education reform) stand the test of time.
A frenetic agenda
Anyone doubting this transformation would be dazed by the scope of the agenda of Daniels from the onset. “The wolf is not at the door,” Daniels intoned in his 2005 State of the State address eight days after taking office. “He is inside the cabin.” And he resorted to legendary CBS News pioneer Edward R. Murrow to help make his case: “Difficulty is the one excuse history never accepts.”
On his first day in office in 2005, Daniels ended collective bargaining rights for state employees by executive order. The governor was prepared to write checks on his political capital to install daylight saving time (which passed the Indiana House by a single vote), transform the Bureau of Motor Vehicles (BMV), spread charter schools, reorganize the Commerce Department into what would become the Indiana Economic Development Corporation (IEDC), expand full-day kindergarten, and boost classroom spending along with a 120-day moratorium on the issuance of any new school bonds.
Daniels would advise other leaders at Mackinac: “Do it early, do it fast, do it swiftly, and do it decisively. In the wisdom of the old country song, ‘If I’d shot you when I should’ve I’d be out of jail by now.’”
By March 2006, the IndyStar's analysis blared an above-the-fold Page 1 headline: "Too Much, Too Fast? Many Hoosiers don't like Daniels’ rush to make changes, The Star finds."
His lease of the Indiana Toll Road that brought in $3.8 billion (and another $1 billion when it was renegotiated several years later) as well as his advocacy of daylight saving time, had pushed his approval rating below 40%. Two years later, Hoosier voters weighed in: He was reelected with 58% of the vote.
Holcomb, Goode and Johnston
In January HPI sat down with Holcomb; Earl Goode, who has served a dozen years as chief of staff to both the current governor and Daniels; and OMB Director Cris Johnston in the governor’s Statehouse office to get their take on the legacy of the Daniels administration.
"He changed the culture and we began to not just think big but act big," Holcomb said. "He led the charge, but the culture of always trying to improve every single day, always competing, always putting the customer first – the customer being the citizen – always trying to build a record not to run on, but to be proud of. And I think that's carried through and on to this very day. Gov. Daniels was so focused on leaning forward."
Goode explained, "I would use two words: Change and pride. It took almost all eight years to begin to introduce change. But there was a lot of resistance, as you recall. Lots of resistance. In fact, I think his popularity numbers were below 30 for a little while. And the other was pride. I think certainly those of us that were part of that felt a lot of pride."
"The things that the governor talked about: daylight saving time, the toll-road lease and so forth, are well known by most people that followed government," Goode explained. "But to me, something's very ... very rarely talked about was the introduction ... good government service. When we got here, most government services were provided through manual processes."
Johnston, who headed Daniels’ government efficiency efforts, added that every state department had its own IT department. There were 10,000 state vehicles not in use, along with 22 aircraft. "He was relentless, saying, 'We’re not slowing down.' Every agenda included how we were going to sustain it," Johnston said, adding that at one point Daniels admonished his staff: "Hiring a consultant is not a victory."
"I had been gone from government and came back and I never heard anybody talk the way he did because he used really descriptive phrases and language," Johnston continued. "When he talked about paying taxes, he talked of 'coercion.' He'd say, ‘We coerced money out of people’s pockets.’ On the spending side, he would say, ‘We have a solemn duty to spend it wisely.’ Whoever uses phrases like solemn duty? It got people’s attention. All the agency heads when they heard phrases like that: it made them think differently. I remember a time when we were getting tired of doing performance measures and our team was down-in-the-dumps tired, and he said, 'We’ll never get a chance to do the big stuff if they don’t trust us with the small stuff.’ It just sort of lit the fire again."
And he was a leader who listened. Daniels was planning to make an IEDC mission to Japan when torrential rains flooded the state. His communications director Jane Jankowski told him, “Governor, you will regret for the rest of your time as governor if you leave this state right now.” Goode recalled, "And to his credit, he was mad, but he listened and course-corrected. He turned out to be the hero that week. He was every place with Gen. Umbarger, all over the state. As involved as he was, he also trusted people. You had to earn his trust, but once he trusted you, he let you do your thing. That’s important for a leader."
Here are how some of the major issues under Daniels stack up after a decade.
The $3.8 billion toll-road lease was a masterstroke, helping the state forge I-69 from Indianapolis to Evansville (it's expected to be completed in 2025), the U.S. 31 freeway from Indy to South Bend, and a new East End Ohio River bridge between Jeffersonville and Louisville. When the original lessors went bankrupt, Holcomb renegotiated the deal for another $1 billion in 2018. Of that extra billion, $600 million would go toward speeding up the completion of I-69; $190 million would go to projects on U.S. Routes 20, 30 and 31; $20 million would go toward luring new direct flight routes to the state; $90 million to improve or build hiking and biking trails, and $100 million to increase rural broadband access.
Holcomb said in January, "The bigger point of 'Major Moves' was a lot of people said, 'You can't do that. It's never been done that way.' It took a whole difference and independence to be able to say, 'No, what's really going to be best for the consumer, is the motorist putting the safety efficiency modernization and so not beholden to any relic of the past that you're not necessarily proud of in terms of your heritage. Triple-A credit ratings might not last. Education reform may or may not last. But those roads and bridges will be there for 100 years. Look at how we’re building the East End Bridge over the Ohio (River). It’s going to get built faster and cheaper and it will be built on someone else’s capital because there’s not enough gas tax money right now."
Daniels said in June, "Who spent more time stuck in a car on 31 than Pat Bauer? There are so many things we did, and honest people can differ, I suppose, but if people had any doubt about it what a success that is, everybody outside of Indiana knows; it won every award. It was found money. Not a penny of interest, not a penny of spending, and not a penny of taxes to build billions of dollars of infrastructure and get a much better toll road out of it, by the way. A great example, I hear from them quite often; you know River Ridge down in Jeffersonville? It’s booming. People down there said for years that if ever we could get a bridge built so the through traffic could go around, so many people would like to put their business right there. That’s probably as clear an example as I can give you."
Johnston added, "The Bond Buyer is a newsletter that comes out daily for the public finance industry and there was a conference on infrastructure and they call it asset recycling. Right? Taking the proceeds of an asset and not using it for other purposes or just supporting your budget, but putting it back into infrastructure. And at this conference, they asked about the different P3 transactions and they commented that if there was a gold standard, it was an Indiana model because it was put back into infrastructure and then it also had the ability to recycle again as the governor said, with the billion dollars in 2018."
After Republicans regained the House majority in 2010 (after four years), Daniels pushed for sprawling reforms in 2011. Prior to that, he said, "We tried to move money from capital (accounts) into the classroom. We got some of that done. We took the Taj Mahal architecture that we managed to stop. I mentioned social promotion; you mentioned full-day kindergarten. The bill protected teachers who were keeping order in the classroom so they couldn’t be sued. We tried to do something every year to strengthen education. When you get to ’11, there were things that we had not been able to do that we then could. You may want to check this, but (Speaker) Todd Huston told me recently that between 20 and 25% of all the kids in Indiana are in some sort of choice environment. That could be changing from one public school to another."
Daniels moved to change the school funding formula. "We finally hit on what was really a simpler system, which was to pick up certain costs entirely," he said in a Howey Politics Indiana Interview last June. "Like we picked up child protection and brought it to the state level. It was a big cost on local property taxes that is no longer there. The other big one was K-12 operating. The effect was once the localities were no longer taxing for operating, they had no basis to charge a kid tuition for coming across the (district) line. It depopulated some – I’m not picking on them but the Anderson school system for example – and suddenly Lapel and Pendleton and places like that were stronger. I was just as happy with that, what I call public school choice, as I was about opening up charter school opportunities as the vouchers. It’s all about just giving people that option. I believe competition, as many have always claimed, improved the quality of public schools over time. They worked to attract and keep students."
On the expansion of full-day kindergarten, Daniels said, "I hope it was positive. It was certainly the right thing to do. We were happy to do it. As you remember so well, half our time we had a divided legislature. I was always looking for things we could get an agreement across the aisle and that was one. The Democrats had been more committed to it than the Republicans historically, so I was really pleased just from that standpoint it had to be positive. I don’t know if we can measure it. Maybe somebody has. There is just no doubt in my mind that was an important step to take."
Daniels missed out on one top priority, moving the elected superintendent of public instruction to a gubernatorial appointment. "I think the biggest single failure of our time – so ironic – was not getting the superintendent of public instruction to be an appointed job," Daniels said in June. "It appeared in the party platform of both parties in 2004. It was just a good government thing. Public education being over half the budget, it just makes sense that an elected governor is aligned with whoever is implementing it. It’s the one thing that both political parties agreed on that didn’t get done. In all honesty, (Senate President Pro Tem) Bob Garton didn’t want to do it, he was protecting (Supt.) Suellen (Reed), maybe. We were doing so much that first year or two. They said, 'We’ll do it next time.' Then it was an election year. There was always a reason and we didn’t get it done." Holcomb finally signed legislation and appointed Katie Jenner Ph.D. to the new position of education secretary.
The week before HPI's interview with Daniels at his Purdue Hovde Hall office, new data showed that college enrollment had fallen from 64% of eligible students to 53%. His letter to the Purdue Community last winter asked “where are all the men?”
As Ball State economist and HPI columnist Michael Hicks Ph.D. observed: "The iconic achievement of the Daniels years was school reform. The combination of limited private school vouchers, expanded authority to start charter schools and sending funding with student transfers was a huge policy achievement. It did exactly what school choice reformers wanted – it forced local public schools to compete for students on quality. Schools responded so effectively that today a higher share of Hoosier students attend local public schools than they did before the Daniels reforms. When Daniels left office, nearly 64% of high school students pursued post-secondary education. Today, that number is 53%, among the very worst in the nation. All of this decline has come in attendance at Indiana’s public universities.”
"The decline didn’t start with COVID. It’s a 10-to-12-year decline and Indiana has not been immune to it," Daniels said. "The number of students going to college has gone down; the percentage of students choosing college has gone down. There’s been a big drop in the last couple of years. COVID accelerated a lot of other things and accelerated this. I think the combination of cost alone has deterred people. All of those things have come together but I think we were all stunned by the degree of the drop. It was one thing to trickle down from the high 60s, but then to drop 8% all at once."
An initial goal of the Daniels administration had been to raise personal income. Is Daniels satisfied with how that turned out? "Well, no. I think it’s been misrepresented in a few ways," he said at Hovde Hall. "We got more people working, but these are per capita figures. Sometimes they don’t adjust for cost of living, which is so much lower here. Your dollar goes a lot farther here than a lot of other places. So many other places are pricing themselves out of the market, so to speak. Nobody thought that was a 10-year or even 20-year project. A two-earner family, when you’re at 2% unemployment, you’ve got a lot of those. Measured against our cost of living in a state where, at least for the moment, darn near everybody who wants to work can, we’re not doing bad. All those speeches I gave about time’s on the side of the Midwest, I think you’re starting to see the evidence. It took longer than I thought."
Property tax caps
Is Daniels satisfied with the impact of his property tax caps? "Yes, the last months, the three most attractive places to live are in Indiana. The caps and low property taxes are the biggest single part of that," Daniels told HPI. He called the caps the "fairest" way to control costs, noting that about half of the referendums pass. "Then we constitutionalized it," he said.
Daniels said the most enduring part of his legacy occurred with revamping the Bureau of Motor Vehicles. "The macro point here is that I've always said we can and should always have debates about how big government should be; what it should do or not do," he explained. "Having decided that, whatever it's going to do, it's got to do it well. You owe to the people and the taxpayers who are paying the money. It's always important to have the public's confidence. We'd like the public to believe it's being administered by people really trying hard to do a good job and give them value for their money. So it's why we did what we did with Department of Revenue and BMV because they touch so many people."
Daniels has a soft spot in his heart for his first BMV Commissioner Joel Silverman, the former CEO of Galyan's Sporting Goods. "We've had a couple of people who were great business people and we caught them in between (jobs) and said, 'Hey, give a little time to your state.' So Joel agreed. Why Joel? When we look at the BMV, I remember someone saying, 'What you have here is 180 Dairy Queens.' It's a lot of walk-in traffic, a lot of cash transactions, it's a retail business and they're making a huge mess of it. That's the business he came from. The thing about Joel was, he was naive. He'd say, 'Of course, you've gotta do these things. You've got to close these branches because they're losing money. Fix up the other ones. If you run Galyan's, that's exactly what you do and it works.'"
Holcomb remembers getting a call "in real time" when Silverman showed up in Rockport for a hearing to close a BMV branch. "Because as commissioner you have to be present to close a branch at the town meeting, due to a quirk in the law," Holcomb recalled. "Joel goes down there and relishes breaking eggs for omelets, and it’s a packed house. Someone sends me this picture of a BMV branch having a meeting and it’s packed and it’s the size of this room. And Joel is sitting there listening to an hour of ranting. Someone who’s down there calls me. 'You’re not going to believe this.'
“Well, there’s a little old lady who says, 'This branch has been here forever.' And Joel says, 'Ma’am, you don’t have to go to the branch to do what you just described. You can do that at home on your computer.' And she says, 'Mr. Commissioner, I don’t have a computer.' And he goes, 'Can you lick a stamp?”'
FSSA and IBM
This was the sequence where a policy disaster could have turned into a political one. IBM had been retained to modernize the Family Social Services Administration in 2006. By October, the Daniels administration terminated the $1.34 billion contract after reports revealed that people with no computer access or skills were falling through the cracks, with sometimes lethal results. HPI reported on Oct. 21, 2009: “Every presidential and gubernatorial administration finds itself in one of those dark moments when the world crowds in, the policy and political prospects dim and enemies seem to abound. For Gov. Mitch Daniels, that moment came last week when he decided to pull the plug on the $1.34 billion welfare privatization deal."
“Among the most vocal were those in the Evansville area where Democrat State Reps. Dennis Avery and Gail Riecken, Republican Rep. Suzanne Crouch and Sen. Vanetta Becker were either critical or wrote legislation seeking to stop further roll-out of the IBM system.”
In the Oct. 21, 2009, edition, we reported: “A gargantuan amount of work awaits to develop the 'hybrid' system that restores the 'face to face' contact and keeps the problems with fraud in check. As one administration source told HPI, “The public appreciates the governor trying to reform and deliver a better and more modernized service. When the company the state contracted with failed to make the agreed-upon changes, they were relieved of their duty. That was leadership, not failure on the governor’s part.”
Goode told HPI in January, "There were two reasons I came here. (Daniels) asked me to coordinate the transition of the toll road. The other was to be his representative on Mitch Roob’s team that was putting together that whole (FSSA) plan. The initial plan that the agency called for was basically completely automated and to use not-for-profits in the counties if you needed assistance. Part of the discussion with the governor was that we’re not walking away without employees, so some of the changes we made were two basic rules: The system as it goes in has to be assessed based on how the Hoosier or citizen wishes, not how we wanted it. If you wanted it online, and it was still pretty early for online stuff, and there had to be at least two employees per county. So it got off to a pretty good start until it didn’t."
Goode added, "So after he met with the chairman of IBM once and it wasn’t getting attention, then after two months, the secretary of FSSA and I were authorized to call the chairman and vice chairman in and told them basically they were fired. That’s when Michael Gargano took over. What the role with FSSA employees through IBM, using the same subcontractors, it was a year when we were pretty much back on track. It’s saved the state a lot of money and I don’t believe we’ve had a complaint about customer service." In essence, the "hybrid" plan developed out of that policy disaster remains today.
Johnston observed in January, "Nor did he ever back off ..." with Holcomb finishing, "of the mission." Goode added, "The real lesson is Mitch listened."
Asked in October 2009 if the IBM contract was his worst problem in five years of office, Daniels responded, “No. I’ve got a long list. I haven’t tried to rate them. The easiest thing to do in a situation like this is throw your hands up and say, ‘Well, that’s as good as it can be.’ This has been a daunting thing all along, and it still is, of course. Our first attempt didn’t get us there, but we did get some positives out of it. We’ll just have to take them and reverse some of the mistakes and move forward. I’ve told you for five years that’s how we’re going to operate, and this is a classic case.”
AAA bond rating
S&P in 2008 granted the state its first AAA bond rating. The other rating agencies – Fitch and Moody’s – came on board in 2010. Daniels explained, "It saves the state and its subdivisions a lot of money. You can borrow less expensively. Second, it was an incredible merit badge. All the work it took to get there, three or four years, had succeeded because the people who give those ratings give them in a hard-eyed way and if they say you're AAA, there's no funny business about it. There's no way to trick 'em. We really had moved the state from a bankrupt position to the strongest one you can attain."
During the Daniels administration, more than 50,000 acres of Indiana land were moved to protected status. Daniels told HPI in February, "It was always something I was interested in doing. We have a lot of natural beauty here. When I invited all the conservation people in, we had already done a couple of big, big projects. Goose Pond was the biggest one in state history by a factor of like two, and then Muscatatuck Bottoms was like three Goose Ponds, and the Wabash River Corridor, which is still being finished, was five times as much. They’re the biggest ones in state history."
"We were trying to figure out how to celebrate the bicentennial; I said it’s got to be a conservation project," Daniels continued. "That fits the occasion and fits the historic beauty. We brought in a lot of those good folks and I had worked with them a lot on some of these other projects. We looked around and found the first $20 million. I said, 'We’re gonna put it out there as a challenge. We want to do at least one project in every single county for our bicentennial,' and they were just astonished. I think that worked out great. We were always looking for things our loyal opposition could be excited about. It was common ground with folks who did not agree with much of what we were doing. But mainly I thought it was well worth doing. I was pretty sure we could be effective at it. Some things in government you don’t know if you’re making any difference or not. Putting all that money into education, for instance, what did we get? But here I was sure what we could get. Once land is protected, it’s protected."
Daniels served for eight years, four of which Republicans were in the House minority. He won reelection in 2008 with 58% of the vote, but failed to bring the House majority with him. Working with Speaker Brian Bosma and the House Republican Campaign Committee in 2010, the GOP returned to power and has yet to look back. Its House majority grew in 2012 and has been in supermajority status ever since 2014, which is an unprecedented concentration of power.
During the two Daniels statewide campaigns, he never ran a negative TV or radio ad. He defeated an incumbent governor. Holcomb, who managed the Daniels reelection campaign in 2008, said in January, "That’s why it’s important to have a plan which is doing right by citizens, taxpayers and fill in the blank. You really have to dissect why we lost the majority because I was there. You had to look at the specific races, who was running, what kind of campaign they waged. Today, we’re benefiting from the momentum that good policy makes good politics. Never lose sight of that; always be tethered to that. If you start to believe what you say then that is thin ice, and so I think going back, I can remember recruiting people who were not drones, but like-minded, who wanted to be change-agents, who didn’t want to take the foot off the gas."
During a 2012 exit interview with Statehouse reporters, Tom LoBianco asked Daniels what his greatest accomplishment was. "This is the who’s your favorite daughter question," Daniels responded. "I think the best way I can answer this is to say there are several: Opening doors to building a better business climate, because that was always the central goal. If it does have staying power, it will lead to all the other good things. It will lead to jobs, therefore to revenues to do the things governments should do. It will underpin the success of the state. If it lasts, establishing Indiana as more of a leadership state at least in certain areas, I hope I’ve changed the culture inside state government to excellence, efficiency and good service, and outside, change the culture and expectations of higher expectations. An expectation of innovation.”
“We ran on a very explicit and very detailed agenda. We did most of it.” Daniels said in 2012. “I was in a hurry. We wanted to get the budget balanced and pay back the debts. We wanted to put some money in the bank. And then we wanted to start reducing taxes. When I look back, I have this tattered little report card we kept for ourselves. I may have one of the last ones around. If you look at those 70-odd things in 2005, there aren’t very many in the ‘Did Not Succeed’ column. We did have a more activist approach, I think it’s fair to say, than our recent predecessors. It’s a ‘to-each-his-own’ situation. I felt, and it’s the reason I ran in the first place, that Indiana was drifting and slipping and we needed to get in motion against a lot of big problems. As a matter of personal approach, every year, and in-between, we had new ideas, we had to define each idea, and present the state and the legislature where they were needed action items. We felt responsible to push in directions we felt were in the public interest. There was a lot to do and we were not a very innovative state. There was a time for a lot of action, or so we thought.”
Daniels liked to tell the story of a tornado plowing through a Hoosier community, reducing it to "looking like an ant farm." Once on the ground, Daniels saw a FEMA worker notice that amidst the destruction, one house stood unblemished. The FEMA guy talked of how Mother Nature could be so arbitrary, leveling entire neighborhoods while leaving this one house unscathed. To which an Amish man replied, “T’weren’t there three days ago.”
A decade ago, HPI's analysis was this: The Daniels governorship can be viewed as “transformative” because of its audacious scope and conspicuous use of political capital. He and his administration were in a hurry to do big, unexpected things. But it will take a decade or more to determine how effective the education and transportation reforms were.
Here we are and the assessment remains the same.
Brian Howey is managing editor of Howey Politics Indiana/State Affairs. Find Howey on Facebook and Twitter @hwypol.
This story was originally published March 30, 2023 at Howey Politics Indiana/State Affairs.
Read this story for free.Create Account
Read this story for free
Treasurer Elliott explains his plans to keep the new ESG policy from becoming a ‘witch hunt’
He calls himself the “nerdy cowboy” — wearing boots with his suit and winning his election, in part, by driving his truck to far, less-populated corners of the state. State treasurer Daniel Elliott, a farm owner from Morgan County, took over the Indiana Treasurer of State office at the start of the year, but he’s …
Plans to turn junkyards and landfills into massive park take shape in southern Indiana
CLARKSVILLE — What once was undisturbed wildlife along the shore of Silver Creek now contains a trail of weedy gravel leading to a discarded mobile home. It’s the only thing left from a junkyard stationed among this patch of forested landscape. “We call it the graveyard,” Vern Eswine, communications director of River Heritage Conservancy, said on …
The debt ceiling, a lack of integrity and the possible fallout
In the coming days, the United States again confronts our statutory debt ceiling. This is a 1917 law (increased every year or so) establishing a cap on federal government debt. The law itself runs up against the 14th Amendment to the Constitution, which was intended to reassure bondholders that we pay our Civil War debts. That means the debt ceiling may be unconstitutional, giving the Biden administration the option of simply printing money to cover the debt.
The debt ceiling law is politically convenient because it offers an opportunity for members of both parties to engage in a bit of political theater. It is important to remain focused on the real issue of debt rather than the political shenanigans. I expect some sort of compromise, but that is more hope than actual analysis.
Neither the Republicans nor Democrats have performed satisfactorily on this ballooning public debt. The GOP showed zero concern about debt when a Republican president was in office. Not a single Hoosier Senator or member of Congress voted against the Trump administration’s Tax Cut and Jobs Act (TCJA) or the CARES Act. These bills fall in first and third place in terms of recent contributions to the debt.
The Democrats, who voted almost unanimously against the TCJA, voted unanimously for the American Rescue Plan, which came in second place for debt loading. There’s not a clean hand in Congress on the current debt. Insofar as I can tell, the sole Republican speaking honestly about the GOP’s profligate history is Mike Pence.
As I wrote at the time, each of these large spending bills had some merits, and there remain reasonable arguments for each. The problem is that so many now in office want to remake themselves as thoughtful budget hawks, but when it mattered, they were nothing of the sort. It is the lack of integrity that highlights the real problem. No one can be honest about the root of the problem.
In 1946, right after winning World War II, our debt-to-GDP ratio stood at 119%. Today it sits at 121%, down from 127% two years ago. But, there is no peace dividend. Our spending problems are not about our military spending, which is today at near historical lows as a share of GDP.
The big-budget items driving our deficit are spending for Medicaid, Medicare, Social Security, and federal government and military retirements. And yes, I know Social Security and Medicare are supposed to be separate budget items. They are not.
If we cut all foreign aid (including Ukraine defense), housing subsidies, environmental remediation, research, discretionary education spending, immigrants, parks, and clean air or water, we wouldn’t make a dent in our debt. Altogether, these spending items wouldn’t even cover the interest payments on our debt.
In order to reduce our debt in the coming decades, we are going to have to do two very unpopular things: raise taxes and cut spending. We are going to have to do more of both than almost anyone really imagines.
On the revenue side, we are going to have to sunset the TCJA and raise marginal income tax rates on middle- and high-income households. By middle, I mean everyone who pays an income tax. Also, we probably must extend the Social Security taxes (FICA) across all earned income types.
On the spending side, we are going to have to extend retirement age, probably to 70 years or so for younger workers. We won’t have to means-test benefits, because we will have higher taxes on more affluent households. But, we will reduce retirement benefits for younger workers, and end the practice of increasing Social Security for older adults who work. We are also going to have to reduce the rate of inflation adjustments for Social Security recipients.
If all of that sounds distasteful to you, too bad. What I have just outlined is probably the easiest resolution to our current debt problem. But, what if we choose a different path?
We could cut defense spending. I’d vote to eliminate the entire Marine Corps. If we did that, it would only take another 117 years to eliminate today’s debt, though that wouldn’t come close to balancing the current budget. So, we’ll have to cut something else. If we cut our foreign aid, we could pay off the current debt, not counting interest, in 600 years. Alternatively, we could reduce overall Social Security costs by 10%, through later eligibility, and extend FICA taxes to a further 10% of earnings, and retire the debt in 60 years.
It is probably wise to ignore the political talking points about our debt and focus on the arithmetic. Still, many might wonder what if we ignore all this and blow off our debts, and default. After all, many Americans declare bankruptcy. Well, that step would be somewhere between a crisis and a full-blown economic catastrophe.
The United States borrows money like every other government does. We have treasury bills notes, bonds, inflation-indexed securities, floating rate notes, domestic series bonds and the like. Altogether this is about $31.5 trillion in borrowing. About 13 cents on every federal tax dollar collected goes to paying interest on these debts (or about twice the annual cost of the entire Marine Corps).
The reason the U.S. can borrow all this money is simply that everyone believes we will pay it back. Our creditworthiness ensures a reasonably low rate of borrowing and keeps our currency as the world’s reserve currency. So what happens if we default?
Well, there will be a flight away from U.S. securities. This will lead to financial markets devaluing our bonds, leading to higher borrowing rates on futures. Since our bonds turn over all the time, that would mean an almost immediate increase in the share of taxes we have to spend to service the debt.
If the U.S. defaults on our debts, the stock market will decline precipitously. It would strengthen China and Russia, while weakening the U.S., perhaps sliding our economy into recession along with most of our allies. The worst forecast I have seen suggests that an extended default would result in a Great Recession-level shock to the global economy.
I think this is an unlikely scenario, only because the domestic political backlash would be so severe we will come to some compromise. But, I’m a notoriously bad political forecaster. Rather than risking default, we’d be wise to heed the rare wisdom of then-President Donald Trump’s advice on the debt ceiling: “That’s a sacred element of our country. They can’t use the debt ceiling to negotiate.”
Michael J. Hicks, Ph.D., is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. He can be reached on Twitter @hicksCBER.
Header Image: Debt ceiling (Credit: Douglas Rissing / Getty Images/iStockphoto)
Thousands of Hoosiers will soon lose Medicaid access, but the cost of the program is still increasing
Hundreds of thousands of Hoosiers are poised to lose Medicaid insurance access over the next year due to the end of a COVID-19 pandemic-era federal policy that prevented states from kicking people off Medicaid. Despite that, state costs for the health program serving more than 2.2 million low-income Hoosiers, including more than 60% of Indiana’s …