May 16, 2001: Features

Eye on the Big Bottom Line

Federal budget director Mitch Daniels '71 crunches America's numbers

by Louis Jacobson

Daniels, right, at his Indianapolis home when his appointment was announced, said the OMB job was the only one he would have considered.

In late December, when President-elect George W. Bush tapped Mitchell E. Daniels Jr., '71 to take the helm at the Office of Management and Budget, the news barely registered in the media. As it happened, Bush had announced two other appointments the very same day - the controversial John Ashcroft as attorney general and the well-known Christine Todd Whitman as Environmental Protection Agency administrator. The muted reaction, however, was eerily appropriate. OMB and Daniels both have a reputation for being influential in a low-profile way.

OMB's portfolio in Washington runs the gamut - it does everything from producing economic forecasts to managing the federal bureaucracy and overseeing federal regulations of all types. But first and foremost, OMB is the administration's chief crafter of the federal budget, as well as its negotiator with Congress on budget details. In recent years the agency has been led by a series of strong-willed (and often controversial) directors, from David Stockman and Richard Darman during the Reagan-Bush years to Leon Panetta, Alice Rivlin, and Franklin Raines under President Clinton.

Each OMB director has served as the administration's main advocate - sometimes publicly, more often privately - for core priorities on spending and regulation. Those who know Daniels, who was confirmed unanimously by the Senate, expect him to be a good fit for the job. "He's absolutely a straight shooter, and very practical," says Victor Schwartz, a senior partner with the Washington-based law firm Crowell & Moring who once taught Daniels in a law class. "He's very bright, but he isn't arrogant or supercilious like some people as bright as he is."

Though Daniels isn't quite "little known" in Washington - a phrase the New York Times used the day after he was appointed - sources acknowledge that Daniels, who moved to Indiana when he was 11, wasn't even thought to be the top Hoosier in contention for the job. (Ex-congressman David McIntosh was.) To take the OMB job, Daniels, 51, gave up a lot: a post as senior vice president of corporate strategy and policy at drugmaker Eli Lilly and Co., where he had spent the past decade, and the chance to spend most of his time in Indianapolis, where his ties run deep.

"The insidious part about it is that OMB is the one job they could have offered me that I would have considered," Daniels said in a March 16 interview. So broad are the OMB's powers, in fact, that "it is a place where a person can be useful all day long."

The first two months of Daniels's tenure proved to be a rat race. With Bush's election quagmire forcing a delayed transition, Daniels settled into his job several weeks later than most of his predecessors had - yet he still faced tight deadlines for preparing the details of Bush's ambitious tax cut. "What I'll say about those first two months is that I'm not eager to repeat them," Daniels says. "It was pretty much 24-7, as they say. But, boy, was it illuminating and, in the end, an exhilarating experience."

At Princeton, Daniels took a meandering path. Though he was a Woodrow Wilson School major and occasionally took part in Young Republican activities, "truth be told, my spare time was mostly spent refining my pool, bridge, and poker skills" at Charter Club and other campus haunts, he says. "I think in those days - it's hard to remember now - but I was probably supportive of multiple and diametrically opposed viewpoints."

Daniels's most important Princeton connection turned out to be Bill Ruckelshaus '55, who ran for the Senate from Indiana in 1968, between Daniels's freshman and sophomore years. Daniels volunteered for the Ruckelshaus campaign during the summer and later got permission from the university to continue as a campaign staffer through the fall. (He had enough advanced-placement credits to qualify for graduation after seven semesters.) Though Ruckelshaus lost a close race, Daniels learned the ropes in Indiana politics.

After graduation, Daniels apprenticed himself to Richard Lugar, a widely respected Republican who served as mayor of Indianapolis and later as senator from Indiana - a job Lugar still holds. As a Lugar aide, Daniels helped craft an unusual merger of city and county governments in Indianapolis and later managed Lugar's senate campaign, as well as his Washington office and the Republican campaign committee Lugar chaired.

In 1985 the Reagan White House installed Daniels as political director. But by 1987,

Daniels resigned in an epic struggle with White House chief of staff Donald Regan. Daniels suggested that Regan step down in order to stem the political fallout from the Iran-Contra affair. Regan refused, and Daniels left instead, joining the Hudson Institute, a conservative think tank with offices in Indianapolis and Washington.

Back in Indiana, Daniels became a political player of the highest rank. "Mitch has a very low profile among the general public, but he is a member of the bipartisan group of behind-the-scenes movers and shakers that make the city of Indianapolis tick," says Ed Feigenbaum, a onetime colleague of Daniels's at Hudson who now publishes Indiana Legislative Insight, a political newsletter.

At Lilly - where the board of directors once included the first President Bush - Daniels played a key role in managing the public-policy issues surrounding Prozac, the company's profitable antidepressant medication. Daniels says that his time at Lilly may have been his most important preparation for the OMB job. "I spent much of that time running a multibillion-dollar business unit and helping to plan a $12-billion global corporation," he says. "I think my 14 years in business have been more valuable [to the OMB job] than anything I did in public life."

At OMB, Daniels faces two major challenges, says Roy T. Meyers, a political scientist and budget expert at the University of Maryland-Baltimore County. The first is to set aside his prior affiliation with the pharmaceutical industry, which has definite preferences in federal budgeting. The second, Meyers says, is to learn the intricacies of the federal budgeting process - an obscure realm that Daniels, unlike several of his OMB predecessors, has never had to master until now.

By March, Daniels said that he felt comfortable in the budget universe. "Only time will tell if I was a wise choice for the job, but I don't think that a professional budgeteer would have been the best choice," he says. "There's just more to the job than that. I do think [the community of budget experts] is a bit of an insiders' club, and I think they were surprised to see someone from the outside get the job. I said to someone recently - maybe a bit uncharitably - that it was like an old-boys' squash club that had a racquetball player from the 'Y' show up. They looked askance. They're career professionals at OMB and the information machine they operate is such that an OMB director can learn an enormous amount in a short time."

Asked what his ideology is, Daniels says that "by today's common and somewhat tired definition, I'm a conservative. But I was very drawn to the themes of the Bush campaign, even though I was not part of it. I have always felt that conservatives have failed utterly to seize their most important opportunity - to assert conservative principles on the grounds that they actually serve society's least-advantaged citizens. Conservatives should go toe to toe with 40 years of failure and submit that the best test of a just society is how it does by its least-advantaged citizens."

To the Bush Administration's chagrin, an economic downturn hit hard just as Daniels and his fellow cabinet members were settling into their jobs. While Daniels notes that OMB's projections take into account future economic uncertainties, he acknowledges that "a prolonged economic downturn would change some of the numbers." Still, he applauds the president for thinking big.

"I'm glad to be part of an administration that did big things after an era of miniaturization" under Clinton, he says. "This is a president who's set out after big objectives. People are talking about tax cuts, but it goes beyond that, to Medicare reform, Social Security, national security. Those are big goals, and any one of them would be a signature accomplishment. I told one group here recently that if you're not going to hunt the big game, don't go on the safari. This is a president and an administration that is certainly after big game."

For now, Daniels travels to Indianapolis when he can, to see his family - his wife, Cheri, two college-age daughters, and two high-school-age daughters. "I like to rationalize that it's useful for a cabinet officer to live where people still think a trillion dollars is a lot of money," he says. "But the first two months I was scarcely there at all. It looks as though I can probably average two visits a month, and maybe do some visits that are a few days at a time."

Then again, there are some positives, he acknowledges.

"My oldest daughter and her best friend were visiting recently, and by surprise, the president had me bring them by for a guided tour of the Oval Office," he says. "So at least my girls will be able to see a few things that not everybody gets to see."

Louis Jacobson '92 is staff correspondent at National Journal magazine in Washington.