Brian Kanowsky

I’m thinking of starting a futures fund betting against Mitch Daniels’ predictions.

You see, Mitch Daniels has a problem with predictions. Given his famous “misunderestimations” of the cost of the Iraq War, the trends of health care costs, and the benefits of his FSSA privatization scheme, you’d think he’d give it up. But he just can’t help himself.

Back in 2008, when it became apparent that GM and Chrysler would become victims of the economic collapse, taking more than a million jobs with them, Daniels confidently predicted that efforts to save them would fail:

“Let’s give Congress a chance, but there’s nothing in recent history that suggests they have an answer for this,” Daniels said. “The only thing we know for certain is the way they’ve been doing business does not work and throwing taxpayer dollars after it won’t make it work.” (emphasis added)

And he was wrong, as President Obama told workers at a GM plant in Detroit yesterday:

Now, that was a tough decision and let’s face it, a lot of people were skeptical.  I don’t know if you all remember, but I remember how last year there were a whole bunch of folks who said, well, that makes no sense.  There’s the “just say no” crowd in Washington — they’re still saying no — who basically said, well, this is a terrible investment.  We should just let the market take its course, let GM, let Chrysler go bankrupt.  So there was a lot of skepticism out there. […]

And now here we are a year later.  And a year later, GM and Chrysler, along with Ford, are all posting a profit. The U.S. auto industry has hired 55,000 workers, the most job growth in a decade. And not only that, but you’re producing the cars of the future right here at this plant, producing cars that are going to reduce our dependence on foreign oil.  This car right here doesn’t need a sip of gasoline for 40 miles and then keeps on going after that. (Full transcript here)

While speaking to a crowd of workers at a Chrysler plant earlier in the day, Obama challenged critics of the plan to come and see the good that its done.

I wish they were standing here today. I wish they could see what I’m seeing in this plant and talk to the workers who are here taking pride in building a world-class vehicle.  I don’t think they’d be willing to look you in the eye and say that you were a bad investment.  They might just come around if they were standing here and admit that by standing by a great American industry and the good people who work for it, that we did the right thing. (Full transcript here)

And you don’t have to take Obama’s word for it. Washington Post business columnist Steven Pearlstein wrote of the auto industry plan’s “unqualified success”:

Perhaps none was more controversial than the decision to rescue Chrysler and General Motors, using $86 billion in taxpayer funds and an expedited bankruptcy process that wiped out shareholders, brought in new executives and directors, forced creditors to take a financial haircut, closed dealerships and factories and imposed painful cuts in wages and benefits on unionized workers. It was an extraordinary and heavy-handed government intervention into the market economy that left the Treasury owning a majority of both companies. […]

A year later, the auto bailout is an unqualified success. The government used its leverage to force the companies to make the painful changes they should have made years before, and then backed off and let the companies run themselves without any noticeable interference.

The results, which President Obama will tout on a visit to Michigan on Friday: For the first time since 2004, GM and Chrysler, along with Ford, all reported operating profits in their U.S. businesses last quarter. The domestic auto industry added 55,000 jobs last year, ending a decade-long string of declines. Auto sector exports are up 57 percent so far this year and, thanks largely to new government regulations, the industry is moving quickly to introduce more fuel-efficient vehicles. Most surprising of all, GM and Chrysler have already repaid more than $8 billion in government loans, while GM is preparing for an initial stock offering later this year that would allow the government to recoup most, if not all, of its investment.

And Ezra Klein posted this graph, illustrating the point more succinctly:

You can see the White House’s full report here, but you can really get a good picture of the scope of the investment by looking at the interactive map. There’s a nice cluster of dots trailing down from Lake Michigan, each representing a plant expansion, electrification, “supertruck”, or green vehicle project – you can hardly see an empty spot in the state of Indiana.

I was disappointed to see the usually-sharp Ed Kilgore fall into the trap of buying Mitch Daniels’ spin – in a recent piece on Mitch Daniels’ presidential prospects, Kilgore wrote that “his state’s positive fiscal record stands out sharply against a national landscape of state fiscal disaster.” Ed, if you believe that, I think Mitch has a bargain-priced $50 billion invasion of Iraq to sell you.

Far from being the “island of growth” that Mitch Daniels likes to pretend we are, Indiana is struggling just as much as the rest of the region. And it’s not just Daniels’ phony jobs announcements that are the problem – Indiana has a real problem with unemployment. And I don’t see any hope of fixing that when the party that controls the state executive branch and the state Senate won’t acknowledge that there’s a problem.

Indiana’s unemployment rate over the last decade:

Source: BLS.gov 

A cursory glance at Indiana’s unemployment rate gives you the outlines – 10% unemployment, using the standard U-3 measure. When you look at the bigger picture, it gets even worse. Using the broadest measure – U-6, which includes “marginally attached” workers and those working part-time who would rather be working full-time – more than 18% of Hoosiers can’t find a real job. That means Indiana is worse off than our neighbors in Illinois, Ohio, and Kentucky.

Just yesterday, the Indianapolis Star ran a piece on how Indiana’s job picture is worse than our neighbors. A recent study by the Brookings Institution’s Hamilton Project shows that Indiana ranks 6th-worst in the nation when they measure declines in employment from November 2007 to May 2010. It’s simply unacceptable for the Governor of the state that ranks 44th in employment growth to be celebrating our nonexistent jobs. The objective reality is that Indiana’s employment growth trails Michigan, Illinois, Ohio, and Kentucky (and almost every other state in the US).

It’s easy for Mitch to spin Indiana’s unemployment when our neighbors to the north in Michigan are facing the worst unemployment rate in the nation. But he shouldn’t get a free pass just because Hoosiers are marginally better off than the hardest-hit state.

But what about Indiana’s budget? It’s often asserted that Indiana has a “positive” budget and that we have a surplus. And that’s true – if you choose to selectively leave out a large chunk of Indiana’s finances.

Indiana is one of 26 states who are in debt to the federal government because they can’t afford to pay out their unemployment insurance benefits, according to ProPublica. Indiana’s Unemployment Insurance Trust Fund has been insolvent since at least 2008, and we currently owe almost $2 billion to the federal government for the state’s share of UI benefits. Just a couple of months ago, at Mitch Daniels’ urging, the state postponed a law that would raise UI rates to start paying off that debt.

March 2010 marked 17 straight months of Indiana’s revenues falling well short of projections. In April, we learned that:

Sales tax collections, though higher than April 2009, are lower than FY 2008, FY 2007 and even FY 2006 levels. Year to date sales tax collections are 5% below prior year. If the -5% trend continues for the full fiscal year it will be the worst performance in state history, exceeding FY 2009’s record of -4.7%. The budget as passed projected sales tax collections equal to prior year. April individual income tax collections are the lowest in five years. Year to date income tax collections are 11% below prior year—on top of an 11% decline for FY 2009. The budget as passed projected a 1% decline in individual income tax collections for FY 2010. (Source: Indiana State Budget Agency)

May’s monthly revenue report showed that “revenue collections through eleven months of the current state fiscal year are now $1.032 billion or 9% below the budget passed by the General Assembly.”

And too much of our state’s budget remains a mystery, even to those in charge of voting on it. When state lawmakers requested details on Mitch Daniels’ budget cuts, he released 476 pages of news clippings, but none of the actual information.

All this shouldn’t surprise Hoosiers. We elected – twice! – a man who oversaw record budget deficits when he ran the Office of Management & Budget for George W. Bush. We elected a man who rushed out to denounce critics in his own party by promising the Iraq War would cost only $50-60 billion. We elected a man who predicted that health care costs were done rising in 1994, so there was no need to address the issue. Given that record, it’s hard to believe anyone would buy Mitch’s spin about the Indiana economy.

The governor refers to Indiana as the island of prosperity. We’re the island of secrets. - Senate Democrat Leader Vi Simpson

On Tuesday, Indiana Senate minority leader Vi Simpson (D-Ellettsville) called out Governor Mitch Daniels and his administration for their culture of secrecy around state budgeting and spending. Specifically, Simpson and State Rep. Bill Crawford (D-Indianapolis) want to know what services, programs, and personnel have been cut under Daniels’ repeated budget crises.

Daniels’ budget director, Chris Ruhl, told Simpson that “a comprehensive list of executive branch budget reductions wasn’t available”. If our leaders don’t have access to this information, how can they make informed decisions? And how can citizens cast an informed ballot if neither voters nor lawmakers have any information?

Of course, it isn’t just budget information that the Daniels administration has been unable or unwilling to provide.

Indiana reporters, especially the team at WTHR in Indianapolis, have spent months trying to confirm the jobs numbers that Daniels has been touting, to no avail. Indiana Economic Development Corporation (IEDC) head Mitch Roob – last seen presiding over the disastrous privatization of Indiana’s welfare system – said of the jobs data, "We don’t share it with the public. We don’t release it to the news media. That’s confidential information." States surrounding Indiana, including Ohio, Michigan, and Illinois, make that information public.

And when Mitch Daniels is asked to back up the numbers, all he can do is walk away:

It’s no surprise that Mitch Daniels doesn’t want the public to have this information – when WTHR went to investigate some of the jobs that Mitch Daniels says he’s brought to Indiana, they found abandoned factories and empty fields.

Mitch Daniels’ culture of secrecy also extends to the much-maligned Indiana Department of Environmental Management (IDEM). The Gary Post-Tribune’s Gitte Laasby has done some incredible (and award-winning) work investigating stories about BP’s environmental permits and the pile of toxic steel waste named after former steel executive and current IDEM director Tom Easterly. Laasby’s editor, suspecting that the agency was “intentionally withholding and otherwise seeking to squelch information,” asked her to request records from IDEM that mentioned Laasby. The result?

Note that, other than the note at the top, every single word is redacted because the words are of ultimate import to the secrets of the state Indiana that all words cannot be released. Every article, noun, verb, dependent clause, all fall under the heading of being so much of a sensitive nature that no one should know about it. And even Laasby’s name, which was part of the open records request — if it exists in the blackness somewhere — is too dangerous to release to the public.

Each of these instances of Mitch Daniels hiding public information from Hoosier voters is troubling, but together they form an unmistakable pattern. As Senator Simpson put it, it is a culture of secrecy that pervades the entire executive branch.

Senator Simpson indicated that Democrats will be developing and introducing legislation designed to increase transparency, including  “easy online access to budget and spending information”. And that’s a good start, but it isn’t enough. Indiana’s antiquated public access laws need a wholesale revision. And we need to start supporting candidates who make transparency and open government a key part of their agenda. In Indiana, that starts with electing Pete Buttigieg to the Treasurer’s office and Sam Locke to the Auditor’s office this November.

Crossposted at Blue Indiana and Daily Kos

The Louisville Courier Journal’s Lesley Stedman Weidenbener first pointed out on her twitter account that IBM’s lawsuit against the state (PDF) used Governor Mitch Daniel’s’ own words against him. Sure enough, here’s a bit from the first page of the complaint:

For two years, the IBM Coalition and the State jointly tackled the problems of the old welfare eligibility system, and rolled out a new, modernized system to 59 Indiana counties serving 430,000 social services clients. In public statements by Indiana officials, including the Governor, the State consistently commended IBM for its role in this project and for the improvements it made to Indiana’s previously fraud-ridden and inefficient welfare eligibility system.

And the state continued to praise IBM throughout the duration of the contract:

On August 1, 2008, in a report to the federal government, the FSSA stated that “[t]he Eligibility Modernization Project is in its second year and has already made substantial progress toward its goals and objectives."

And:

In fact, the FSSA attributed its prompt disaster relief assistance to the IBM Coalition’s efforts: “The ability to mobilize multiple state agencies and provide computers and phones for Hoosiers to apply for state and federal assistance was made possible by the infrastructure already in place a s a result of eligibility modernization.”

And:

On October 15, 2009, Governor Daniels held a press conference to announce that the State was terminating IBM’s involvement in the Modernization Project […] During the course of his remarks, the Governor commended IBM for its work, citing a litany of benefits that the IBM Coalition had conferred on the State […]

Reading through the lawsuit, it’s apparent that despite Daniels’ current protestations, the state got exactly what they wanted from IBM – a system that virtually eliminated face to face contact:

In fact, the only things that Governor Daniels offered as reasons for the termination were two “fundamental flaws’ in the basic concept of the Modernization Project: “saving welfare applicants the burden of a face-to-face meeting” and breaking up the determination process into “discrete tasks… done by specialists.” However, these “fundamental flaws” were key objectives of the State identified in its own RFI, RFP, and inter-agency Review Committee report.

So for Indiana to win its case against IBM, we essentially have to argue that Mitch Daniels was lying to Hoosiers and to the federal government about what was going on at FSSA. The alternative isn’t much better – that he’s only lying now to do some political posturing before the 2012 Presidential race heats up.

The Star’s Bill Ruthhart and Mary Beth Schneider report “there may be a political price for Daniels.”

He came to office in 2005 as a champion of putting public business in private hands wherever it seemed to make economic sense. Ignoring critics who argued that welfare wasn’t the right venue for such changes, and the fact that similar efforts had failed in Texas and Florida, Daniels announced the contract with fanfare in late 2006. Now, the episode threatens to be a blot on his legacy as governor, and could tarnish his luster as a potential Republican candidate for president.

It’s also important to remember that this isn’t just a matter of financial mismanagement, incompetent governance, or even political costs. This debacle had a real human cost as well.

Medicaid cut off to a Hoosier who missed her welfare appointment — because she was hospitalized with terminal cancer. Welfare benefits denied to a deaf person — because she couldn’t do a telephone interview. A nun who lost Medicaid benefits and was deemed uncooperative when she missed a telephone interview because she had to play the organ on a Holy Day — though she repeatedly tried to reschedule.

And that’s not even getting into the fact that multiple courts have found that FSSA’s "modernized" system violated the law.

But like my state representative told the Journal Gazette, I hope Indiana prevails in this suit – the last thing we need to do is give more money to IBM after all these years of Mitch Daniels’ financial incompetence.

Rep. Peggy Welch, D-Bloomington, said she is glad the state is standing up for itself: “I don’t want us to roll over. Unfortunately, the state of Indiana rolled over for too long with IBM and let IBM call the shots. We’re not doing that anymore. If that means a legal battle, then so be it.”

Is it pride? Ideology? Pandering in pursuit of his ambition?

Whatever the reason, Mitch Daniels is refusing to double-check Anthem’s request to drastically increase health insurance rates for Hoosiers. I guess all that talk about being fiscally responsible is – once again – just talk.

Just last week, Anthem was forced to withdraw their request for a major rate hike in California after "an independent audit determined the company’s justification for raising premiums was based on flawed data." And the mistakes weren’t exactly a matter of opinion – they included basic mathematical errors:

• Error #1: Double counting of aging in the calculation of underlying medical trend for the projection of total lifetime loss ratio.
• Error #2: Anthem overstated the initial medical trend used to project claims for September 2009 for known risk factors.

Kathleen Sebelius, Secretary of Health & Human Services, sent a letter to other states where Anthem/Wellpoint operate:

"In light of this recent finding, I urge that, to the extent you have authority to do so, you re-examine any WellPoint rate increases in your state to determine whether any mistaken assumptions similar to those made in California were made in your state," Sebelius wrote to the governors. "Even small errors can mean unaffordable premiums for policyholders."

Replying through his spokesperson, Gov. Daniels declined to check Wellpoint’s math:

"When we feel the need for advice about health-care costs, we won’t start with the people who just passed this disastrously expensive and backward federal legislation," Daniels said in a statement…

(Through my spokesperson, I replied that maybe we shouldn’t be taking advice on health care costs from a man who said back in 1994 that health care costs had peaked. Or who said the Iraq War wouldn’t cost more than $60 billion. Or…)

The timing of this couldn’t look worse for Mitch Daniels – Reps Baron Hill and Andre Carson asked the Centers for Medicare and Medicaid Services to review the costs to Indiana of the recently-passed Affordable Health Care act. Unfortunately for Mitch Daniels, while his talking points on the issue may play well to 2012 Presidential primary voters, they don’t hold up well to the facts. In their report, CMS wrote that “Health insurance reform will bring relief to the Indiana budget.”

Hill and Carson added, in a statement:

“The governor is certainly entitled to his political viewpoints on the health care reform law — and he’s made those opinions very clear,” Hill, D-9th District, said in a statement he issued jointly Thursday with U.S. Rep. Andre Carson, a Democrat who represents the Indianapolis area’s 7th District. “But now that this historic legislation is law, it’s important that Hoosiers have factual, accurate information about the health benefits made available through these new provisions,” the statement said.

Couldn’t have said it better myself.