10/11/2010 02:41 pm ET Updated May 25, 2011

Gov. Mitch Daniels Compares Dangers Of U.S. Spending To Soviet Nuclear Threat: America Is Facing 'Genuine Survival-Level Issue'

Indiana Gov. Mitch Daniels (R), who is often mentioned as a possible presidential contender in 2012, issued a dire warning about the state of the U.S. economy in an interview with the BBC on Monday, saying the country is on the brink of collapse because of its spending.

In the interview with BBC Newsnight's Paul Mason, Daniels calls the stimulus a failure, saying it was "ill-designed." "It's trickle-down government," he said. "The vast majority of these funds were poured into a growing government edifice. We've had this reverse outcome, in which the private sector has continued to shrink, and the government sector has gotten bigger, and that's not a very good formula for long-run success."

When Mason noted that $4 billion has been spent and 10,000 jobs created in Indiana because of the stimulus, Daniels called the jobs number "fictional."

"I have full confidence that the $4 billion is right, and no confidence the 10,000 jobs is right," he added. "Nobody knows."

Daniels then issued an apocalyptic warning about U.S. spending, saying the country is facing a "genuine survival-level issue" akin to the nuclear threat:

DANIELS: I start from a premise that maybe others don't. I believe America -- for the first time other than the nuclear threat of a few decades ago -- faces a genuine survival level issue. My reading of history and of economic history tells me that there are points of no return, past which nations really will not recover to anything like their previous strength. If you don't think things are that serious -- if the arithmetic doesn't speak to you in the same way -- then you wouldn't agree with many of the other --

MASON: Are you saying America is approaching a point of no return? Towards what? Perennial decline?

DANIELS: Decline might not be the right word. It might be very abrupt. It might be very sudden. I'm not predicting that, but it cannot be excluded. Responsible national leadership cannot look at the debt we already have, and the -- These aren't forecasts. It's like when you asked me about the spending and the jobs. The spending is real. It's going to happen. Whether the benefits ever do, we don't know.

Daniels said that in order to avoid disaster, politicians will have to go after some of the "third rails" -- presumably Medicare and Social Security, which many lawmakers have been hesitant to address. "Do we have what it takes to defer gratification, not to deposit on the future and on our progeny, really unfair and unbearable burdens? I happen to think yeah, this little uprising some are so worried about is the first sign that spirit's still alive," he said, referencing the Tea Party movement.

Some prominent economists, such as Dean Baker, co-director of the Center for Economic and Policy Research, disagree with the governor's analysis. "First, the markets strongly disagree with him since the people with billions of dollars on the line are willing to lend it to us for 10 years at just 2.6 percent interest," said Baker. "Furthermore, it is difficult to understand his economic logic in saying that we are near bankruptcy. Relative to its economy, Japan has borrowed about 3 times as much as the United States. Yet, it can still borrow long-term in financial markets at interest rates of under 2.0 percent. It seems like Daniels is scared by big numbers. The U.S. debt is a big number, but so is the size of the U.S. economy. Until he can learn to relate the two, Daniels would probably be better off staying away from economics."

Daniels also sidestepped a question about whether he is interested in taking a leadership role in the Republican Party (such as running for president). "I honestly would prefer to be part of finding the 'what' instead of the 'who,' but I've agreed to keep an open mind," said Daniels.

Last month, Politico reported that Daniels was "holding a series of private dinners with top Republican business leaders, policy hands and donors from around the country since this spring, an indication that he's thinking more seriously about a presidential bid than he publicly lets on. The dinners, which take place at the governor's mansion in Indianapolis, are meant to introduce Daniels to a class of GOP heavy-hitters who could both finance and advise a White House campaign." Daniels has reportedly said that he won't make a decision on running for president until after April 2011. A recent poll found that a plurality of Indiana voters don't believe Daniels should run.


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