An Economics Lesson from Indiana’s Governor

It wasn’t long after Gov. Mitchell E. Daniels was first elected to office that he met with members of his new administration to outline his main goal for state government. Most of those in his cabinet were political neophytes who were entering public service with a fresh perspective on the state’s problems (or, what the Chinese deem “young eyes”).

Daniels, a political newcomer himself, arguably was looking at government from a similar perspective, though he had clearly defined objective in mind. During that first meeting, the newly elected governor gave his cabinet an edict that helped turn around the state’s finances and has since become a cornerstone of his reign in Indiana. “I said something to the new recruits on that first day that I still repeat often,” Daniels said during a plenary breakfast session that kicked off the second day of AdvaMed 2011—The MedTech Conference in Washington, D.C., on Sept. 27. “I told them ‘We will move at the speed of business, not the speed of government. Time is money.’ No matter what branch of government you are working in, no matter how remote you think your job is from the goal, think about what you and your colleagues can do better and faster, or stop doing, so growth happens here.”

Since handing down that decree to his cabinet, growth has occurred in Indiana—and in a big way. The Indiana Economic Development Corporation, which Daniels spearheaded to attract new jobs to the state, generated $18 billion in new investments its first four years of existence; in 2005, the state turned a $600 million deficit into a $370 million surplus; and the 2006 leasing of the Indiana Toll Road—another one of Daniels’ ideas—generated nearly $4 billion for reinvestment in the state’s 10-year transportation and infrastructure program. In addition, sweeping property tax reform and large tax cuts have given Indiana the nation’s lowest property taxes.

Daniels’ formula for restoring significant growth to the Hoosier economy was simple: Build a better business climate and give residents more money to spend. Both moves, he surmised, would improve life in the state.

“I said to the people in that hotel room on that first day, ‘Every great enterprise I ever saw had a clear purpose. Everyone knows what that purpose is, people know what the business is there to do and every worker knows what his or her role is,” Daniels told the device executives, policy makers and industry leaders that gathered for his early morning speech. “Here is our goal—we are here to raise the disposable income of Hoosiers. We need to do everything we can to make sure businesses come to our state and pay more in wages to our workers. We also have to try to leave more dollars in people’s pockets. If we do that, life in Indiana will get better. That’s what we tried to do. We’ve built a better business climate, we’ve lowered taxes and done everything we can to improve the margins of businesses with us now or those that might come to us in the future. We deliver effective, high-performance government.”

Daniels contends that his formula might also do the nation some good, particularly as it attempts to free itself from the burden of unaffordable, unsustainable debts and restore its waning position in global medtech innovation. One of the most important things a business can do, Daniels noted, is make money. “If you make more money, you can hire more people and create new opportunities.”

But before companies can start making money again, the nation’s leaders must restructure its spending obligations and operate at the “speed of business.” Daniels punctuated this point by providing two examples of the efficacy of this mindset. In the first example, the governor described the reasoning behind mail order pharmacy giant Medco’s decision to locate a high-volume mail order pharmacy facility in Indiana. He said Medco executives chose the Hoosier State for its efficiency in helping the company obtain the necessary permits to conduct business. Upon learning of Medco’s interest in Indiana, the state’s Board of Pharmacy held an emergency meeting and secured the permits several days later. The Pharmacy Board in the other state Medco was considering (but never identified by Daniels) did not move as quickly, telling the company that it could consider the matter at its quarterly meeting in several months and then helping to secure the necessary permits weeks after that.

The second example involved Indiana’s Bureau of Motor Vehicles. Drivers who visit the bureau to obtain a license can make a reservation so they don’t have to wait in line, or log in to the bureau’s website to determine in “real time” the length of the wait (which, according to Daniels, should be no more than 10 minutes).

Daniels said his background as CEO of the Hudson Institute and president of Eli Lilly and Company’s North American Pharmaceutical Operations has served him well in government, teaching him the skills he needed to jump-start growth and reduce waste in Indiana. With cost pressures mounting, and a medical device excise tax looming, Daniels advised the medical device industry to continue to stress the high-tech nature of the industry. “Americans relate to new technology and the scientific genius behind it,” he noted. “Never fail to stress the incredible science and speed with which you advance medical technology. And always drive home that this technology is in the best interest of patients.”