Ind. Gov. Daniels: Nation's Biggest Problems Are 'Unfunded and Unfundable Commitments'

This is a rush transcript from "On the Record," September 19, 2011. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Indiana Governor Mitch Daniels, who has a brand-new book on the bookshelves tomorrow called "Keeping the Republic," joins us. Nice to see you, Governor.


VAN SUSTEREN: All right, Governor, I'm listening to the president's program today. Will it help Indiana? I realize that you have a huge surplus, so you may not be in as much trouble. But you do have an unemployment rate that's hovered around 8.7 percent. Does this help you?

DANIELS: No. The help we want, as (Fox Business Network's) Dennis (Kneale) just said, is an economy that starts growing and provides jobs and opportunity and hope once again for our people. Incidentally, that would be very helpful in terms of paying down the deficit. Dennis correctly points out our -- it's the single largest problem facing America right now, but -- no, in fact, I'm -- it's getting a little old.

I mean, did the president forget he just raised Medicare taxes last year? They're coming in a year from now on the very same people. He never seems to understand that these folks he wants to keep laying more and more burden on predominantly are small businesses, the very enterprises that have always generated the net new jobs in America. And so I -- it will not generate the revenue he's talking about. And it's counterproductive in terms of the growth that alone can get us out of this fix.

VAN SUSTEREN: Well, I'm always a little bit curious about what you had to say because I know that when you took office, you had a $700 million deficit. And now you have a billion dollar surplus. And that's a big jump in about, what, four or five years. Five years. So I'm a little bit curious. I realize the state needs and concerns and problems are different than on a national level.

But is there anything in particular that you did on the state level that could so effectively be transferred on a national level that would make a difference, and as fast as you possibly can because we're desperate. Not speak as fast as you possibly can. We need the best, fastest ideas, is what I mean.

DANIELS: Yes. Well, I'm with Dennis. This is a spending problem. The nation cannot afford the size of government, the expense of government we have today, let alone the biggest problem are the unfunded and unfundable commitments that are out there in the future. The president...

VAN SUSTEREN: Like what?

DANIELS: Social Security and Medicare.

VAN SUSTEREN: So what do we do about those? I mean, we -- I mean, we can't just, you know, let people on Medicare and Social Security -- we can't hold them up.

DANIELS: No, of course not.

VAN SUSTEREN: So what do we do about that?

DANIELS: You say to the people in the programs today, Nothing will change. For you, for the people now in retirement or soon to be, you say nothing will change. A deal is a deal. You've counted on these programs and we're going to protect them as they are. Now, will you help us create for the future, starting in a few years, a Social Security and a Medicare system so that younger generations, the people who are paying for your retirement and your health care in this pay- as-you-go system, can have some protection, too?

You know, the president keeps ranting on and on about these, you know, millionaires he dislikes so much. By the way, he ought to feel pretty good. There are a lot fewer of them than there were when he became president. Just look at the statistics.

But you know, the -- he's looking in the wrong place. I agree very much that to move out of this fix we're in, everyone should contribute. But raising tax rates and hurting the economy and the prospects for jobs is exactly the wrong place to go.

Warren Buffett doesn't need a Social Security check. You know, these programs should concentrate finite resources on the people who need them the most, the people who might be destitute in their later years.

The tax system ought to be reformed in the direction of growth. Speaker Boehner spoke to this the other day. He's on the right track. And if you did that, by the way, if you limited or eliminated many of the tax deductions and exceptions and exemptions, higher-income people benefit more from those than -- than those of more modest means.

So you know, this would be a direction -- Greta, every -- as far as I can tell, we all are in this mess together, and every American, regardless of philosophy, has a very common interest in a strongly growing private sector. And every national decision for the next several years, I believe, ought to be tested against the question, Will doing this make private investment and growth, and therefore jobs, more or less likely? And unfortunately, this administration seems to make every call in the opposite direction.

VAN SUSTEREN: What about -- I mean, there's never any discussion of the -- the -- or at least I don't hear it -- the urban areas where they have the enormous unemployment rate, you know, hovering around 25 percent, people who, I mean, are really -- never had maybe the education, maybe the jobs just -- what do we do about those urban communities that are really taking a beating that don't have much of a voice?

DANIELS: Well, I think what we don't do is continue to pour more money into programs that have encouraged dependency, and you know, limited the incentive for people to take better care of themselves. I mean, I don't think there is a separate economic policy for different parts of America. I think we need a macroeconomic policy...

VAN SUSTEREN: How do we inspire them, then? I mean, is there an inspiration issue in those communities?

DANIELS: You know, I can only speak for our state. I don't think there's any shortage of ambition for people to do better for themselves, better for their families. We have enormous numbers of people in urban and rural Indiana going back school or back for training. I think the desire to work is still very much there.

This book I wrote is I sometimes say obstinately optimistic about the character of Americans and about their ability to take -- to make wise decisions for themselves and to come together to make the kind of decisions we were just talking about.

So you know, a pro-growth tax policy, an all-out energy production policy to pay Americans for the energy that we need, a regulatory ceasefire, not to -- you know, I would stop the new regulations in their tracks and provide some of the certainty that Dennis talked about so that the businesses of our state -- and I talk to them all the time -- are generating -- some of them are making some money and they are paying their current workers more. But they are far too reluctant right now to hire anybody new because they think that more taxes and more regulation are coming.

VAN SUSTEREN: You have a horse in the race for 2012 yet?

DANIELS: I don't presently.

VAN SUSTEREN: Leaning towards one?

DANIELS: I'm going to support the nominee of our party. I think we've got some really good people running. I hope our nominee will step forward pretty boldly on these subjects, level with Americans about the changes that we ought to make, about the way in which we're in this together.

You know, the thing I thought was most unfortunate about the president's presentation again today was that it was intentionally divisive, purposely divisive at just the time when we ought say to Americans, Sure, we have some differences, but we've got one or two absolutely common threats and common problems to solve, the debt and the need for a pro-growth economy. Let's come together on that.

And I'm hoping that we'll have a nominee who, you know, summons the best -- assumes the best about Americans and summons the best from them.

VAN SUSTEREN: Governor, thank you very much. Nice to see you, sir. And he, of course, is a tease! The governor is back tomorrow night about something else. But you're going to have to guess what it is. Or you're going to have to be here tomorrow night 10:00 PM "On the Record" to find it.