Debt Politics

The Law & Liberty Podcast

In the wake of the 2024 election, former Indiana Governor Mitch Daniels joins James Patterson to talk about the one issue politicians all try to avoid: the national debt. Though we have an impending debt disaster, both sides of the aisle avoid the hard choices that will eventually need to be made. Today, Daniels worries, it may be too late for a soft landing. We chose not to find solutions, and we’ll start living with consequences very soon. Daniels and Patterson also touch on the state of higher education, the election, and our evolving partisan dynamics.

Related Links:

Mitch Daniels, “The Day the Dollar Died,” Washington Post
Mitch Daniels, “I’m Talking to You,” Law & Liberty (2022 Purdue University Commencement Remarks)
The Future of Liberty, hosted by Mitch Daniels
Vance Ginn and Thomas Savidge, “Two Rules to Tackle America’s Debt,” Law & Liberty
Samuel Gregg, “David Hume and America’s Debt Disaster,” Law & Liberty

Transcript

James Patterson:

Welcome to the Law & Liberty Podcast. I’m your host, James Patterson. Law & Liberty is an online magazine featuring serious commentary on law, policy books and culture, and formed by a commitment to a society of free and responsible people living under the rule of law. Law & Liberty in this podcast are published by Liberty Fund.

Hello and welcome to the Law & Liberty Podcast. I’m James Patterson. Today is November 8, 2024. Today, our guest is Governor Mitch Daniels. Mitch Daniels served as a two-term governor of the state of Indiana from 2004 to 2012, and as the 12th President of Purdue University from 2013 to 2022. He currently serves as a distinguished scholar and senior advisor at Liberty Fund. He was elected governor in his first bid for any elected office and then reelected with more votes than any candidate in the state’s history. At Purdue, Daniels prioritized student affordability and reinvestment in the university’s strengths.

He ended 36 straight years of rising prices by freezing tuition and mandatory fees at 2012 levels for all students. The freeze is still in place today. As a result, the total cost of attendance is lower today than in 2012, even without adjusting for inflation and aggregate, student borrowing has declined by 37 percent. Prior to becoming Governor, Daniels served as Chief of Staff to Senator Richard Lugar, Senior Advisor to President Ronald Reagan, and Director of the Office of Management and Budget under President George W. Bush. He also was the CEO of the Hudson Institute and had an 11-year career as an executive at Eli Lilly and Company. Daniels earned a bachelor’s degree from Princeton’s Woodrow Wilson School of Public and International Affairs, and a law degree from Georgetown. He’s the author of three books and a contributing columnist to The Washington Post. He and his wife Cheri have four daughters and eight grandchildren. Congratulations. I should mention that he is also the host of the podcast, the Future of Liberty, here on Liberty Fund. My goodness, Governor Daniels, welcome to the Law & Liberty Podcast.

Mitch Daniels:

After that long and dreary recitation, James, I hope we have some listeners left. If they’ve all fled, I would understand but thank you. It’s very gracious of you.

James Patterson:

I just read what they sent me, Mitch. … No, sorry, Governor Daniels. As a Native Texan, I get a little informal. So let’s get started. We just had an election, but I wanted to frame the election around something that I know is important to you and should be more important to the people of this country. Last September, you wrote an op-ed for The Washington Post titled, “The Day the Dollar Died is Coming. What’s the plan?” I thought we might open with you talking about the argument you present there and whether the results of the recent presidential election might have changed your views.

Mitch Daniels:

I haven’t changed my views because my views are based on arithmetic. And it’s pretty inexorable and certain. No, I mean, I thought a sadness of the most recent election was that what I consider the biggest threat facing the country, and I’m not alone in that, never got mentioned by either candidate and when it did … I’m talking about our national debts we’ve accumulated and are accumulating, and when it came up even tangentially, it only served as a platform for the two candidates to promise to make it worse. That is not to touch the so-called entitlement programs and things that will have to be touched eventually if we’re to avoid national ruin. So I understand why practicing politicians run away from this question, but as a nation, we won’t be able to do that much longer.

James Patterson:

Actually, that leads to my next question. Why do you think issues like the debt and budget deficits don’t play a bigger role in our politics despite the fact that we have a pretty proximate disaster running here? Is it that it’s just easy to kick the can or maybe they don’t even know?

Mitch Daniels:

It is too easy. It’s too easy to demagogue the issue. We’ve not found, or no national politician has found a vocabulary or chosen to use one that tries to explain to people that, for instance … people who are worried about this and want to act on it aren’t out to undercut the safety net and those who rely on it, we want to save it and save it from devouring itself, for instance. And so each person, it’s not that a few people haven’t tried to get Americans to think a little more about the future, a little less about the present, more about their children, a little less about themselves. It’s just that each time somebody stuck their head up tried to do that, it’s been a political cheap shot to take it off. And that doesn’t speak well of our maturity as a self-governing people. But you know this old saw that we won’t act on problems until there’s a crisis, I suppose is playing out again.

Before I wrote the piece you just mentioned, I’ve written a bunch and spouted off on this for many, many years. And during those years, I’ll say the last 15 or so, we’ve unfortunately I think moved past the point where we can deal with this without some pretty wrenching changes. We had that opportunity. If we’d gotten started back for instance, when the Simpson-Bowles Commission reported before President Obama walked away from it and torpedoed it. If we’d gotten started then there’d have been some difficulty as we tried to keep the promises we’ve made and social security and Medicare and other programs, but we could have moderated that. We certainly could have protected the most vulnerable people better than we’re going to be able to now. So just to compound this problem, James, something else has happened in those 15 years that … and I really don’t have an answer for this, and that is that our national defenses have atrophied.

While our adversaries have gained strength, and aggressiveness and appear to be allying with each other. And so we face a twin dilemma, it seems to me right now. If you consider as I do, the two fundamental duties of government, the reasons government comes into being in the first place, first to protect the safety and order of those to whom it’s responsible. And secondly, to dispense of collective resources. Those we confiscate from free people for what we believe to be important common purposes. We’re defaulting on both of those and now we have huge repair work to do on both fronts. And those two fronts are inconsistent with each other. So not trying to ruin everybody’s morning or whatever time the day they’re listening to this, but I think we have to face these challenges very squarely. And I hope despite the campaign that we just saw that the next administration and the next Congress will do so.

James Patterson:

How did we end up in this mess? It’s very unusual for nations historically to go into such debt during peacetime. I mean, certainly during some of this period in the post-war years we were at war, but not all the time and not necessarily at costs that would necessarily entail the size of the debt we have now.

Mitch Daniels:

Good question. It’s a reflection, I guess of the advance, if you call it that, of civilization. No country I can … no nation, I can think of that has reached the point we have reached. This year, we reached a more than symbolic threshold as interest payments on the debt surpassed our investment in national defense. And no nation that has gotten to that point before has come out of it well—in fact has really survived as an important world power. But those throughout history that have passed that point generally got there because of wars. England, fighting France and Habsburg Spain, and so forth. And we got there with the—I’m willing to credit—the best of intentions, trying to make certain that people were not destitute in their old age, things like that, but without the will, as it turned out, to fund those programs adequately. So now people are going to have to be told that many of the promises that were made can’t be fully kept and that many of the premises that they thought they understood were not true. I’m talking about the idea that somehow people have paid for their own retirement and so forth through social security, which is not the case for most.

James Patterson:

Yeah, and actually on that subject. In 2023, Nationwide sponsored a survey run by the Harris poll, and the results were pretty astonishing for people that don’t follow this stuff closely. Three fourths of adults over the age of 50 were worried that social security would run out in their lifetime, and that’s up from 66 percent 10 years ago. Additionally, one in five adults over 50 say they have no source of retirement income in addition to social security, and that’s up from 13 percent 10 years ago; and nearly half of Americans had a pension in addition to Social Security 10 years ago, but that’s only 31 percent today. What’s going to happen to these state-run retirement programs in the coming years? Are these Americans right to be worried?

Mitch Daniels:

Yes, they are. I think when—and it’s no longer if, unfortunately, as I said, we’ve procrastinated too long. When we’re not able to keep all the promises, then finally, we will start means-testing these programs in effect. That is to say, reducing or eliminating payments to the wealthiest Americans. That never made any sense in the first place to send a check every month to Warren Buffett or somebody, but by the architects of the program, they believed that they couldn’t honestly make this a welfare program or a program for the less well-off because it wouldn’t have enough political support. I don’t believe that. I think Americans will continue to support it, but that’s going to have to change, that’ll be one of the first things to change.

But you’re really raising the issue that’s always troubled me the most. Our debt is going to be—is already I think—but is going to be a serious economic drag on the country, as the government is forced to borrow more and more of the money that could otherwise be invested in the next technology or the next innovation or the next factory. That’s an economic problem. But I’m worried even more about the social costs, the sense of betrayal that I think will happen when these chickens roost. People will have a legitimate reason to say that they were misled and not well-served. I think history will judge harshly those who were in positions of national authority over the last decade or two since somebody last tried at least address this problem.

James Patterson:

Yeah. I always like to have some questions that I want to ask and you’re going in exactly the order here. This is going to really change our politics. We just went through what a lot of people were calling a vibes election in which the Democratic candidate, Kamala Harris, really avoided taking very specific stances on a lot of issues and the victorious Donald Trump avoided talking about at least this issue and focused on issues like immigration. I mean, when the chickens come out to roost as you put it, they’re not going to be able to avoid these things with vibes or alternative policy preferences. So how do you see this changing our politics?

Mitch Daniels:

Well, it’ll be a big shakeup, and these happen in history. The current generations haven’t seen it, but they’re inevitable ultimately. The last such change would’ve been the Depression and the New Deal, and it changed our politics. This will happen again, and it can be positive on the backside. We’ll just have to hope it is. But this is the story of history, with nations or civilizations rising to leadership and prominence, running into crisis of one kind or another. The question is, how do the elites of that time handle or not handle the challenge? And usually it results in the replacement of one set of elites by another.

Despite the fact that I wish that the candidates and the campaigns had confronted this issue you’ve just asked about directly or confronted it at all, I do think that this election was settled on really important grounds. The, I think relentless suppression of free speech and inquiry; people afraid to say what they think—what it turns out, a majority of people think about certain questions. I think the so-called vibes, that election you talked about to some extent meant that, that people just felt they were tired of being told that they were sexist, racist, misogynist, all these things for believing what they thought to be common sense, and turns out a majority of their neighbors thought the same.

James Patterson:

It’s especially difficult for, as you said, a majority of Americans to endure this when it’s pretty clear that experts at administrative agencies don’t know what they’re doing and want to conceal this fact by engaging in limits on free speech. And that’s what worries me when I was asking you the question about the politics of the national debt, is that there’s such little trust in much of the government that it’s unclear that people will be happy with any decision that Congress and the President would have to make. Or even worse, they’re right to suspect that Congress may not have the people in office that can make good law to deal with this. I don’t mean to be too pessimistic, but you’re the one with the experience in politics, so maybe let me know if I’m a bit too doom and gloom.

Mitch Daniels:

I can’t say that you are, but every new administration is a chance to turn a page and do things differently. There appears to be, as we’re speaking here, at least a temporary majority that is in a position to act. It’s been my observation that the time of greatest peril for political actors is the time of greatest triumph. They tend to over-read. The last administration certainly did, won a very, very narrow victory on the clear impression that they would return the nation to something more like normalcy, more like consensus, and instead veered into extremist policies on issue after issue. So I think they’re paying the price right now for that. The new administration, the new Congress could make the very same mistake if they aren’t thoughtful about it. But again, I think we are facing this dual threat, not to even mention other problems the nation is host to, this dual-threat that’d be very hard to reconcile the necessary rebuilding of our national security at the very time when we are borrowing money in unconscionable amounts.

James Patterson:

Well, what do you think are at least the best or the most likely policies for handling the national debt or the ones that you’d like to see?

Mitch Daniels:

I think the best available option that I’m aware of that’s practical would be the creation of another commission, this time with teeth. Congress can’t avoid the up and down vote on a package that’ll have all sorts of things people regret or dislike in it—there will be something for everybody to hate. And that’s an idea that’s been out there for a while. It has supporters. I don’t know whether it can gain any legs in the current Congress or not or with the President. But in terms of a practical near-term answer, I think that’s the one that would have a chance to at least start nibbling on the heart of the problem. The standard processes of Washington have proven that they’re not well configured to do that.

James Patterson:

Yeah. One of the ones that you sort of hinted at earlier about Warren Buffett getting checks reminds me of a story when I first moved down here to Ave Maria, which is right next to Naples, a major retirement area in Florida. I was getting my haircut at a salon/barbershop and a woman who came in a late model Mercedes explained to the woman cutting her hair that she just got her social security check and was going to go spend it at the Seminole Casino.

Mitch Daniels:

Yeah. I know.

James Patterson:

And I was like, the lady cutting your hair is paying her social security for you to drive your G-Wagon to the casino. That’s a lot to take in.

Mitch Daniels:

Odds are that the Mercedes owner didn’t even consider who was paying, who was funding that check of hers. She may be one of those millions of Americans who still believe that somehow, it was their money, they parked it themselves and now they’re just taking it out.

James Patterson:

Yeah, that is a common misconception now, unfortunately.

Mitch Daniels:

Well, it was intentional. It’s called in the social security literature, the noble lie, not clear to me how lies are ever noble, but the idea was we have to tell people that so they will maintain support of this program and that old myth has died very slowly and is still alive in too many places.

James Patterson:

So we’ve seen actually a lot of surveys where you have people who are millennials, Gen X, even Gen Z, don’t actually have any expectation of receiving anything like the retirement security that baby boomers came to expect. Do you think maybe that might actually make this easier to deal with since people have less of a stake in the idea that they’ll get this money?

Mitch Daniels:

It’s healthy and it’s realistic on their part, and if they are diligent about saving more money for their own retirement or their own later years, that’s a good thing in more than one way. But it won’t solve the problem that we have and will have more and more and more people taking out of the till and fewer and fewer people relatively paying in. And if the economy and where they’re earning their money doesn’t grow very, very strong, they won’t be paying in enough to forestall the day of reckoning. But no, it’s the right conclusion for today’s younger generations to come to and I hope they act on the obvious implications of it.

James Patterson:

So shifting to another subject that I know a lot of listeners to this podcast think a lot about, which is higher education. You were president of Purdue, which made you technically the boss of two of my friends from graduate school who I want to name, but they were very pleased with the administration you provided. What is it that conservatives maybe don’t understand or know about large research universities like Purdue?

Mitch Daniels:

They know a lot these days and that’s one reason that there’s been such a sharp decline in confidence, trust, support for higher ed. It’s come down as you know very sharply nationally and that decline is driven by people who describe themselves as conservatives, Republicans or otherwise philosophically on that side. So you say what don’t they know? They may not know how monolithic and how deeply entrenched the status quo is.

It took a couple, three generations to get to a point where the places which are supposed to be the sanctuaries for free inquiry and the competition of ideas and so forth, which in fact have as their raison d’etre, the advance of knowledge and knowledge only advances when you have different points of view. When everybody thinks the same thing, you get stasis. And so I think that people see the more flagrant examples of alternative viewpoints being stifled. They may not realize how many are never expressed just because it would be career limiting to do so.

They may not fully appreciate how intimidated the students are, not just by the faculty by the way, but when you ask them, they’re afraid of their own fellow students sometimes as much as the professor in front of the class. So there’s all that. Now, people don’t need any instruction in the inefficiency of higher education, the cost, and so forth. They see that close up and you’re seeing behavior change. You’re seeing rates of college going declining as people have belatedly come to question the value: “Am I getting enough for the high amount of money I’ve been asked to pay?”

James Patterson:

The trouble with making that assessment about the value is that as a lot of these younger Americans learn about what goes on at these campuses, they are a little afraid. They don’t want to have to take stands on issues they don’t fully understand or maybe is in the minority of what they perceive that college to have. And worse, they are more than aware of how easy it is to have themselves publicized all over the world just by being filmed at an event. And so the costs often seem to be not just in terms of the amount of student debt you’ll have to pay down, but also in sort of psychic or reputational costs. What is it that university presidents should be doing to deal with order on campus?

Mitch Daniels:

In all honesty, I don’t know how much of the flattening or decline in college-going relates to the ideological character. I mean, I know there are a lot of students who choose which school to go to on that basis if they’re aware enough or they’ve learned enough about the intellectual climate or environment. But it’s clearly being driven by the run-up in costs over such a long period of time matched on the other side of the equation, unfortunately, by a decline in rigor and quality.

The figures around grade inflation make you rub your eyes. There are colleges now where the average, average grade is 3.5, [3.]6, [3.]7 [3.]8. You ask yourself, how bad does a student have to be to get a B? In honesty, I have felt for a long time that the notion that we were promoting in this country, everybody ought to go to college, was flawed. And that we were encouraging too many young people to go that route as opposed to learning something beyond high school. And you can see the casualties in the low graduation rates that we have and way, way too many of those people did not advance themselves in life by spending one or two years in a school.

The odds are what all they came out with was some debt, or at least the lost opportunity to have been doing something else more productive in that time. So anyway, I think that the shakeout we’re seeing: we’re seeing schools shrink, we’re seeing schools merge, we’re seeing some schools disappear. It’s sad each time it happens, but it was absolutely understandable and probably necessary. I hope the survivors draw the obvious conclusions.

James Patterson:

Yeah, we’re two years away from the demographic cliff. We were talking about the fiscal cliff earlier. 2008, we had the housing crisis and the Great Recession begin and that’s when the American birth rate took a nosedive. And in 2008, you had 18, the average college-going age. It’s 2026 and that’s when the real deluge will hit and a lot of places are going to close. It’s weird because here at Ave, we’ve got maximum enrollment and a big reason for that is that we’re a confessional school that remains confessional. There are a lot of religious liberal arts schools in the mid-century back during the heyday of the Higher Education Act and GI Bill benefits that pivoted away from that. Is this maybe what you see the future here being: differentiation of services as well as maybe closures?

Mitch Daniels:

Well, this is how efficient markets operate. I’ve said to colleagues in more than one of the lives I’ve led. In business, our business hit a very prolonged period of difficulty. I was employed by the people of the state of Indiana at times during a period of very difficult national recession and so forth. And I made the, I think, obvious point that these are the times that sort the winners and losers, sort the best from the also-rans.

And that a business, a state, in this case, an institution of higher education, that recognizes what needs to be done, has the will and fortitude to do it, not only can survive but come out with a higher, let’s say, market share than it had. So I’m not surprised you’re growing. Purdue University is bursting at the seams. In fact, we’ve reached what I had always thought—I mean, we grew by 30 percent the years I was there, while the quality of students incidentally kept going up. And at our school, we have reached what I believe is just about the capacity that makes sense from an academic and quality of life standpoint. So we’re going to grow elsewhere now.

But that I think is what you’re most likely to see. And there will be schools that do very, very well that respond to the felt need and to the problems that have plagued the system most recently.

James Patterson:

So just taking a step backwards and just more talking to you about your own life and your own experiences as we near the end of the podcast.

Mitch Daniels:

This will drive away any remaining listeners probably.

James Patterson:

Well …

Mitch Daniels:

But let’s try.

James Patterson:

Now I’m self-conscious. Now, I don’t know if I should ask this question. Tell me about your hobbies. No, no. How has politics changed since you were in the mix?

Mitch Daniels:

Immensely. Yeah.

James Patterson:

Yeah.

Mitch Daniels:

One clear difference is there are enormous technological differences, so much conducted digitally and so forth now. It was not that long ago that I was in this world and I resisted using the so-called social media and so forth. Now it’s probably two-thirds of the game, I guess. So there’s all that. But of course the tenor of it has changed. I’ve said so often, right up until I was done, certainly in none of the three campaigns I was party to, a primary and two general elections—the only time I ever ran for public office—we never made a negative commercial. And I made a thing of that. I used to say that. It was an absolute guaranteed applause line right up to the end of 2012 to make this point.

I worked for Ronald Reagan many years ago, I used to quote him who said to a couple of us one day when we got a little too hotheaded, he’d say, “Wait, boys, we have no enemies, only opponents.” Which was a good rule, I thought, to try to operate by. And I had a few lapses, but generally tried to do that. And to your question, we conducted our campaigns that way. I used to say “we will show respect for our opponents, whether that respect is returned or not.” In a way that was about, my view, we were campaigning to govern not merely to win an election.

And we intended, and I claim that we made, enormous change in our state throughout our time there in service. And I thought it was essential, I used to say big change requires big majorities. Look at this last administration, they won by a whisker and then jammed enormous change down the throats of the American economy and the American people. And I think that’s, first of all, bad practice. And secondly, it’s not a way to make that change endure because if it spurs a reaction like it just did, a lot of that, what you did is going to get undone. And so that’s a big, big difference.

So for today’s candidates, it would be folly, I suppose, for somebody to campaign as we did. You would probably lose after an unending barrage of criticism and sometimes falsehoods and all, you’d spend a lot of money trying to defend and correct and refute these things. There would be somebody, this was the case back then, we always had people come around saying, “Oh, you can’t win like that. You got to tear that other person apart.” Happily, we managed to succeed without doing that. But I confess that that’s the currency of winning politics today.

James Patterson:

Yeah, the transition to social media really does seem to have not just made it more required for candidates to be on there, but also seems to have captured the imaginations or even the perceptions of the world by people on campaign staff. I remember the article about Harris’s failed 2020 campaign, talked about how her entire staff was very online. And I was worried about that happening with her this time, but it appears like her entire campaign staff was gone. They just didn’t have events for her or good messages for her. But most of the time, I do think there is this issue where people perceive the political reality of the world too often through things like X or Twitter or Instagram.

Mitch Daniels:

Well, by now, they’re bookshelves full of analysis about this, it’s come on us very, very quickly, but still its effects and I’m hard put to identify too many positive effects. On polarization, people both seeking out and being fed by some algorithm of things that simply confirm their own view.

James Patterson:

Yeah.

Mitch Daniels:

All sorts of things like that, the tone—we all know people will say something at a computer keyboard, they wouldn’t say to somebody in person, all of that. And it’s a reality. And one has to hope that those who would govern us well can find a way to succeed in that reality and yet lead us in a way that is not so polarizing, not so sometimes superficial. Because we’ve got what I always called 50-caliber issues that we have to deal with and that has not, as some of your questions illustrated, driven the content of the campaigns we have.

And granted, state-level elections can be about other things, they don’t have quite the yes-no binary questions that federal candidates have or are required really to speak to, they’re more practical. But I always saw our campaigns as one-of-a-kind opportunities to explain to people what it is we would do if we were hired. And if you do that and then happen to be chosen, you have every right and some basis then to move forward on that program. And nobody can claim that they were surprised or misled in some way. And so that is not, right now at least, the incentive that our national candidates seem to see in front of them. And I don’t fault them for dealing with reality as they find it.

James Patterson:

Thank you so much for coming onto the Law & Liberty Podcast, Governor Mitch Daniels. I hope we have you on again soon. And again, those of you listening to this, please also listen to his podcast, The Future of Liberty. I have that right, right?

Mitch Daniels:

That’s correct.

James Patterson:

All right. Put also on by Liberty Fund. Thank you so much, Governor.

Mitch Daniels:

Appreciate it.

James Patterson:

We’ll see you guys next time. Thanks for listening to this episode of Law & Liberty Podcast. Be sure to subscribe on Apple, Spotify, or wherever you get your podcasts. And visit us online www.lawliberty.org.