Wednesday, March 30, 2005
Providence Journal: We welcome Indiana Gov. Mitch Daniels to the grownup world.
As President Bush's budget director, Daniels was pitchman for slashing taxes; his enthusiasm earned him the nickname The Blade. Since neither the administration nor Congress had much intention of cutting spending, one must also conclude that Daniels felt comfortable with massive government borrowing.
In November Daniels was elected Indiana's chief executive, and now he must walk the straight line of fiscal responsibility. States balance their budgets. The federal government can run up big debts and print money; states cannot.
Now facing a tight state budget, Gov. Daniels has committed the ultimate heresy in some conservative eyes: He wants to raise the state income tax 1 percent for residents who make more than $100,000 a year. Conservative tax-phobes are passing around the smelling salts. And back in Washington, the mouths at Americans for Tax Reform and Club for Growth are on the attack.
Of course, Daniels is right. Furthermore, he has little choice. The budget mess he inherited was a long time coming. He's already playing tough with state workers, having consolidated some departments.
Let us note that Indiana is not a high-income state, so the proposed tax hike would affect only 5 percent of the taxpayers. And Gov. Daniels says that it would be "temporary."
Some see alternatives
Some tax cutters might argue that he does have choices. He could shrink state support for education; he could throw more low-income residents off Medicaid. There's no end to the pain he could inflict.
But the view is a lot different from a state capital than from Washington. For one thing, state officials must live with the consequences of their policies.
For example, the Bush administration is proposing cuts in Washington's contributions to Medicaid, the state-federal health-insurance program for low-income people. But it's the states that face crisis when they must reduce their Medicaid rolls.
Facing his critics, Governor Daniels said, "What people don't understand is that my applicable and formative experience came not when I was in the White House, but before that, when I was in business." Since businesses, like states, cannot print money, his words are undoubtedly true.