Mitch Daniels: For Whom the Bell Tolls

Amy Schatz suggests Indiana voters are leaning left:

When he worked at the White House, Mitch Daniels wasn’t always the most popular guy in the room. It’s not an uncommon problem for the head of the Office of Management and Budget, whose job includes telling the president and federal agencies how much less money they’ll have to spend than they want. That’s one reason why Daniels, who as Indiana governor has spent a lot of time trying to balance the state’s budget, probably won’t be fazed by new poll from WISH-TV in Indianapolis, showing Hoosiers aren’t very happy with him. Daniels, a Republican, was rated in the fair or poor categories by 57% of all respondents (although just 35% of Republicans). The poll of 800 likely voters conducted from Sept. 5 to Sept. 8 found that 55% think the country is headed in the wrong direction while 41% say its going the right way. Daniels isn’t up for re-election this fall. But three Indiana congressional seats are in play, which is why both Republicans and Democrats are pouring money and resources into the conservative state. Among local issues, voters appear to still be miffed about Daniels’s decision to lease a northern Indiana toll road to an international conglomerate as well as the continuing drama over the state’s effort to pick a time zone.

Brad DeLong has called Mitch Daniels the worst OMB director ever so it’s no surprise that he responds with:

But… but… but… everything I have heard–everything everyone I know has heard–is that Mitch Daniels did not do his job as OMB Director: that he was remarkably complaisant when anyone from White House Communications or Political Affairs wanted to raise spending or cut taxes. Certainly nobody I have talked to who worked in the Bush Treasury has said a good word for him, or has described him other than as an enabler of fiscal insanity. That almost every OMB Director save Daniels has taken his job seriously doesn’t mean that Daniels did. And I certainly haven’t seen any signs.

Ms. Schatz also seems to think Mitch Daniels is a fiscal conservative as governor (“spent a lot of time trying to balance the state’s budget”) but let’s see if we can explain why the voters are miffed with the toll road decision. As long term readers of Angrybear know, I have posted several comments on this decision including this one:

Some would argue these deals are based on efficiency gains where the private firms and taxpayers both win. Others – like yours truly – wonder if they may be some political favoritism going on where taxpayer assets are being sold below their true value.

Or let’s go back to what Daniel Gross suggested:

If a governor told you there were a way to spread pork, raise funds for infrastructure investment, promote jobs, avoid raising taxes, and put a dent in the trade deficit—all in one fell swoop—you might think he had a bridge to sell you. And you’d be right. Only in this case, it’s a toll road. And instead of a sale, how about a long-term lease?

Sure, the State of Indiana got $3.8 billion upfront for this deal, but as Mr. Gross and others have noted, the foreign firms got the rights to collect tolls many years:

What’s in it for the foreign companies? Huge potential profits. Gigantic, steady profits. Toll roads are an incredible asset class. They’re often monopolies. They can support debt, since they provide a recurring guaranteed revenue stream that is likely to rise over time, as more people take to the roads and tolls increase. According to Cintra, the Indiana Toll Road generated $96 million in revenues in 2005, and Cintra expects a 12.5 percent internal rate of return on its investment. The heavy lifting has already been done: The state or federal governments have acquired the land and rights of way, built the roads and maintained them for years, and enacted toll increases. All the private companies have to do is deliver cash upfront, maintain the roads, and collect the windfall.

Shifting revenues forward but reducing them over the long-term is not balancing the budget, but it does seem to be how GOP politicians play the game.