White House Budget Director Resigns

WASHINGTON – White House Budget Director Mitch Daniels (search) is stepping down in 30 days, the White House announced Tuesday.

"Mitch told me that he wants to go back home to the state of Indiana and perhaps pursue a run for political office," President Bush told reporters during a break in a meeting with Defense Secretary Donald Rumsfeld.

"I told him, 'Mitch, we're going to miss you a lot in this administration.' He has served us
well. He has been a really good watchdog of the taxpayers' money. And, you know, I'm going to miss him," Bush said. "On the other hand, this administration's loss is the gain of the people of Indiana."

Daniels, 54, a former congressional staffer for Sen. Richard Lugar and executive at Eli Lilly (search) pharmaceutical company, is said to have reminded his senior staff that his stay at the White House had always been temporary. His family has maintained a residence in Indiana and one of his four daughters is graduating high school this spring.

White House spokesman Ari Fleischer did not say Daniels was leaving over the tax cut debate. In fact, aides say Daniels is considering a run for Indiana governor (search).

However, Bush has had trouble making the case to lawmakers for increased tax cuts, and has argued that deficits are necessary to get the economy moving again.

He said that he will get tax cuts passed despite Daniels' departure.

"We're going to get a tax package through because it's the right thing to do," he said.

Daniels is known as a budget hawk who has fought hard to keep spending in line and has not been shy to criticize lawmakers for their "money-grubbing" ways.

Daniels' departure is not characterized as the final blow on the economic shake-up that followed midterm elections. At that time, Bush accepted the resignations of National Economic Council Chairman Lawrence Lindsey -- replaced by Stephen Friedman --  and Treasury Secretary Paul O'Neill -- replaced by John Snow.

By contrast, Daniels was not asked to resign and is said to be one of the president's favorites. His departure, however, means he is the last of Bush's initial top economic advisers to leave.

While a replacement for Daniels has not been named, administration officials have said Clay Johnson, a longtime Bush friend, could step up soon to become associate director for management, the No. 2 job at the budget agency. Administration officials say they believe Johnson's nomination could be approved in the Senate by the end of the week and perhaps as early as Wednesday.

As to his future, according to an aide close to Daniels, he told staff, "Any speculation on my future plans is just that."

By law, Daniels must resign from government before declaring any future run for office. He could make an announcement as early as this summer. If he opts to run, he will be pursuing an open seat made vacant by term limits on Democratic Gov. Frank O'Bannon.

If he runs, he could go up against Republican former Rep. David McIntosh, the party's 2000 nominee. State Sen. Vi Simpson and former state and national Democratic chairman Joe Andrew are running for their party's nomination.

Fox News' Jim Angle and James Rosen contributed to this report.