Mitch Daniels: Governing by the Numbers

Indiana is one of 10 states that has seen its unemployment rate go down in the past year, from 10.5 percent in May 2009 to 9.8 percent in April 2010. It has a budget surplus and a triple-A bond rating. Property taxes and the state payroll have gone down. For the first time since the 1970s, more people are moving to the state than leaving.

Cruising past one of the state's abundant cornfields on June 9, Governor Mitch Daniels (R) has more reasons to feel good every day. An hour before, the former Eli Lilly (LLY) executive announced that a computer-design firm rebuffed the advances of Virginia and will expand into what was a Noblesville food mill. Checking his BlackBerry, he reads that Chrysler will invest $300 million to upgrade two Kokomo transmission plants. Now he's headed to Marion, to announce that the town will soon be home to a Chinese furniture maker's first assembly and wholesale center in the U.S.

"Government's the last great monopoly, overcharging and underserving its customers. It's not a business but can be more businesslike," says Daniels during a diner stop for a Styrofoam cup of black coffee. Daniels has tried to turn his administration into a case study of how a private-sector mentality can transform public policy. Partly by tying cash and tax incentives to job creation, Indiana, a state with just 2 percent of the nation's population, has generated 7 percent of the nation's new jobs this year. He saved millions of dollars centralizing and contracting out state services, including printing to Pitney Bowes (PBI), computer purchases to Dell (DELL), and prison food to Aramark, cutting the cost from $1.43 a meal to 99 cents in the process. "And," says Daniels, "the food's better"

After serving as an adviser to Indiana Senator Richard G. Lugar (R) and briefly to President Reagan, Daniels spent a decade as a Lilly executive in Indianapolis. He had risen to head of corporate strategy when George W. Bush beckoned him back to Washington as the director of the Office of Management & Budget. "I learned almost nothing at OMB that relates to [being governor]," says Daniels. "What I learned, I learned in business."

He returned home and toppled a Democratic incumbent in his 2004 gubernatorial run, filled his cabinet with smart private-sector types such as Earl A. Goode (the former president of GTE Information Services and his current chief of staff), and went to work. An executive order giving state workers collective bargaining rights? Ditched. Daniels sold the state toll road to a Spanish-Australian consortium for a head-turning $3.9 billion before the recession (there's self-financed road construction everywhere, itself a lure to business) and put most of the state on the Eastern time zone, ending a history of multiple time zones that drove businesses crazy.

Daniels has the self-confidence of a politician riding high and the data-driven focus of a policy geek. Metrics thrill him, and not surprisingly most of his government tweaks started with an offending number. He saw the number of child fatalities and more than doubled the number of caseworkers, from 696 to 1,590, reducing each worker's load and cutting the deaths by 40 percent. He assessed rising traffic fatalities and increased the number of troopers, cutting deaths to 680 in 2009 from 814 in 2008. The state was spending $37,662 in incentives to create each new job, so he ditched "the worthless" Commerce Dept. The outlay is now $8,701 per new job.

A staunch conservative—he derides President Barack Obama's stimulus package and auto bailouts as "nationalization"—Daniels admits his approach isn't always best. He didn't adequately prepare citizens for the toll road sale to a foreign entity and botched an attempt to privatize the welfare system by trying to force beneficiaries—who are often impoverished and technologically ignorant—to enroll online for Medicaid and food stamps. He doesn't see government as the central investor in Indiana's future but knows there are certain areas in which it can't be replaced; he explains the decision to double child welfare caseworkers, for instance, because, "[you] can't find those in the Yellow Pages."

His aggressive use of private-sector tactics in the public sphere has rankled legislators in both parties, who at times feel they're being treated as underlings to the smartest guy in the room. That hasn't stopped pundits and fellow Republicans from putting Daniels' name forward for the GOP nomination for President in 2012. He doesn't have Sarah Palin's rhetorical fire, and at a shade under 5' 7" he won't look terribly imposing next to Tim Pawlenty or Mitt Romney. Daniels, meanwhile, has perfected a myriad of banal ways to deflect the speculation. But if numbers matter as much as he says they do, consider these: He won reelection by a hefty margin of 18 points in 2008 even as Obama carried the state. And Daniels' current approval ratings are hovering between 60 and 70 percent, while the President's is at 52 percent. Those just might be actionable figures.

    Before it's here, it's on the Bloomberg Terminal.