Mitch Daniels

Excerpts from a Monitor breakfast with federal budget director Mitch Daniels.

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Mitch Daniels is director of the White House Office of Management and Budget. Previously, he served as chief executive officer of the Hudson Institute, a Washington think tank, and as senior vice president of Eli Lilly.

On a budget deficit he predicts will be $200 billion to $300 billion in coming years:

"Nobody is happy, and certainly not me, about the return to deficits. But stuff happens as the bumper sticker says.

I would like to point out ... [that] we would have a three-digit deficit this year and next if there had never been a Bush tax bill. [A projected deficit of 2 percent to 3 percent of GDP] is better than 12 of the last 20 years. Not good enough for me, but we do have to keep some perspective here. Most people feel that in a time of recession or slow growth government fiscal policy ought to be toward stimulus. The trick is to see that these deficits crest this year and next and [then] start down."

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On whether he worries President Bush's budget policies will make it tougher to deal with Social Security's long-term problems:

"No, I don't, although it would be a legitimate worry. It is something to keep one's eye on....

[There are] two reasons why I am not preoccupied with that question. One is that we ought not overestimate the growth of government even in these extraordinary circumstances. Despite everything, I think the president is going to succeed in a deceleration of government spending or at least prevent it from accelerating unduly. When you look past all the arguments about this program or that, actual outlays only went up about 4 percent this year; they will only go about 4 percent next year.

The second reason I would say ... is that the nation does what it has to do. The most important thing the nation has to do is defend itself. I think the president is doing exactly what he ought in rebuilding defense and prosecuting the war and in building a homeland security infrastructure."

On homeland-defense spending:

"There is an infinite range or variety of risks facing the country. We really cannot defend every square foot of America against every threat some hateful person might concoct. The challenge for the [Homeland Security] department and for us all is to spend the money we do spend in a way that reduces the overall risk."

On the state of the economy:

"The economy is growing, but inadequately. Also, with productivity as high as it is, it is generating fewer jobs for each dollar of growth than we have usually seen in the past. And that tends to have a political effect if it goes on too long."

On running for governor of Indiana:

"I owe folks there an answer and I believe I owe it to them in the next few months.... [There are] no fixed deadlines but in common-sense terms I can't wait til summertime."

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