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AMANPOUR (voice-over): It's been a tough week for Governor Mitch Daniels, and the first thing you notice is the bandage slapped across the middle of his forehead. At the gym, someone had slammed the door on him.
M. DANIELS: This was the day before I announced I wasn't going to run, and the popular theory is it knocked some sense into me.
AMANPOUR: I came to meet him at Indiana's state capital to talk about that decision and its implications for the Republican race to the White House.
(on-screen): So many people in the party wanted to you run, and they were disappointed. How difficult was it for you to say that you loved your family more than your country?
M. DANIELS: That was easy to say. It's a true -- it's a true statement. It was uncomfortable to feel two duties that I am very passionate about, but in the end, it wasn't really any question which came first to me.
AMANPOUR: Why do your wife and your children hate the idea so much?
M. DANIELS: We've got young women, three of them married not too long. They're looking forward to building lives, starting families, and this was just a disruption that they were very, very leery of, and who wouldn't understand that?
AMANPOUR: Does it say something about the way politics is played?
M. DANIELS: If it weren't for the cheap shots and the, you know, personal unfairnesses that would -- that would come with it, there's also just the inevitable loss of privacy, the security, all of that.
AMANPOUR (voice-over): Daniels and his wife Cheri divorced in the 1990s, and she moved to California while he raised their four daughters here in Indiana, but they remarried after several years apart. Unwilling to put his family through a re-airing of that story, he decided to forego the race of a lifetime.
(on-screen): Do you think you could have beaten President Obama?
M. DANIELS: Yes, I think so. I mean, no one can know.
AMANPOUR: Business people and community leaders said that they really felt Governor Daniels could give President Obama a run for his money in a general election. Much has been said about Governor Daniels' lack of charisma, but most people say that his record of success in this conservative Midwestern state speaks for itself.
(voice-over): He tamed the public sector unions and cut the number of state workers. Daniels lowered property taxes and invested in infrastructure projects.
M. DANIELS: I enjoy this centennial version of the -- as we love to say, greatest spectacle in racing. Thanks, John.
AMANPOUR: Just before today's Indianapolis 500 race, he hosted a reception for motor sport executives that he's trying to lure here. Doug Brown runs a local technology company. He's adding more than 100 jobs thanks to Daniels' tax incentives.
BROWN: You don't think of Indiana as a high-tech state, but his policies really are growing jobs in that sector. Indiana had one of the highest job growth rates for private companies in the nation.
AMANPOUR: As the governor of a small state, Daniels mingles easily with his constituents here at the gym.
M. DANIELS: Hello. How are you all?
AMANPOUR: During his last campaign in 2008, he put out a series of videos that he called Mitch TV. This one shows him and his wife, Cheri, at the state fair.
C. DANIELS: Come on, Belle.
AMANPOUR: She came in second in the cow-milking contest, and he won a second term in a landslide. Daniels was budget director under President George W. Bush, and his attempts to control spending earned him a nickname that he still proudly displays.
(on-screen): So you have a lot of memorabilia, including what looks like a samurai sword. What is this here?
M. DANIELS: That's what it is. Because of my alleged thriftiness...
AMANPOUR: Slash and burning?
M. DANIELS: ... well, some said -- I had that nickname for a while, and...
AMANPOUR: The blade?
M. DANIELS: Yes, the blade, and the nicknamer-in-chief conferred that on me.
AMANPOUR: And that was?
M. DANIELS: President Bush.
AMANPOUR: Indiana's magnificent state capitol took 10 years to build and came in under $2 million. That's under budget. Now, of course, that was in 1888, but the governor likes to say it's a metaphor for the kind of fiscal prudence that's needed in today's hard times.
(voice-over): He slashed state spending and turned a budget deficit into a surplus, and that's what made him so attractive to his party faithful.
M. DANIELS: The state was broke, for no good reason, except that it had simply overspent its income seven straight years, and so we -- we turned that around.
AMANPOUR (on-screen): It's been said that for you, if you were running, if you became president, your agenda would be deficit, deficit, deficit, cut it, attack it.
M. DANIELS: Yes, reduce the debt, the long-term debt facing the country before it crushes the American dream, limits our influence in the world, and, you know, possibly even worse consequences, and -- but that -- to me, that is the challenge of this time.
AMANPOUR: Well, Paul Ryan has tried to put across his own budget proposal, and it's quite controversial, particularly the Medicare aspect of it, because clearly this one is causing people to run away from it, not just politicians, but also people. The polls say that people do not want their Medicare or their Medicaid touched.
M. DANIELS: Well, I'm not running away from it. I think it is the best way.
AMANPOUR: Do you think it will be the litmus test, though, in these -- the election coming up?
M. DANIELS: I hope so. I think it is the central dilemma. I think it ought, therefore, to be the centerpiece of the next election, and we ought to test the proposition -- and I have faith that the answer will be yes -- that Americans are absolutely up to the job of making changes necessary once they understand the facts.
AMANPOUR: Is there a way to do this in a way that does not put so much of a burden on the individual, on the seniors?
M. DANIELS: There's a way to do it that protects the most vulnerable seniors more. I mean, another, I think, important and positive point to be made is that our current system is brutally unfair. It is tilted toward higher-income people in many, many ways. There's no reason on Earth that we should be sending Warren Buffett a pension check or paying for Bill Gates' health care or mine, for that matter. And in the 2.0 system of Medicare and Social Security, for the next generation, not this one, we ought to heavily devote the resources to those who need them most.
AMANPOUR: You've also said that tackling debt, debt, debt and absolutely having to get that done is paramount to the survival of the republic and that perhaps there should be a truce on some of the very, very divisive social issues that tend to take up so much of the oxygen. Do you still believe that?
M. DANIELS: Yes, I do. You know, not that anybody changes their mind, not that anybody retreats one foot, just that temporarily we address the issue that threatens us all. If this country goes broke, we will all pay the price, black and white, gay and straight, male and female. We are all in this together.
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