WASHINGTON -- Gov. Mitch Daniels (R-Ind.) is known as a strong fiscal conservative, a top selling point for a potential presidential run. But before he was governor, Daniels was the first budget director for President Bush during a time when the country went from a budget surplus to a budget deficit, and it's likely that he'll have to explain how that fits with the philosophy he touts should he decide to jump into the Republican field in 2012.
On "Fox News Sunday," host Chris Wallace pressed Daniels on this point. "When you came in, this country had an annual surplus for the first time in 30 years of $236 billion. When you left, two and a half years later, the deficit was $400 billion. You were also there when President Bush launched his Medicare drug benefit plan that now cost $60 billion a year. I know there was a recession, but do you think it was wise -- at a time when we were fighting two wars -- to have two tax cuts and launch a huge new entitlement?"
Daniels said deficits during that time were inevitable. "It was a recession, two wars and a terrorist attack that led to a whole new category called homeland security," he said. "So nobody was less happy than I to see the surplus go away, but it was going away."
While Daniels defended the Bush tax cuts and said he was proud to serve Bush, he also distanced himself from the administration:
"Chris, I was proud to be part of that administration. Yes, I think the original tax cuts were good and timely and helped the economy to recover very very quickly from that recession. But if you want to know what I think about fiscal issues, don't look at 2 1/2 years when I was in the supporting cast with no vote. Look at six years where I was in a responsible position, submitting budgets and fighting for them. There's the record that I think is most accurate."
Daniels' tenure as Bush's budget director has already received some scrutiny. In January, David Leonhardt at the New York Times wrote that Daniels "badly underestimated the cost of the Iraq war," a criticism that the governor has said is unfair because he was "asked to estimate only the cost of the brief occupation that military planners expected, not to estimate the length of the occupation that would be needed."
"I think the bigger question is why, as budget director, he did not try to prevent the Bush administration from turning a big surplus into a huge deficit -- not just through the war, but through tax cuts and other policies, too," wrote Leonhardt. "If he runs for president, that question deserves to be a big part of the vetting of Mr. Daniels by the media, his opponents and the voters."
In 2009, the Center for Budget and Policy Priorities looked at the legacy of Bush's spending and its effect on the deficit: