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OMB Chief's Blunt Talk Could Point to Trouble


WASHINGTON — President Bush's towering approval ratings as a wartime leader give him clout aplenty on Capitol Hill these days. But a corrosive battle between Bush's top budget advisor and powerful members of Congress could complicate the crucial year-end budget negotiations.

Mitchell E. Daniels Jr., the White House budget director, is the outspoken, often acerbic point man for Bush's efforts to hold the line on government spending. But in the process, Daniels has been so withering in his criticism of Congress that even the easygoing Republican chairman of the House Appropriations Committee has refused to return his phone calls. Vice President Dick Cheney had to be diverted from the war on terrorism recently to mediate.

The power struggle speaks volumes about the difficulties looming for Bush as he seeks to restrain spending and avoid plunging the government into budget deficits. And it puts the spotlight on an obscure Cabinet officer who has one of the toughest jobs in Washington: controlling spending by lawmakers whose expectations were shaped earlier this year by visions of a vast budget surplus.

That surplus has evaporated, thanks to Bush's big tax cut, the ailing economy and the cost of responding to the Sept. 11 terrorist attacks. But political pressure to spend has intensified because of the sense that, at a time of national crisis, money should be no object.

Daniels, a former senior vice president at Indiana-based pharmaceutical giant Eli Lilly & Co., doesn't see it that way. As Office of Management and Budget director, he supported Bush's broad veto threat against plans to bust the administration's proposed budget with post-Sept. 11 spending on defense, security and other items.

Daniels Angers Some Republicans

That ran afoul of plans being laid by some of the most powerful barons on Capitol Hill: the leaders of the appropriation committees, who have argued that more money is needed to combat terrorism.

Daniels has irked Republicans as well as Democrats. Asked what Daniels could do to repair relations with Congress, GOP Sen. Ted Stevens of Alaska snapped, "Go back to Indiana."

Such tensions may make it harder for Daniels to play a direct role in negotiating the 13 appropriation bills that Congress must finish writing before lawmakers can adjourn for the year. They return this week from their Thanksgiving recess.

"As director of OMB, you've got to be the one who is responsible for negotiating on budget issues," said Leon E. Panetta, budget director under President Clinton. "The danger is that [lawmakers] will always wait for Dick Cheney to show up before they cut a deal."

To a great extent, tension between the OMB and the House and Senate appropriation committees is unavoidable. The power of the appropriators comes from spending; the OMB's job is to manage spending. But Daniels brings to the job an especially strong commitment to control government spending--especially on programs he views as wasteful.

"It is our lot in life to disappoint people on a daily basis," Daniels said recently of his job.

To a degree unusual in Washington, Daniels' comments about Congress have been cutting. He has bemoaned the long congressional session by quoting a line from a country song: "How can I miss you if you won't go away?" He lambasted the post-Sept. 11 spending pressures in a speech that declared: "It might be autumn everywhere else, but in Washington it is springtime for spenders."

Perhaps his most provocative remark came when, referring to lawmakers, he told the Wall Street Journal: "Their motto is, 'Don't just stand there, spend something.' This is the only way they feel relevant."

Daniels now regrets that comment: "That was one of those moments when my brain went on vacation and left my mouth in charge." He launched a fence-mending campaign by writing personal notes earlier this month to the four top leaders of the House and Senate Appropriations Committees.

"To be effective for the president, I need to be able to work with them," Daniels said.

Through it all, he enjoys strong support from the White House and is considered a trusted advisor to Bush on tax and budget issues.

In his personal style, Daniels, 52, is well-suited to his designated role as belt-tightener-in-chief: Although a multimillionaire, he lives a notoriously frugal lifestyle. He stays in a one-bedroom apartment in Washington (his family has remained in Indiana) and buys suits off the rack. When he started playing golf, he refused to buy a golf glove, using an old gardening glove instead.

He was considered an unusual choice for the OMB job because he had little experience in federal budgeting. But he had an extensive background in politics.

He served for many years as an aide to Sen. Richard G. Lugar (R-Ind.). He was a political advisor to President Reagan in the mid-1980s and then head of a conservative think tank, the Hudson Institute, before taking the job with Eli Lilly.

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