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WALLACE: And hello again from Fox News in Washington. As states struggle with huge budget gaps and take on public workers, our first guest has become the new "it boy" of American politics.
Republican Governor Mitch Daniels of Indiana is being celebrated for turning deficits into surpluses and adding jobs, and some are saying he should be the Republican nominee for president next year.
Governor Daniels joins us now. Governor, welcome back to "Fox News Sunday."
GOV. MITCH DANIELS, R-IND.: Thank you, Chris.
WALLACE: And we need to say that what is going on there is you just had rotator cuff surgery and you're not going be ready for spring training.
DANIELS: All the right wing jokes have already been made, so--
WALLACE: All right, I went with baseball.
WALLACE: You are in the middle of a standoff right now with House Democrats who have crossed state lines and are inside Illinois and are blocking any action in the legislature.
They first said that they were fighting against the right-to-work law, which is now dead. Now they say they are fighting against 11 other bills on the agenda. Question, are you prepared to make a deal to get those House Democrats back to Indiana?
DANIELS: No, if they come back, we will talk about what sort of changes or amendments they might want, but while they are subverting the democratic process, there is nothing to talk about. So when they come back to work, we will talk about their concerns. You describe it quite accurately, Chris. Our situation is very different than Wisconsin. This is not about government unions. This was a bill I did not initiate and I thought it ought to really wait for a different time, because I thought exactly this might happen and it might get in the way of a very important agenda that was laid in front of the people of Indiana. Low-tax agenda, reduce the corporate tax to attract jobs, reform education and so forth.
And yes, they ran off to Illinois ostensibly over the right-to- work bill. But as soon as they got what they wanted there, they issued an ultimatum from a hot tub over there with about 10 more items.
This is to tell you how reactionary Indiana Democrats are. The first four items they want killed are President Obama's race to the top agenda.
WALLACE: When unions started protesting the right-to-work law this week and House Democrats took off, you said that you thought that the bill should be dropped, as you just pointed out. Then you added this.
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DANIELS: Even the smallest minority, and that's what we've heard from the last couple of days, has every right to express the strength of its views, and I salute those who do.
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WALLACE: Conservative bloggers immediately hammered you, said you weren't tough enough, said you wanted a truce on fiscal issues, and the day after you issued a much tougher statement. Here it is.
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DANIELS: The House Democrats have shown a complete contempt for the democratic process.
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WALLACE: Were you trying to reassure conservatives that you are tough enough?
DANIELS: No, I was reiterating exactly what I said the first day.I was a little I guess careless about my pronouns. The statement I made I'll make again. I was referring to the private sector protesters, the union members who came to disagree with the right-to-work law. They had and they have every right to express their First Amendment point of view. When I -- I was distinguishing --
WALLACE: When you said them, salute them, though, you weren't talking about the Indiana House Democrats?
DANIELS: No, I mean, in fact it's very -- I guess I'm glad I made the mistake because it allows us to really I think clarify an important distinction. It is one thing for the people in the private sector to express their point of view as our protesters did.
It is quite another for public servants accepting a public paycheck, having lost an election to a very clear agenda, to try to trash the process, run off to a different state and hide out. That's what I said on both those days was completely illegitimate.
WALLACE: All right. You took away -- what is going on in Wisconsin now, you took away public workers' collective bargaining rights by executive order six years ago the day after you were sworn into office, but now you are calling their unions the privileged elite. Question, teachers, public safety officers -- the privileged elite?
DANIELS: Across America, Chris, we've had a huge inversion. There may have been a time, a century ago, where public employees were mistreated and vulnerable and underpaid. If that was ever a problem, we have over-fixed it. Not everywhere but in many places.
As you know very well, public employees in America -- most decidedly federal employees, but everywhere -- are better paid than the taxpayers that pay their salaries. When you add much more generous benefits and much more generous pensions on top, the gap widens, and then there is near total job security in the last recession.
WALLACE: But you really would call teachers, I mean, they're public servants, you said they are public servants. Would you really call teachers a privileged elite?
DANIELS: I was really talking about the government unions, of whom their union, of course, is one. Now, it is true that teachers are paid in Indiana 22 percent more than the taxpayers who pay their salary. The benefits raise that further, that is all true.
I happen to think that is a good idea. We have some of the best paid teachers in America, and I think that is absolutely fine. In fact, one of the bills our Democrats want us to kill would allow us to pay the best teachers more, which is something I'd really like to do.
But as a general phenomenon, we have a situation in which public sector unions get gillions of dollars in dues, which they hand back to the politicians who then sweeten the pot for them in an unending circle, and that's a bad idea.
WALLACE: You have a strong record, I think it's fair to say, of balancing the budget as governor of Indiana. Let's take a look at the record. You inherited a $600 million deficit and turned into a $370 million surplus the next year.
You ended the last fiscal year with a reserve fund of $830 million. And at the CPAC conference two weeks ago, you talked about the greatest threat facing this country. Let's watch.
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DANIELS: We face an enemy lethal (inaudible) and even more implacable than those America has defeated before. I refer, of course, to the debt our nation has amassed for itself over decades of indulgences. It is the new red menace, this time consisting of ink.
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WALLACE: I want to do a lightning round because we have limited time. Quick questions, quick answers. What would you do about Social Security?
DANIELS: I would bifurcate it. I would say those in the program or approaching it, a deal is a deal, you're good to go, nothing changes. For the young people who are paying for today's retirees and tomorrow's, we want you to have something when you retire. We will need a brand new compact. I think it starts with means testing, which is to say we shouldn't send a pension check to Donald Trump. We should concentrate the resources on those who are going to need them the most.
I think we should in the future raise the retirement age to catch up to the medical reality of our time. I think we should protect the benefits against inflation, but not overprotect them.
Chris, as I said many times in the past, that is my cut at it. If somebody has another route that gets us with assurance to the same results, I would like to hear it, because I just want to see a solution to this before it destroys the America we know.
WALLACE: You talked about Medicare 2.0, private vouchers, not a government program?
DANIELS: It will be a government program, but instead of a top- down monstrosity that we have today, once again I would divide the program and say to those who are in it or who are about to be in it, nothing will change for you.
But I think for the young people coming up who are going to shoulder the bill, we ought to trust them to make more of their own decisions. You could, again, concentrate the resources on the poorest people, and also in this case the least healthy people, people who are better off --
WALLACE: But you'd give them a private voucher so they could choose their own insurance plan?
DANIELS: I would.
WALLACE: You even say the government should put limits on end- of-life care. Are you talking about what Sarah Palin called the death panels?
DANIELS: No, I didn't say government should put limits on this, but what I'm worried about is the government making these decisions. I just stated what I think is a simple fact. I wish it wasn't, but I think it is. We cannot afford in an aging society to pay for the most expensive technology every -- for every single person regardless of income to the very, very last day.
WALLACE: Who makes that decision?
DANIELS: I think it has -- at least a part of it has to be the family and the patient himself or herself. I mean there --
WALLACE: Does the government at some point say we can't afford to give the 92-year-old the liver transplant?
DANIELS: Chris, I've told you, I think with some specificity, what I think ought to happen in Social Security and Medicare. I just answered the question honestly. I think this problem will have to be addressed. I don't pretend to have an exact answer to this one, except that autopilot won't work.
WALLACE: Do you think voters are ready? I mean, you talked about some things that seem to be sort of political taboos. Do you think voters are ready for such strong medicine?
DANIELS: I can't tell you that for sure, but I have a little -- more confidence maybe in the American citizenry than some.
DANIELS: Some in politics today.
I -- I do believe that people are ready to step up, that once they have the real facts -- many of these facts that you may know are -- have not been shared, honestly, with the American people, and I give -- I give a little more credit than I think some of our politicians do.
WALLACE: You -- you also have a record as the first budget director under President Bush (INAUDIBLE) George W. Bush. When you came in, this country have an annual surplus for the first time in 30 years of $236 billion. When you left, two and a half years later, the deficit was $400 billion. You were also there when President Bush launched his Medicare Drug Benefit Plan that now costs $60 billion a year.
I know there was a recession, but do you think it was wise at a time when we were fighting two wars to have two tax cuts and launch a huge new entitlement?
DANIELS: Well, it wasn't just the recession. It was recession, two wars and a terrorist attack that led to a whole new category called Homeland Security. So nobody was less happy than I to see the surplus go away, but it was going away no matter who was the president.
You know, Chris, I was proud to be part of that administration. Yes, I think the original tax cuts were good and -- and timely and helped the economy to recover very, very quickly from that recession.
But, if you want to know what I think about fiscal issues, don't look at two and a half years where I was in the supporting cast with no vote. Look at six years where I was in a responsible position, submitting budgets and fighting for them. And, you know, there's the record that -- that I think is -- is most accurate.
WALLACE: You've also infuriated the right by calling for a truce on social issues. Here's what you said at CPAC.
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DANIELS: Big change requires big majorities. We will need people who never tune in to Rush or Glenn or Laura or Sean.
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WALLACE: But some conservative say that abortion and traditional marriage shouldn't be negotiable, and our next guest, Mike Huckabee, says -- and he's a fan of yours -- says he's disappointed that you would suggest that pro-family activists would just lie down.
DANIELS: Well, that isn't what I suggested.
A truce in -- first of all, it's only a truce if both sides agree to stop fighting for a little while. I don't want to have an argument with anybody about this. It was a -- a suggestion, really, tactically. It starts with the premise that our nation is at mortal risk.
I'd love to -- I'd love to learn that I'm wrong about this, but that is not threatening not just our economy but our entire way of life, our role in the world, maybe even our national security.
Now, if you share that fear, then all I'm saying is we're going to have to unify a lot of America, we have to get a lot of people together to make these changes.
You asked me these -- tackling these problems that we're talking about is supposed to be politically undoable. Well, if we're going to do the undoable, we're going to need to gather ourselves together as a nation, and that will, by definition, mean that there'll have to be some folks in that coalition who do disagree about other things.
WALLACE: We've got about a minute left.
Where are you on running for president?
DANIELS: Well, I sure haven't decided to do it, haven't decided not to. I'm -- I'm keeping the option open, and I -- as I've been urged to.
But, you know, Chris, I never expected to run for any office. All I set out to do was to try my best for four years, maybe eight, to make a better state, more prosperous state in the place I live. And, you know, any thought I ever had about national issues was maybe we could set some good examples and create some successes others could look at and maybe here and there offer a constructive thought. And that's still where I am.
WALLACE: And when do you have to make a decision? When -- have you set a timeline for yourself?
DANIELS: No, I've -- others -- others keep suggesting these deadlines, and then they keep passing. I -- I think it's one of the great breaks we've had as voters that this thing didn't start.
WALLACE: But some have said when the legislature goes out of session -- of course it may never be in session, in April.
DANIELS: I will tell you this, I'm giving my full attention to the duty, the job I hired on for, and I hope that we -- that our Democrats get out of the hot tub, will go back to work, will finish at the end of April. And --
But if they don't, I'll still be there, and so will they, eventually because that's the -- that's my duty. If it means that deadlines pass, it does.
WALLACE: Finally, governor, some people have suggested that you don't look presidential. Barack Obama is 6'1", you're 5'7". He's charismatic and, forgive me, but some people suggest perhaps you're not. Does that matter?
DANIELS: Well, probably, you know? Some voters -- I've never in -- in the limited elected time I've had, I've never suggested to a voter what they should consider a valid criterion.
So, you know, sure. If it comes down to height and hair, I probably wouldn't do very well. But I guess that's just something you weight in the balance with many other factors.
WALLACE: Governor Daniels, we want to thank you so much for coming in. I hope you feel better.
DANIELS: I have to (INAUDIBLE).
WALLACE: And it's always good to see you. And we'll be waiting ready to see what happens in Indiana and what happens on the presidential campaign trail.
Up next, another possible 2012 contender who's leading the GOP polls right now -- former Governor Mike Huckabee. Back in a moment.
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