GOP Gov. Mitch Daniels: ‘At Some Stage’ We May Need ‘A Tax Increase’

Daniels2Since President Obama took office, Republican leaders have united behind a phony message of fiscal responsibility that simultaneously demands tax cuts and deficit reduction — two contradictory policy prescriptions. Despite their fear mongering about the size of the deficit, these deficit frauds have refused to even consider letting the Bush tax cuts for the wealthy expire, let alone entertain the idea of actual tax increases, which many economists believe are necessary to pay down the debt. Rep. Phil Gingrey (R-GA) even called for a “pledge of your sworn sacred honor” and a “covenant…in blood” from lawmakers to not let the Bush tax cuts expire.

But in a Newsweek profile, Indiana Gov. Mitch Daniels (R), a potential Republican presidential candidate in 2012, said he is willing to have a “grown-up conversation” about tax hikes, and that increases should not be taken off the table:

For decades, Republicans have railed against deficits and debt, but they’ve been too afraid of voter backlash to venture beyond marginal measures (“wasteful spending”). Daniels didn’t get the memo.

Let’s raise the retirement age, he says. Let’s reduce Social Security for the rich. And let’s reconsider our military commitments, too. When I ask about taxes—in 2005 Daniels proposed a hike on the $100,000-plus crowd, which his own party promptly torpedoed—he refuses to revert to Republican talking points. “At some stage there could well be a tax increase,” he says with a sigh. “They say we can’t have grown-up conversations anymore. I think we can.”

Daniels, who served as the director of the Office of Management and Buget (OMB) under President Bush, has cultivated an image as a pragmatic, technocratic, fiscal conservative, prompting conservative New York Times columnist Ross Douthut to dub Daniels “America’s Best Governor.”

As Newsweek’s Andrew Romano notes, Daniels has won praise as governor by lowering property taxes, creating a budget surplus, and insuring 45,000 low-income residents through a statewide healthcare scheme — but in order to do these things, Daniels had to raise taxes. One of his first acts as governor was to propose a temporary one percent tax hike on anyone earning more than $100,000, a move that was controversial among conservatives at the time.

But while Daniels may be a truer fiscal conservative than many of his GOP colleagues, as OMB director, he was “one of the main designers and defenders of Bush’s $1.35 trillion tax cut,” which are responsible for a significant portion of the current deficit. And as Matt Yglesias notes, Daniels recently-proposed economic stimulus plan is “very much the concatenation of vagueness and bad math” and “wholly unworthy of the kind of praise” some liberal pundits have given it.