November 28, 2001

Mitch Daniels Delivers Remarks To The National Press Club

DANIELS: It's conventional for a guest to indicate the honor they attach to the occasion. This noon, as we say sometimes in the government, has the additional virtue of being true, and you do me a great honor by being here. His Honor former Mayor Richard Daley referred to this sensation once as the pinochle of success. I view it that way, too.

(LAUGHTER)

I recognize, on the other hand, that this esteemed and illustrious audience is here, at least in case of many of you, out of a sense of duty. It does come as a part of your job description. And I've learned to be mindful and properly humble about that.

About 10 years ago, I gave a speech to a group of, I think, fifth graders, who then, I know on the instruction of their teacher, wrote the obligatory thank you notes later, and I saved one from a young fellow named Greg (ph), who wrote approximately this: "Mr. Daniels, thanks for coming to our class. You are a very talented speaker and you had a captive audience."

(LAUGHTER)

I know some of you are in that position, but I'm grateful for your presence just the same. Now on the other hand, given the erudition and well-informed character of this audience, I do not expect to experience again misinterpretation, as occasionally happened after one talk a few years ago. A lovely, somewhat matronly lady rushed to the stage afterward, said, ``Oh, Mr. Daniels, thank you so much. That was simply superfluous.''

(LAUGHTER)

And I said, "Well, thank you, ma'am."
She said, "Will your remarks be published?"
And I said, "Oh, I doubt it, unless posthumously."

(LAUGHTER)

She said, "Oh, I do hope that will be soon."

(LAUGHTER)

I have remarked, and others have observed similarly that on September 11 the two World Trade towers were not the only structures which were brought down. And one could say that the twin towers of America's fiscal health and strength were leveled at essentially that same time. First of all, the economy, which had roared through the '90s and given rise to surpluses that surprised everyone, was tipped into recession.

As we learned this week, the recession officially began early this year. President Bush last year had essentially forecast economic weakness on the way. The market--stock market, as you know, began to drop in March of 2000, manufacturing production in June of that year. Unemployment peaked in December.

So as the NBER reported just this week, a recession was under way, but also as they reported, was aggravated, perhaps confirmed, by the events of the 11th. We may well have been on our way out of the slowdown until that happened.

And the other pillar of America's surprising fiscal health in the last few years, in some resects perhaps the more important one, was the unwritten but self-enforcing compact that we knew as the Social Security lockbox.

This was, of course, an agreement across party lines. It connected both ends of Pennsylvania Avenue. It was observed by the interest groups who populate this town and who, in ordinary times, compete to see really how much spending they can secure for the causes dearest to their hearts.

And the so-called lockbox proved enormously effective in putting an overall ceiling on our collective appetite in this democracy to spend money that all too often seems free to those who spend it or seek to have it spent.

I've suggested that lockbox was possibly not the best metaphor for that situation; that, in fact, lockdown might have been more apt, because in a way this common agreement to maintain surpluses and to stop spending, at least at the level attributable to Social Security surpluses, did put, in a way, handcuffs on all parties to the public debate.

DANIELS: And the extent to which all parties felt imprisoned by that common agreement I think is evident in the alacrity with which all parties abandoned it as soon as they have the opportunity; had all the characteristics of a jailbreak with people running in all directions. And I might hasten to add that the first escapees that I observed were representatives of our own administration who promptly flooded my office with requests for several times the amount of supplemental spending which we were seeking and that Congress ultimately proposed.

In any event, we have, within a very short time, experienced a costly convergence of factors that has lead to a dramatic shift in both our near-and long-term fiscal prospects. And it's a shift that demands our attention and our careful response in the days just ahead.

The converging factors are: the recession, the newly necessary spending--imperative spending to deal with the two new threats--the two new needs to defeat terrorism abroad, and to defend our homeland. There also have been, coincident with this, new estimates of long-term growth that are somewhat lower than those that all economists, ours, others in the government and those in the private sector, agreed on just a few short months ago. And these really trace to the impact and the duration of the slow-down we're facing now, but they do mean that now the same consensus that forecasts long-term growth rates in a 3.5 percent range, or closer to 3 percent, are now looking out. And this has profound effects, when compounded out over time on the amount of money that we can expect to have available in the federal treasury.

And adding these factors together, it is regrettably my conclusion that we are unlikely to return to balance in the federal accounts before possibly fiscal '05. That is within the next two years. Things will have to break right for us to do that.

And maybe more importantly, the decisions just ahead of us, the decisions we will make between now and the end of this fiscal year, and particularly those we will make about the fiscal year to follow, the budget that we will be submitting just a couple months from now will determine whether we ever see another surplus. We will need a new agreement of some kind about a proper rate of spending and spending growth to replace the one that's served us well, but which disappeared back in September.

When a budget goes to war, what should it look like? I think there are, sort of, two fundamental courses we can take, and colloquially I would describe them as battle stations or business as usual. If we go to battle stations, we will work on the new priorities of winning the war against terror and defending Americans, whatever it takes here at home, and we will make all necessary adjustments enable to fund those new imperatives. Business as usual means what it says. In this context it would mean we would pile those new costs on top of the entire edifice of everything we're doing now, almost $2 trillion.

DANIELS: Now that might appear to be the preferred course of a number of people at this stage. Senator John McCain wrote in The Washington Post a week or so ago, "Yes, we ought to get to normal in America, but do things have to be this normal in Washington?"

The idea of reallocating assets from less important to more important things, especially in a time of genuine emergency, makes common sense and is applied everywhere else in life. I discovered that this organization furnishes a pretty good model recently. I'm not a member, I regret to say. With Groucho, I probably don't want to be a member of any organization that would have me.

(LAUGHTER)

But a friend who is shared with me the letter that your board, so ably lead by Dick (ph) and Rick (ph), sent out recently. And it says that the press club, like every other organization in the country, has been severally affected economically, and lists some steps that you have, quite prudently, taken: a reduction of hours, not filling open management staff positions, temporarily closing the Fourth Estate restaurant. Here is swift, decisive action to deal with a new budget situation.

Now I must complement you, because the board did identify the top priorities which ought to be fully and protectively funded: free breakfast...

(LAUGHTER)

... Friday taco nights...

(LAUGHTER)

... and, and I was especially impressed with this, the low happy hour drink prices Monday, Tuesday and Wednesday. Now there's an organization that can separate priorities.

(LAUGHTER)

But there's lots of history we can look to also. Let me read you some--three quick quotes from President Franklin Delano Roosevelt to his budget director, one Harold D. Smith, like all budget directors, now anonymous, forgotten and unlamented, I'm afraid. October 1939. But Roosevelt tells Smith he wants the departments, quote, "held at the present level and below if possible, and all new works project trimmed out."

November 1939--two years before the war, let's recall--he tells Smith, "The administration will not undertake any new activities even if laudable ones." And a year later, as they prepared the next budget in November of '40, Roosevelt told a press conference his policy for the next year would be to, "cut down to the bone on non-military purposes."

Now they did. Between 1939 and 1942 spending on non-defense purposes in the federal government was cut by 22 percent, and by 37 percent within the next two years til 1944. The Civilian Conservation Corps, the Works Project Administration, the National Youth Administration, three hallmarks of the New Deal, were gone entirely by 1943. In 1939, they represented 13 percent of the federal budget; all gone four years later in the service--not because they were, I'm sure, deemed unimportant, but in the service of greater national needs.

In today's terms, that would be as though we propose to end the Medicare program, or alternatively to close up shop at HHS, the Department of Education, HUD, DOJ, Energy, Ag, Treasury, Interior and Labor combined.

Now World War II was the greatest conflict in our history, and not necessary an analog for what we face today. But take Korea. In one year, from '50 to '51, non-defense spending dropped by one-fourth.

Now the counter-example, perhaps you've already been thinking about, was Vietnam, which gave rise, as far as I know, certainly gave currency, to the phrase, "guns and butter," when a different approach was employed. In 1963, defense and non-defense spending were roughly equal. By 1970, defense had risen 54 percent to fund that conflict. But instead of being financed by restraint in the rest of the budget, non-defense spending doubled, with consequences, fiscal and economic, that we remember as unfortunate.

DANIELS: Mrs. Felix Frankfurter, I once wrote, told her husband that he made just two mistakes in speaking: He digressed from his text and he returned to it.

(LAUGHTER)

I'm going to digress, but just for a moment, to point out that President Roosevelt, Presidents Truman and Eisenhower and President Johnson enjoyed one advantage that this administration does not, that is to say, they had much greater flexibility over public spending, in the sense that what we call mandatory spending, that now two-thirds of the budget which is on autopilot until fundamental change in underlying law is made, not subject to annual appropriations, was then either non-existent or very, very small.

And I do believe, to digress, that it would be a very important step forward in public policy if we were to begin to reverse this trend, and long before September 11, had begun collecting examples in the federal budget of things which are on the automatic spending side and for no good reason.

And I don't know if there will be any takers, but I do believe that the Appropriations Committees of the Congress ought to have control over more than they do. And hope to interest leadership of those committees in, perhaps, begin to bring back at least a few small things to get started to the discretionary side of the budget, where they can be subject to annual review and decision-making.

Next year's budget, I think, will test our maturity as a democracy, as an administration in the cooperation with Congress, and we will find out whether we understand the assignment that history has given us. I hope we will budget for victory, and while we're at it, organize for victory and manage this government for victory. We will need to perform well in our jobs, we will need the cooperation of Congress, the press and the public to do this.

The bipartisanship which has been so manifest in the last two months--two-plus--here in town, I think, has been uplifting for us all. It has been very real. It has, I think, led to dramatic action and a new mentality that I think will carry on for a long time to the benefit of the country. It must said, however, that bipartisanship is pretty easy when there are no tradeoffs involved.

On the night of September 11, I sat in the Roosevelt Room while the president was speaking to the nation across the hall and began cobbling together a request for the new emergency spending that clearly would be needed to respond to those events. And from a rough tally we produced a request quickly for $20&bsp;billion, which the Congress responded to and, in fact, responded by doubling to $40 billion.

I was put in mind of John Jacob Astor's alleged comment in the State Room of the Titanic, when he was supposed to have said, "I rang for ice, but this is ridiculous."

(LAUGHTER)

We need the bipartisanship that emerged so productively in these last two months to carry over into a mature conduct of the public's affairs when tradeoffs will be required. And we're not talking about tin drives and ration cards here. This is not, it appears, the kind of conflict that will demand enormous sacrifices or enormous changes in the rest of government.

But for goodness sakes, will we be able to differentiate priorities now that two transcendent ones are so patently in front of us. People who are not able, really, to separate must-do from nice-to-do items before, I hope will find it more clear now. And I hope that those for whom protection of turf and jurisdiction was more important than effective organization and administration of government will think again about their points of view.

DANIELS: Errol Flynn said that his great problem in life lay with reconciling his gross habits with his net income. We will have to so reconcile.

We won't have any trouble, I don't believe, agreeing on what's important, on what's imperative. Churchill taught that, "The responsibility of ministers for the public safety is absolute, requiring no mandate. It is, in fact, the first object for which governments are brought into being."

So the conquest of evil and the protection of Americans in their homes and in their homeland require no mandate and we will err on the side of being thorough. It may be an unfamiliar sensation to my colleagues at OMB, but the guidance I gave them as we began to put next year's budget together was anything touching those two goals, we will err on the side of action and we will break ties in the direction of yes. This is not our typical MO.

The real question is not, "Will we adequately, thoroughly fund these imperative priorities?" The real question is, "Will we be able, collectively, to scrutinize the secondary?"

And, again, in any other realm with which I'm familiar, business, nonprofit administration, the National Press Club, this is the normal part of proper budgeting and business.

Andrew Carnegie, in building U.S. Steel, began every year's budget discussion by asking, "What can we throw away this year?" Peter Drucker says that "organized abandonment" is the operating principle of today's successful enterprises. But in the federal government we have not proven particularly successful at ever throwing away anything or abandoning anything, however obsolete, however duplicative or however poorly it may perform.

Now long before September 11 we were at work in the Bush administration hoping to do better about that; hoping that very seriously, even with the inaccuracy and imprecision that may attend this, to identify those programs and those aspects of government that work well and reinforce them. And as your guest today, I was offered very generously the chance to bring three guests with me to the head table, and I have taken that opportunity to invite three managers of excellent federal programs, who I hope you will welcome and salute.

And so, General Jack Kelly is here from the National Weather Service, an organization which has staked itself to specific goals and met them and surpassed them. Tornado warning times have doubled, flash flood lead times have more than doubled, and they have been recognized by Government Executive magazine as the only agency to get straight A's on that publication's recent assessment. So please welcome General Jack Kelly.

(APPLAUSE)

And representing the Women, Infants and Children Program, the WIC program, the slogan of which I learn is "WIC Works," the associate administrator of the Food and Nutrition Service, George Braley.

George, thank you for your work and for being here today.

WIC is a program that has provable results in lowering health care costs that are occasioned by the people it serves, proven health care improvements in anemia rates and a variety of other hard, tangible measures and increased immunizations and other measures of success that prove that it is a sound investment on the public's and the taxpayer's dollar.

George Braley, thank you for your work.

(APPLAUSE)

DANIELS: And representing another of the truly--true centers of excellence in this government, the National Science Foundation, where more than 95 percent of the funds you provide as taxpayers go out on a competitive basis directly to researchers pursuing the frontiers of science, a very low overhead cost. It has supported eight of the 12 most recent Nobel Prize awards earned by Americans at some point in their careers.

I was to have, as our guest today, Dr. Margaret Lynon (ph), who helps runs that program, but she is in Antarctica, studying very carefully, I'm sure, one of the grantees, and in her stead, Dr. Robert Eisenstein, who you met earlier, assistant director for mathematical and physical sciences.

Thank you and the foundation for all you do.

(APPLAUSE)

Programs like this, and there are many, many others, that perform well, that are accountable to you as taxpayers for reaching for real results and measuring and attaining those results, deserve to be singled out, deserve to be fortified and strengthened.

Now conversely, programs that make no such attempt or fail to deliver or can provide no evidence of success really need to be scrutinized, and the money we are now investing them redeployed to higher purposes, either in the ongoing programs I've just been talking about, or to the urgent business of winning a two-front war.

I've observed that there a number of people in Washington, who have appeared to have attended the Debbie Boone school of public policy, where the school song is, "It Can't Be Wrong If It Feels So Right."

(LAUGHTER)

Well, it's not enough for a program to feel right, to have a nice title. If we're going to take a tax dollar from a citizen in Indiana or any other state and spend it on that program, at some point there must be a reckoning, there must be an accounting. And if the performance isn't there, we ought to be looking for a better place to make that investment.

And I must appeal to the nation's press support and demand this sort of accounting. And it's very striking to me now that the press does this very well on the military front. Every newspaper for the last several weeks has been filled with analysis and reporting dissecting the effectiveness or not of our military operations in Afghanistan. I'm all for this, by the way.

Now Robert E. Lee once wrote that the one great tragedy of the Confederacy was, "All the best generals were writing for newspapers."

(LAUGHTER)

He wasn't alone in this, by the way. On the other side of the lines, General Sherman was saying, "With the press unfettered as they are today, we are defeated to the ends of time."

(LAUGHTER)

I don't agree with that. This is, of course, a vital function of the press in peace or war. I'm only hoping and suggesting that we need the same insistence on performance and high standards and accountability in the rest of government. And too often, frankly, I think that much of the press seems not very interested in that, and even protective of the status quo.

While we're at it, while we're budgeting and redeploying resources for success, we need to organize and manage for effectiveness, too--and that's a sermon for another Sunday. But I will say that the next budget and subsequent budgets must try to rationalize, consolidate and sometimes move from place to place well-intentioned programs, which at this point are littered across the government in sometimes very disorganized ways.

Why do 10 departments of our government in 48 separate programs try to train people for jobs? Is our border defense truly optimally rationalized? The subject that Governor Ridge is working on very hard right now. And can we achieve greater freedom to manage for this president and future presidents, from a Congress, which, I think, inadvertently in many cases, has tied many of our departments up in a morass of Lilliputian does and don'ts?

So I think the next budget will be a telling and maybe decisive one. We can--I hope we will--budget and govern as adults should in a time of crisis and urgency. Whether we do or don't will decide whether we head back in the direction of balance--I hope--surpluses and reduction of our national debt, or lose contact with that objective for good.

DANIELS: We will need, I hope, to shake ourselves out of the natural human tendency, as someone once said, to mistake the edge of the rut for the horizon.

And I'm not unrealistic about the difficulties of bringing any of this off. But one of your great giants, Edward R. Murrow, taught us that, "The one excuse history never accepts is difficulty." And so neither shall we. And with your support and active assistance, perhaps we'll make the progress the American public deserves.

Thank you for this gracious invitation.

(APPLAUSE)

MODERATOR: First of all, Mitch, I'd like to know who leaked that Press Club memo to you.

(LAUGHTER)

However, now that you know about it, you are invited to taco night with the free happy hour drinks.

(LAUGHTER)

Senator Tom Daschle said today he would like to add to the homeland security package about $7.5 billion and try to attach it to the defense bill. What is your position on that? And do you think, or would the administration agree to a spending plan of that size?

DANIELS: The president has asked that Congress refrain from further spending at this point to give him, to give Tom Ridge, Secretary Rumsfeld, as the commanders, if you will, of each of the two fronts of this conflict, the opportunity to define the need--the nature of the need and the size of the need.

We have all the money we need for now. At the end of this month, in two days, by our best estimate, 84 percent of the supplemental funds, the $40 billion Congress has appropriated, will remain unobligated and unspent. So we do have the funds available, and it will be a while before we know where and when and for exactly what purposes additional money may be needed.

And so we have asked the Congress' restraint in this, and the president has indicated its importance that we do keep the deal we made with the Congress, which calls for discretionary spending of $686 billion and $40 billion of extra spending for the near term. It's plenty enough. And again, we would hope that the administration would be given the opportunity to propose to Congress the best ways to spend any new money that may be required.

MODERATOR: Is it possible to prevent the $40 billion emergency supplemental spending from becoming a permanent addition to the baseline budget? Will the administration try to separate those funds in the next budget?

DANIELS: We will to an extent. Some of that money will become a recurring cost of government. The needs for homeland security will grow and will extend, I suppose, now permanently, because this threat's not going away. The president has often pointed out, this is likely to be a long, perhaps indefinite, struggle.

On the other hand, the majority, the big majority of the $40 billion does involve one-time costs: the reconstruction of New York, fortifying cockpit doors in airplanes only needs to be done once, vaccine for enough to cover the entire American population is a one-time expenditure and so forth.

So we will separate those items that plausibly need to recur year on year, and those would become part of our baseline, but not the rest.

MODERATOR: This questioner would like to know how the homeland defense office will influence the agencies in their expenditures. Will the office have to go through OMB or will they have direct authority over the certain expenditures within the agencies themselves?

DANIELS: Governor Ridge will have, I think, very direct impact. We have put our organization at his disposal, built a dedicated unit to work with and for him and his team. And everybody at OMB understands this is really job one.

So we will assist him in every way we can. We will implement, give effect to his decisions, as the president ratifies them. And I think, if it's not already apparent from some of the actions he's taken, it will quickly become clear to one and all that he has the authority to make these decisions and make them stick.

MODERATOR: Given the current situation with the homeland defense, do you see any situation in which the country might need to return to, sort of, the World War II situation in which there was rationing for such things as sugar and gasoline and all that?

DANIELS: No, not foreseeable to me. I suppose if this conflict were ever going to broaden in a way that would require any real sacrifice of that kind, Secretary Rumsfeld and the president would so indicate.

But I tried to say in my opening comments that we're not in that position, and that the measures that we will recommend really at the margin of a $2 trillion budget to redeploy funds to winning the war, from and to high-performing programs, from important but less important priorities, and from programs that don't work very well, these should be very, very minor. They'll be transparent and undetectable I would say to the average citizen; perhaps not to interest groups deeply committed to these individual items, but to the general public absolutely.

MODERATOR: Can you tell us what is the best combination of spending increases and tax cuts for the stimulus bill? How big should each of them be?

DANIELS: The president indicated that a stimulus package somewhere in the neighborhood of $75 billion seemed appropriate, and that is still his guidance. Spending at that level and higher, actually, has already occurred or been built in by previous decisions, and the president was very clear that that's really all the spending he thought was necessary, apart perhaps from direct assistance to dislocated workers, which was part of his proposal.

But the balance of any stimulus--and he still hopes there will be such a bill--to further propel the recovery that people are beginning to sense and to forecast, but is certainly not guaranteed, and for which we ought to provide ourselves an insurance policy, that the bulk of that stimulus--the remaining stimulus ought to come in the form of tax relief that provides not only a boost to near-term demand, but also incentives and better expectations that will lead to investments and longer-term job-producing measures.

MODERATOR: This questioner would like to know if the White House would, under any circumstances, negotiate an economic stimulus package with Congress before the Senate acts, or will you wait for the Senate Republicans or Democrats to cut a deal before the White House gets involved.

DANIELS: It's a tactical call that I'm really not certain how to answer. I think the president does believe that having laid out both boundary conditions and clear specifications about the kind of stimulus that is needed, that the Congress ought to act and bring him something that is consistent with those principles, and is disappointed that the Senate seems unable to do that. The Senate leadership seems incapable of bringing that about. But we're still hopeful, and the president met with the leadership again this morning as he has done essentially every week since the 11th, and we're still very hopeful that Senator Daschle and the Democratic leadership there will produce a bill, and produce one that he can sign.

MODERATOR: When you talked about the factors affecting long-term budget deficits, why didn't you include the president's $1.3 billion tax cut as one of those factors?

DANIELS: Now that we know that the economic slow-down that the president sensed a year plus ago was real, and, in fact, became a recession essentially around the time of his coming to town, one can only say thank goodness for tax cuts that are a major reason why this recession, many are saying, may prove short and shallow.

But the last thing anybody should be suggesting or should want in a time of recession is to strip away the long-term growth-inducing policies of that tax cut, which are very much a part of the near-term as well, since some of those reductions have just occurred, or will very soon. So what the president asserted was wise when not everybody agreed, now looks very, very prescient indeed.

MODERATOR: Looking toward the new budget that will coming up, this questioner wants to know if the administration will submit a fiscal 2002 budget that reforms Social Security, adds drug coverage to Medicare, and does not tap the Social Security trust fund.

DANIELS: Well, it says '02, but I know that must mean '03, the budget just ahead of us. And I'm not here today to unveil a budget that's still in the process of preparation.

But the one piece of the question that I can answer is that, the next budget will--to use the terminology here--tap the Social Security trust fund. That is to say, there will be excess receipts from payroll taxes and the interest we credit to the trust funds that do greatly exceed the surplus, which will quite possibly be zero or less that the books show. So we are, as I mentioned earlier, now living in a post-lockbox world and we're going to have to be very, very disciplined and work together very closely if we want to return to one.

MODERATOR: Do you have, sort of, a target figure on how large a deficit that would be acceptable to the administration?

DANIELS: Have not set a target figure. The president had said, throughout his campaign and long before these events were visible to us, that he hoped to always operate in the black and, in fact, at levels beyond the Social Security surplus, but that there were three conditions under which a deficit would be acceptable. Those being war, recession or emergency. And as he said to me, shortly after the 11th, "Lucky me, I hit the trifecta."

(LAUGHTER)

So he and the economic team believe that running deficits in a time like this is acceptable, but the task for us all, as I've indicated, is to keep our heads and to work every day to make sure that this is a temporary and not a permanent condition.

MODERATOR: One thing that helped to produce the huge budget surpluses that we had for a while was the so-called peace dividend. Obviously, this factor is now appears to no longer be with us. So this questioner wants to know how much will defense add to the budget next year and over the long term.

DANIELS: It will be additive. The president has not picked a number yet. But we will have a multi-year, a five-year defense plan and the budget, I believe, will forecast the rebuilding of our defenses. The president was planning this, campaigned on it, of course, well before we entered war-time conditions. And the 11th, I think, will only--those events will only accent the need to rebuild and transform our national defenses.

So you can look for increases, but the extent of those is not knowable yet.

MODERATOR: You talked about, in your speech, shifting some programs from automatic spending to discretionary spending and that would have to be renewed each year. Which programs are you talking about?

DANIELS: I would like to review these with the leaders of the Appropriations Committees first, but I'll just make a couple of general--give a couple of general examples.

We do have some programs in which the administrative costs--we tend to think of mandatory programs as the entitlements, and in the main they are, where checks go to people or benefits go to people based on their eligibility under the authorizing statute. But in many cases, if you look a little further beneath the covers, you find that we have slid pure administrative costs of government in some of these programs in under the same umbrella. That's not good policy. Somebody ought to be looking each year at whether these programs are being well-run, as well-run as the National Weather Service or the National Science Foundation at 5 percent, for instance.

And so as I say, at like to at least start small. I'd like to see if we can't begin moving this tanker back a little bit in the direction of the Congress having greater annual control of the purse strings, as it should.

MODERATOR: A couple questions came up when talking about that stimulus package, and in both cases the questioner notes that there is quite a bit of stimulus already in the pipeline, and that we are doing more spending, and the question is do you think that we really do indeed still need a stimulus package, or is it just simply a feel-good thing?

DANIELS: No, it's the former. I think the president believes that it is only smart to try to take out an insurance policy, or to take steps necessary to make sure we get people back to work as fast as possible.

Yes, there are many promising signs. And the market seems to sense some recovery not to far ahead. Certainly energy and commodity prices are increasing. Consumers' discretionary income, that's a big plus that may be a bigger than was evident not too long ago.

But this economy is still far too shaky. And talk to people in businesses, as I try to do on my regular trips home, it is--at the street level, at the factory floor level, at the payroll clerk level, it is not yet obvious that sufficient recovery is in near-term prospect.

MODERATOR: A couple of questions dealing with the farm bill. One would like to know, "What farm bill approach does the Bush administration support, and how strongly are you pushing for Senator Lugar's farm bill proposal?"

DANIELS: The president's secretary of agriculture issued a tremendous book back in August that will tell you the kind of farm bill that this administration would support. It's an expression of principles, and really a great little tutorial if you have the time--short time it takes to read it, about how agriculture has changed in America, who is farming, what the distribution of our farmers is and so forth, and the kind of policy that ought to point you to.

This farm bill need not occur this year. We have a farm bill that runs out until next fall. It would be better to do this more reflectively, and that may still be the result.

But the alternative farm bill which was proposed by Senators Cochran and Roberts, and got almost half the votes in the Senate Ag Committee, is pretty faithful to those principles. It's very important that any farm bill that Congress passes be fully consistent with our trade, and our free trade obligations; this is one big problem with the bill the House passed. And likewise, that it'd be progressive and not retrograde in terms of not distorting markets, not artificially inducing surplus production, that only serves to depress prices and makes matter worse.

MODERATOR: There are a number of questions here that deal with you and Congress. This one asks, "How would you characterize your relations with Congress? Do you consider the snarly comments members of Congress have made about you a badge of honor?" And this, "What do you really think Congressmen Young?"

(LAUGHTER)

DANIELS: Well, first of all, I think that, in general, it's my job to have good relations with Congress. I think, in general, I have enjoyed tremendous cooperation in Congress.

There is a part of Congress, those who are responsible for the appropriation of monies, with whom I think there is a natural and inevitable tension. And I need to be careful to manage this, and not to aggravate that tension ever through careless remarks. I recently observed on at least one occasion my brain went on vacation and left my mouth in charge. And I regret that will be careful here and elsewhere not to repeat it.

But, yes, there is some natural friction, of course, between folks who are very zealously pursing--sincerely pursuing the public interest as they see it perhaps in one piece of the budget, and those of us whose responsibility is to try to keep the whole rational and under some control.

DANIELS: And I think beyond that, I want to be careful not to say much more.

An Indiana state trooper stopped a married couple one night for speeding. And as he was interrogating the husband, the wife broke in and said, "Oh, officer, my husband's a very good driver. We were just on our way home from friends." And the husband said, "Agnes, please, don't say any more. You'll just make things worse like you always do." And the trooper was naturally offended and said, "Ma'am, does he always treat you that way?" She said, "Officer, only when he's drinking."

(LAUGHTER)

MODERATOR: Inappropriate at the time, I suspect.

I have a couple of questions here, and we're nearing the end. But these deal with you personally. And this one says, "Indiana media reports you plan to return to Indiana to run for the Senate or as the governor. What is your plan for the future? Are you considering running for governor in Indiana in 2004? What factors will go into your decision in whether to run for governor of Indiana in 2004?" You get the idea.

DANIELS: It's a strange idea, but I get it.

No, I'm not. I got a job I find fulfilling. And the only attractive about those suggestions is, I'd be home with Cheri (ph) and the girls.

But I have an assignment that is at the pleasure of the president, and any day I'm not useful to him I'll leave or he'll tell me to. But I have no such intentions and you won't see that.

MODERATOR: Before asking the last question, I do have a little bit of business I'd like to do up here.

First of all, I'd like to present you with a certificate of appreciation for your appearance here at the press club this afternoon. And secondly, a famous National Press Club mug that I hope that you will use and put on your desk and fill it with whatever you seem to think appropriate.

(LAUGHTER)

I read, Mitch, that you once said that, "The difference between Washington and Indianapolis, was that Indianapolis had a better football team." Well, Indianapolis now has a four and six record and Washington has a five and five record. I wonder what your comments now might be?

(LAUGHTER)

DANIELS: Well, I'm versatile enough to maintain dual allegiance, and I even rooted for the Redskins when--all those years at home. But, yes, I'm a little surprised to find the Colts with the worse record.

But I want to thank you for this, by the way. And I tempted as I might be, I won't hock it; I'll keep it.

(LAUGHTER)

And if I may, I'll bring it to taco night.

MODERATOR: Very good. And we can put a happy hour drink in there.

(APPLAUSE)

Thank you, Mitch. It's been a personal pleasure for me for you to have been here.

And I want to thank all of you for being here in the audience today and those of you who watched on C-SPAN or listened to this program on National Public Radio.

Thank you all, and we are adjourned.

END

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