As our nation swims in red ink, more Americans are looking for examples of successful fiscal leadership. That search leads them to one place: Indiana, and Governor Mitch Daniels. In a column in Barrons today, Jim Mitague says that “if you want creditable solutions to our nation’s fiscal problems, look no further than My Man Mitch.
Last week, I met with Indiana Gov. Mitch Daniels to hear his ideas for restoring our economy — which can be done, he says, without tax increases.
Daniels is a man of deep thought and bold action. His state has one of the strongest balance sheets in the country, largely because of his stewardship. Most states have huge deficits; Indiana has none. Daniels eradicated a $1 billion shortfall, beginning in 2005 and built up an even bigger rainy-day fund — $1.3 billion. He pared government spending, sold a toll road to private investors at an enormous profit, and attracted new business to the state. Revenues are off steeply, so he will use $300 million of the surplus in fiscal 2010 so that taxes won’t rise in a recession. Revenues, which are below 2007 levels, aren’t expected to recover soon. The rainy-day fund will last through June 30, 2011. The economy should be growing by then.
Unlike Indiana, the federal government can’t rely on cuts alone to achieve meaningful deficit reduction because the hole, at 10% of GDP, is too deep, says Daniels, a Republican who served as President George W. Bush’s head of Office of Management and Budget for two years. Lawmakers must help maximize economic growth, he says.
The administration and Congress immediately should cancel the TARP program aiding troubled financial institutions and return both this money and the unexpended portion of last year’s $787 billion fiscal stimulus to the Treasury, “as a demonstration that we as a country are serious about deficit reduction,” he says. This will help to keep interest rates low.
Then the administration should reform the Social Security system. This would be “the single, best, first step” towards achieving higher rates of long-term growth, Daniels says. “We need a new compact that preserves all of the old promises, but makes a newer, affordable compact with younger citizens,” he says. — Read on at Barrons
