Mitch Daniels

Mitch Daniels asked why his state couldn't improve its finances and shake up the bureaucracy.

Eight minutes and 36 seconds. That's now the average wait time for customers at the Indiana Bureau of Motor Vehicles. It's a number Mitch Daniels knows by heart. When he took office, the bureau had a well-deserved reputation for poor service. "People showed up," the governor says, "with their lunch box, a copy of "War and Peace" and a bad attitude." Now? The bureau just won a national award for customer service. Says Daniels: "We have to add, 'No kidding.'"

The same could be said about Indiana's government, which is running smoothly despite the economic woes hitting much of the Midwest. When Daniels, a Republican, ran for governor in 2004, Indiana was using budgetary gimmicks to paper over its deficit. "Indiana had been steadily sliding in the wrong direction," says Steve Goldsmith, a former mayor of Indianapolis and now a professor of government at Harvard University. "Many of the state agencies were underperforming." Today, the story is dramatically different, thanks in large part to the governor's leadership.

Daniels wasn't the most likely person for Indiana to look to for solutions. He had plenty of experience — in the Reagan White House, as an executive with Eli Lilly and, most recently, as the head of President Bush's Office of Management and Budget, where he came to be known as "the Blade." But Daniels had never held elected office before.

The new governor quickly ensnared himself in two controversies. He wanted Indiana to join virtually every other state in adopting Daylight Savings Time. Plus, he wanted to lease the money-losing Indiana Toll Road to a private company to fund infrastructure improvements. Daniels' approval rating plummeted, but he kept pushing. The legislature agreed to the time change in 2005 and the toll-road plan in 2006. Today, while other states struggle to pay for road projects, Indiana has the money it needs. The state also can boast of a budget surplus and a new AAA bond rating.

Daniels' politics are conservative; his governing style is anything but. Last year, he won approval of a bold health care plan that uses health savings accounts to provide care to low-income Hoosiers. This year, he passed massive property tax cuts. He's also put in place all-day kindergarten, established merit pay for state employees and privatized the state welfare system. The jury is still out on some of these efforts, of course, but no one could accuse the governor of timidity.

Meanwhile, Daniels has shown himself to be ideologically flexible. He proposed a temporary income-tax increase in his first year, and he funded his health care plan with a tax increase on cigarettes. "We are believers in limited government," Daniels says, "but that imposes a responsibility to make certain, within its proper limits, government is as effective as it can possibly be."

— Josh Goodman
Photo by Stephen Hill