In the early days of the Bush Administration, White House budget director Mitch Daniels sent a clear message to fellow officials by adopting as his anthem the old rock song You Can't Always Get What You Want. Now, the man dubbed "the Blade" by President Bush is learning he'll have to work harder to get what he wants, too.
Daniels' world of number-crunching has been flipped upside down in the past six months. A recession exacerbated by September 11 turned what Bush once called "surpluses as far as the eye can see" into deficits at least until 2005, according to Daniels. What's more, tens of billions of dollars in unforeseen spending for the war on terror and homeland defense have been a big-time budget-buster for a President who promised to hold the line on spending. As a result, the hoped-for 4% cap on spending growth may balloon to 11%. And a huge, back-loaded tax cut could complicate efforts to restore postwar fiscal sanity. Unless the White House and Congress hold the line, Daniels warns, "we will lose touch permanently with balanced budgets, surpluses, and debt reduction."
TRUE GRIT? Tough words, indeed. But Daniels, whose formal title is director of the Office of Management & Budget, will need real grit to reverse the pessimistic fiscal outlook. Some Washington watchers wonder, however, if the blunt, sometimes acerbic Hoosier is the right person for the job. Daniels has alienated some Bushies, and he has raised congressional hackles by decrying the porcine behavior of Capitol Hill. Among those nursing a grudge: House Appropriations Committee Chairman C.W. "Bill" Young (R-Fla.), senior committee Democrat David R. Obey (D-Wis.), and the GOP's top Senate appropriator, Ted Stevens of Alaska. "The White House is saying there's pork in here, there's pork in there. Like hell there is," thunders Obey. And the situation is likely to deteriorate when the Administration unveils its 2003 budget in February. "Daniels will be trying to pay for those tax cuts [Bush] passed last year by cutting the gizzards out of everything," says Obey.
A newly diplomatic Daniels allows that "I said a couple of things that weren't constructive" and promises to woo "folks that I got sideways with." It might take some doing. Congressional sources say both Young and Stevens sent the budget director a message by "taking their time" before responding to Daniels' apologies.
Despite the dustups, President Bush retains full confidence in Daniels, a former Reagan White House political director, think-tank president, and senior vice-president at Eli Lilly & Co. Although not an economist by training, Daniels remains the President's preeminent adviser on budgetary matters, eclipsing even economic policy adviser Lawrence B. Lindsey and Treasury Secretary Paul H. O'Neill, a former deputy budget director. In the spending debate, "Mitch Daniels is pretty much running the show, to the exclusion of the others," says Representative Robert T. Matsui (D-Calif.), a senior member of the House Ways & Means Committee.
The strength of the OMB director will be tested when Congress begins reviewing the Administration's budget blueprint in February. Already this year, a projected $281 billion surplus dipped to $158 billion in the OMB's latest estimate in August--and that's before the fallout from September 11. Economists expect the red ink to start flowing by 2002. In preparation for tough times ahead, Daniels already has met individually with each Cabinet member to deliver a message of wartime austerity. While the White House, in the case of homeland security, "will break all ties in the direction of `yes,"' other spending requests will be carefully scrutinized, Daniels has warned colleagues.
That doesn't mean a blank check for anti-terrorist initiatives. The Blade promises to slice and dice any agencies that try to slip in new spending in the guise of war-related emergencies. Administration sources say Daniels is scrutinizing "emergency" requests by the Environmental Protection Agency, the Transportation Dept., and the Smithsonian Institution. Case in point: the Smithsonian's $35 million request to pay for additional security measures at two museums that have not yet opened.
WHIPPING BOY. Some departments already are making plans to sacrifice. The Interior Dept., for one, is considering a plan to outsource half its functions within the next five years. Interior Secretary Gale A. Norton, in a Nov. 26 memo, said 3,500 government jobs will be at stake in the next two years as Interior begins to allow private contractors to compete against the agency for delivery of services. And that's just the beginning if Daniels has his way. He's planning to use the fiscal crunch to push an ambitious reform agenda, including privatization of more federal services, management efficiencies, and consolidation of overlapping programs. One likely target: job-training initiatives. Daniels won't get specific, but other officials predict the Bush budget will boost non-war spending by just 2% to 3%.
Such tightfistedness will further anger Daniels' detractors. Indeed, he has become a whipping boy for critics who are afraid to attack a popular Commander-in-Chief. "Part of the OMB director's job is to be a spear-catcher for the President," says Robert L. Bixby, director of the Concord Coalition, a fiscal watchdog group. "Daniels is exactly the right person to be doing that. But he's thrown a few spears, too."
Despite his vow of civility, Daniels is likely to chuck a few more. This is no time for "business as usual," he warns. And while he is sure to face resistance from bureaucrats and lawmakers, the budget boss says he's willing to risk bruising egos. "Your options are to make the best case you can or throw in the towel before the first bell rings," he says. Ever the fighter, Daniels appears eager for the coming brawl. It looks like it's going to be a bloody one.
By Richard S. Dunham, with Lorraine Woellert, in Washington
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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