NEIL CAVUTO, HOST: Ahead of tomorrow's official unveiling, we are starting to get some specifics about Rick Perry's aforementioned flat tax plan. Now it looks something like this, a flat rate in the vicinity of 20 percent, but it will be optional. In other words, everyone doesn't have to participate.
Steve Forbes is a fan of it, but what does my next guest think about it?
Indiana Governor Mitch Daniels joins me now.
Governor, always good seeing you.
GOV. MITCH DANIELS, R-IN: You, too.
CAVUTO: Shouldn't everyone be on board, and everybody be in this, because, boy, that gets to be like France, right, we have the value added tax and we have this besides?
DANIELS: Well, if you are asking me what I think about these latest proposals, I like them. They all head in the right direction. Lower. Flatter. More neutral. Get rid of all the encrusted preferences that have grown up in the code since we weeded it successfully in Ronald Reagan's second term.
And let money start finding its way to the places where it might put somebody to work, not where the tax code tells it to go.
CAVUTO: No, I agree with you on those counts, Governor.
I guess what concerned me -- and I guess the governor will spell it out himself -- is it's optional, you can either participate in it or not. Well, that keeps the existing system, a monster as you have appropriately mentioned, it in its form. Shouldn't the idea be to send a wrecking ball to what we have got and start something different?
DANIELS: I do think that would be preferable.
But in the situation we're are in now, I keep saying whether the subject is tax reform or the reform of the safety net programs, ideal may not be -- if ideal is not attainable let's go with second best. I would prefer to see a complete overhaul of the system.
My guess is, actually, if you did what Governor Perry you say is gonna suggest, that the vast majority rather quickly would emigrate to the new system and it might not have much practical difference.
CAVUTO: I think you know more than I do about this so I appreciate your deferring to me in what we are hearing. But the talk is that you and Governor Perry have chatted a great deal. Is that just talk? Or do you do that with all the candidates? What?
DANIELS: I know them and like them. And I talk to them when they want to talk to me.
But we have not had any great in-depth discussion.
CAVUTO: Does that mean Perry has sought you out on this specific issue, Governor?
DANIELS: Well we have talked about it in brief, but I wrote about it in this book that I published recently and I called for essentially a flat tax or as close to it as we could get. So, maybe he knows what I think from that context.
CAVUTO: Do you think, as Frank Luntz was here delineating, that Rick Perry might be hurting himself and whoever the nominee might be even if it is himself, with these personal attacks or what certainly the Romney people take as personal attacks and what the studio audience as measured by Frank Luntz seem to construe as personal attacks, that it will come back to boomerang?
DANIELS: I don't know.
I certainly believe that we are better off without that in our politics. And if you are in pursuit of results, that it is best to bite one's tongue. Correct misstatements, of course, but not engage in the back and forth of "So's your old man." I don't think it will make a lot of difference in the end. What matters, finally, will be how our nominee conducts himself in the one-on-one with President Obama. And no one has proven a more avid practitioner of personal attacks in politics, I'm sorry to say, than our president.
CAVUTO: So, when you see these others who are rising, Herman Cain, for example, who has proved more than a flash in the pan, on a variation of the flat tax with this 999 plan now, it's been pilloried, he's been ripped apart, his numbers keep rising, though. What do you make of that?
DANIELS: I think people are saying that they like candor, that they like specifics, that they sense, even though no candidate, certainly not the president and not yet our own, has, ya know, fully leveled with people about the extremity of the situation we're in.
But they can sense it. And, therefore, when somebody speaks forthrightly about a very big, bold departure that has jobs and has economic growth of the private sector at its core, like Mr. Cain has, I think there is an audience for that. I think probably Governor Perry's gonna find a receptive audience with his somewhat similar suggestion this week.
CAVUTO: Ya know, governor, you were nice enough to stop and be us in Chicago when we were doing our 15th anniversary show. And the one thing I noticed with the crowds who were there is how much they personally liked you. I almost thought you were governor of Illinois, at least that crowd wanted you to be.
And then I started thinking of this presidential race and how up for grabs much of the Midwest is, electorally, politically, the whole nine yards. And it's an area where Republicans were weak four years ago. After all, the president took your state back in 2008. So, someone like you would be very advantageous for a ticket, don't you think?
DANIELS: Well, I don't know. I sure had fun that day with you on that beautiful day by the river.
And I love people and I love to clown around with them. And I do notice from time to time a lot of other people in elected office in both parties are a little clumsy with that. But to me it just comes naturally.
CAVUTO: All right, well, the clowning around part, no dispersions to the president, vice president, but there is a little bit more latitude for that, being vice president.
Would that interest you?
DANIELS: Well, I guess -- well, I mean, to each his own.
What really matters is who is going to be president 15 months from now. I believe that it is a matter of genuine urgency that there be a huge change in national direction. The president, I have come to conclude, will just simply never get it. He thinks somehow that growing government has a positive as opposed to a negative effect on the lives of people at large.
The comments by Senator Reid last week were just astonishing talking about the private sector doing just fine, we have some government we have to spend more money on. The clock is ticking on both our economic and our related debt problems and we have just got to change direction in a big, bold way. So, I'm hoping that our nominee --
CAVUTO: Even for the number two spot on the ticket, so you make a compelling argument. So if the nominee, whoever he or she is, comes to you and says, you articulate a vision that I know you could take up against Joe Biden and take us all the way to the White House and you can be in Canton, the Naval Observatory, a wonderful home, what do you say?
DANIELS: Neil, I thought I was doing such a good job of avoiding this question. And you come right back to it.
CAVUTO: You were. You were. No, you were.
DANIELS: No, again, in all seriousness, I'm not running. It wasn't in the cards for me and my family.
And what will matter is what our nominee sees for America and how well he or she presents that. And I do hope, as your earlier questions, I think, prefigured, that next year's alternative campaign by our party will be a bold one, a clear one, a specific one that talks about growing the private economy and that talks about meeting our debt obligations before they consume the American dream.
CAVUTO: Governor Daniels, a pleasure again. Thank you, sir.
DANIELS: Thanks, Neil.