op-ed about Mitch in the WSJ...

From Fred Barnes in this weekend's issue of the WSJ...

Interestingly, there's nary a word about property taxes this time!

INDIANAPOLIS -- When Mitch Daniels was elected governor of Indiana in 2004, his role models were Republican governors Jeb Bush of Florida and Bill Owens of Colorado. "They were both solid conservatives who were activists and had done big things," he told me. Now, reform-minded governors -- Mark Sanford of South Carolina, for one -- regard Mr. Daniels as a governor they'd like to emulate.

Gov. Daniels has been energetic and successful, but his achievements have not come easily. The most daring decision, leasing a major toll road that stretches across the state to a foreign company for 75 years, prompted a wave of populist anger and drove down his popularity. And that wasn't his most controversial move. In his campaign for governor, Mr. Daniels vowed to adopt daylight savings time for six months of the year, replacing what some in Indiana, particularly farmers, regard as "God's time." Indiana was one of three states that, for decades, had spurned DST. As governor, he ordered DST to be followed statewide, provoking public protest.

Mr. Daniels, 58, is an unusual politician. In 1988, he turned down an offer to replace Dan Quayle in the U.S. Senate after Mr. Quayle had been elected vice president. Gov. Robert Orr had been eager to appoint him. Mr. Daniels says "[i]t wouldn't have worked." Instead, he stayed in Indianapolis as an executive with Eli Lilly, the pharmaceutical firm. Then, in late 2000, he got a call from Andy Card, soon-to-be chief of staff in President Bush's new administration, and was offered the job of either congressional liaison or domestic policy adviser. Mr. Daniels said no, but agreed to run the Office of Management and Budget. "That was the one job I was interested in," he said.

Mr. Daniels distinguished himself by clashing with Republican spenders in Congress -- Sen. Ted Stevens of Alaska, an earmark king, groused to the White House about his penny-pinching. Mr. Daniels quit in 2003. While driving home, he called Republican leaders in Indiana to say he was going to run for governor in 2004.

In June 2006, Mr. Daniels opened eight bids for leasing the 157-mile Indiana Toll Road, accepting the $3.8 billion offered by a consortium of Macquarie Infrastructure Group of Australia and Cintra, the giant Spanish construction firm. The lease, he insisted, was "the right thing to do," since the consortium agreed to upgrade the deteriorating road, add new lanes and install E-Z Pass computer billing to keep traffic flowing through toll booths. But polls found Indiana citizens disapproved by a 2-1 margin.

Now, 15 months later, Mr. Daniels has been vindicated: The money from the lease will pay for a 10-year road-building program that requires no new taxes or borrowing. Construction has begun on projects originally planned two decades ago.

Had the state continued to operate the tollway and rely on the gasoline tax to pay for road work, Indiana would have fallen further behind in making critical highway repairs. "The gasoline tax doesn't come close anymore," the governor said. "The need keeps growing." In one year, interest on the $3.8 billion raised by the lease brought in roughly $250 million, more than the state earned running the tollway for a half a century.

Mr. Daniels has also privatized thousands of state jobs and numerous state functions. Prisons used to cook their own meals; by outsourcing food preparation, he said, the state is saving $14 million a year. "And the food got better." Administration of the welfare program was turned over to an IBM-led consortium, with savings estimated by Mr. Daniels at $500 million over 10 years. He also refused to extend an executive order that had forced state employees to pay union dues. Once the dues became voluntary, 85% of the state work force stopped paying.

Still, conservatives are uneasy with Mr. Daniels because he has supported some tax hikes. He calls himself "a washed-in-the-blood supply sider," but proposed, as one of his first acts as governor, a 1% surtax on incomes of more than $100,000 for one year. "I made a mistake," he said, "especially springing it as a surprise." As luck would have it, the legislature rejected the tax hike and balanced the budget with spending cuts.

Mr. Daniels also persuaded the city of Indianapolis and seven surrounding counties in 2005 to raise their restaurant tax by 1% to finance a new football stadium for the Super Bowl champion Indianapolis Colts. "It was that or nothing" -- no tax, no stadium -- he said. The stadium is expected to be finished in time for the 2008 season.

This summer, the governor proposed creating a new health-insurance program for poor adults who constitute the "core uninsured." Because he is financing it with a 44-cent per-pack increase in the cigarette tax, the proposal drew fire from Grover Norquist of Americans for Tax Reform. Mr. Daniels was undeterred, arguing that the program will have the added benefit of reducing smoking. It's now awaiting only final approval by Mr. Daniel's old bailiwick, OMB.

"I know my supply-side catechism," he explained in an interview with me. "A consumption tax on a product you'd just as soon have less of doesn't violate the rules I learned under Ronald Reagan." Mr. Daniels was political director of the Reagan White House from 1985 to 1987. Now as governor, Mr. Daniels has his own set of political rules that include, he implies like Reagan, going along with a tax hike when there's no alternative.

Mr. Daniels is not the perfect model of a conservative governor. But he's bold, he's lured Japanese companies to Indiana, notably Honda, and stirred a stagnant economy. And he's privatized inefficient state functions despite union opposition and minimal public support. Other governors can benefit from what Mr. Daniels learned the hard way: Don't propose tax increases when spending cuts are possible.

He is running for re-election next year, but not with much relish. "I was never obsessed with holding office," he says. That may be good. Because some conservatives dislike Mr. Daniels, Democrats think there might be an opening to defeat him. One leading Democrat -- Jim Schellinger, an architect in Indianapolis -- has already raised millions of dollars to run against Mr. Daniels and others are lining up to run as well. So far, it's Mr. Daniel's race to lose. It's likely he'll spend four more years being envied by his fellow governors.