This is a rush transcript from "On the Record," September 20, 2011. This copy may not be in its final form and may be updated.
GRETA VAN SUSTEREN, FOX NEWS HOST: What did Governor Mitch Daniels do to get his state, Indiana, from deficit to surplus? Who did it hurt? Could it be done on a national level? Governor Mitch Daniels just wrote a book that hits the stores today called "Keeping the Republic," and he went "On the Record."
VAN SUSTEREN: Governor, nice to see you, sir.
IND. GOV. MITCH DANIELS: You, too.
VAN SUSTEREN: And congratulations on your new book.
DANIELS: Hold that thought. Maybe nobody will read it.
VAN SUSTEREN: I read it. The first thing, when you came into office in 2005, you were down in the dumps $700 million. Now you have a $1 billion surplus. What is the trick?
DANIELS: It's tricky. It's very mysterious. We spent less than we took in.
VAN SUSTEREN: I figured that one out. How?
DANIELS: No one way, a lot of things. Looking at every expenditure, saying does government feed to do this? Sometimes the answer was no. If the answer was yes, how can we stretch the dollars and do a better job of spending. You have to work on it every day.
We tried to build a culture of performance. We pay people based on how well they do their job if you get thousands all looking for ways to economize it works better than just somebody at the top trying to give orders.
VAN SUSTEREN: I don't mean to take away from the great success financially, but I'm curious. Is there anything unique about the industry in Indiana? Whatever you did couldn't be done in Tennessee, Wisconsin, Idaho? Is there anything special about Indiana?
DANIELS: I can't think what would be. I don't run around prescribing the things we did are right for other states. Every state ought to decide for itself. I think most watch we do is a fairly general application. In some cases we contracted with the private sector. I told our folks if you can find it in the yellow pages, maybe government shouldn't be doing it directly. People who do something for a living, all day, every day might be better at it than government.
VAN SUSTEREN: When you came into office in 2005 you issued an executive order about government unions, something Governor Scott Walker did in Wisconsin. People took to the streets. They were crowding through the capitol, most unhappy. You didn't have protests.
DANIELS: In Indiana, there's never been a statute to legalize this. That's a difference from Wisconsin. It had been done by the stroke of a governor's pen 16 years before. My option was to undo it the same way. I was able to do it in one day. That was certainly different than what Governor Walker faced. He had to fight a bill all the way through his legislature. That gave lots of time for people to express disagreement.
VAN SUSTEREN: Have people been hurt to get your budget under control? In Texas we hear the education system got slashed. Did people get slashed and take a beating, any big groups?
DANIELS: No. We had one very, very modest reduction in public education after years of increases. Public education might be understood, higher percentage of the Indiana state budget than any state in America, 56 cents of every dollar goes to K-12. So that is a priority we protected.
We have found, as I say sometimes, you would be surprised how much government you will never miss. Maybe it was helpful in our case that the state was broke in good times when we came in, in 2005. Most states were doing fine, ours was not. We were able to make reductions that made sense while the economy was still growing. And we never let up when things turned down and never got in the shape that other states did, so we didn't have to do those very unfortunate things.
VAN SUSTEREN: In your book you write about President Reagan's 11th commandment, which is speak no ill of another Republican. You added a 12th, which is speak no ill of another American. You say all hands will be necessary to avert a disaster, maybe we need to speak no ill of another American.
DANIELS: I really think our national leadership ought to be calling all Americans together. We can't agree on a lot of things, but there are one or two we ought to agree on because they are common problems we threat.
The mathematical threat that we face from the debts we've piled up and are scheduled to pile up threatens every American. It threatens the heart of the American promise that somebody can start with nothing and rise through their own efforts. And I think that it would be very, very helpful if people on both sides of the argument were to step back a little from the personal attacks and ad hominem rhetoric, which has been so dominant lately.
VAN SUSTEREN: Let me ask you, what you did in Indiana with your financial situation and in light of the 12th commandment, could you do that on a national level?
DANIELS: Somebody could.
VAN SUSTEREN: Could you do that on a national level?
DANIELS: You know, nothing important in this life happens because of one person. So it would take the efforts of a lot people, obviously a majority of Congress. Most of what needs to happen nationally, would need to happen by Congressional enactment.
But I honestly believe, serious as the problems are, I only wrote the book because I am alarmed. If we don't do anything -- people talk about pain and sacrifice. You want to see pain keep drifting along, failing to act on our problems.
But on the other hand this book, I told somebody that I'm obstinately optimistic both that there are answers that will not unduly burden people if we move on them quickly enough, and also that the American people are up to it. They are up to the job of governing themselves, not spending ourselves into bankruptcy, as many philosophers over the years predicted democracies would.
VAN SUSTEREN: I guess because of your success in Indiana I can't help but think you would see the challenge on the national basis. I know you said you would not run for president, but I can't see how you wouldn't sort of like have the itch to do it on the next step up.
DANIELS: I don't know about itch. I said elsewhere on your network I'm not sure why any sane person wants to go through what you do. But on the other hand, if you love the country, as most Americans do, and you read the arithmetic in the only way I think it can be read, then you really do want to see us make a big change in national policy.
But there are a lot of ways to contribute. For some it might be running for president. In my case it was to put these thoughts on paper and hope to make a small, constructive contribution.