are headed in completely different directions. we have been asking the question what can state governments do or do better or do faster or maybe stop doing to make it more likely that the next job, the next investment -- the federal government for the last two years gets up and thinks what we do to put another barrier, another regulation, another uncertainty, another tax on the people who would like to hire people and grow this economy? we states balance our budgets no matter what and take care of our food usual duties -- financial duties. host: today, our system of governance is being challenged by china and other authoritarian cultures that have generated faster economic growth in anything we have seen capable of. ho why did you write that? guest: i think it is a statement of fact. it has been written widely and said by the leaders of these countries. the only way to have a system that lists huge numbers of people permanently otut of poverty and into better lives is a one that america pioneered, a free system that is maintained by self-reliant people. temporarily, through some stumbles on our part, what seemed a decade ago, people writing books about it, would seem so self-evident is now under question. america, i believe, will recover its footing. host: what did you mean by that title? guest: thinking back to your history, it was reported that benjamin franklin leaving independence hall after the writing of the constitution was asked by a crowd -- the woman supposedly said, "what kind of government have you given us?" he said, "a republic, madam." those conditions and gave rise to liberty in this country. i think, an exciting challenge for our day. to prove, once again to the world, that americans are the kind of people who can act individually to elalead responsible lives of their own and do not need the government to constantly protect them and shelter them and coddle them. because we are that kind of people, we can act together collectively in a free democratic system to make important decisions, not to spend our children's money before they earn it, not to bankrupt the future for the benefit of the president. host: i want to read one of the more different introduction to the book. guest: i guess that was a warning to the reader that if they were looking for something typical, at least as i observed boos' books,official's this one would be different. i said no i did not think the world needed another one of those. i wanted to say a few things about the central questions in front of us. who is in charge here? what people of good will do to try to protect and promote the important part of life, which is private life, the freedoms we enjoy it as members of the family and businesses and little leagues and so forth, or is the government's supposed to be in charge and ensure that somehow no one takes advantage of each other and that kind of thing? what kind of people are we going to be here? preachers of dignity or objects of therapy. those are the things that i wanted to talk about. i wrote that opening to alert the reader that if they were looking for something else, this was not their product. host: you go on to bash the baby boomers. guest: there was a little bit of an exaggeration for effect. ours has been -- i am hardly to observe this first. we have been a pretty self- center generation. many of us thought we were the center of attention. elsewhere, there is a great opportunity in front of this generation to leave a very positive mark by tackling the huge problems that have accumulated during our lifetime, specifically the debt which is going to crush our economy and this whole idea of the american dream that someone can ris start with nothing and rise. it will require those qualities that i just mentioned, a willingness to come together and unify the people to do some common sense things which will insure the future is better than today. you are reading accurately, of course, the things in the early part of this book, but this book is an optimistic statement about both the character of the american people and our ability as an american public to come together, get past what i think unfortunatevery politic of recent years. host: if the newly constituted get commission were to look at your book and look for ways to how to change a federal tax dollars, what advice could they find in here? guest: we must act now even though the actions would take the real effect years from now. they are totally on affordable. the enemies of social security and medicare are the people saying leave them alone. that is mathematically false. it is not a matter of left or right or republican or democrat. this is an arithmetic. the best thing we can do toward a much better economy today would be to say to the world america is not going broke. you can do this while protecting 100% of those who are in those programs today or those who are coming near them in the next two years. god bless you. nothing changes. help us perform these programs in very modest ways, by the way, starting years from now so the next generation can have some protection, too. that would be the first thing. host: on page 199, governor mitch daniels writes -- he goes on to talk about the important contributions and to remind us how old they are in 2010. nancy pelosi inadvertently strengthened the case for change when she threw a party. host: what was that important to point out the age of social security? guest: i do not know that many companies or products that have not changed over a period of that long. we all know this. social security was created at a time when the average life expectancy was under the age of 70. there were dozens of workers for every recipient. now that is completely different. life expectancy is climbing, thank goodness, so people are taking out of those programs far longer than before. under those circumstances, it is really not sensible at all to demand we freeze in place the terms and conditions of so long ago. host: mitch daniels was chief of staff to senator richard lugar in the 1970's and 1980's. he worked with eli lilly during hte interim period. you have been governor since 2004? guest: 2005. host: this is his book. i want to talk about one more topic before we move to the phone calls. the phone numbers are up on the screen. i want to talk about health care and an indian a program. i want to know what it is. -- an indiana program. to pay for the indiana health care program, an increase in the tobacco tax. in major target of the fitness and wellness efforts i have launched. one obvious reason for our high smoking levels was the cheapest of cigarettes driven by a very low tax at 55.5 cents per pack. i refer republicans -- i referred the republicans to ronald reagan who said, "if you want more of something, tax it less." i wanted less smoking in indiana. so, health care funding, health care, and taxes. guest: all right. first, to pick up where you left off, it was a fund it that way. i point out specifically this is a program for the low-income uninsured, those who are not covered by medicaid. we wanted to spread the umbrella, the peace of mind of health insurance, to more people. this was our way of doing it. there were major differences between the plan and medicaid. it is not an entitlement program. we collect money through an increase in the tobacco tax that covers a significant fraction of our uninsured. that was by design so it would not eat the budget like it happened in many other states with open-ended entitlement programs. secondly, the principal difference is the program is self-directed. it goes back to things we were talking about earlier. these low income folks contribute to a low percentage of the income that they do have and the state puts the rest in an account. we trust them to make smart decisions for themselves. if they run through it all because of a bad health experience, they are completely covered on the other and. it is their money. guess what? they turned out to be very discerning consumers like anyone else. they use the emergency room far less because it is expensive. they are more likely to use preventive care and are more likely to ask for second opinions from physicians. the money that is left, and it is accumulating, is theirs. they can use it to pay down the next year premiums or use it for the future. we believe is a better way of doing health care as it has been done in this country. i think it demonstrates something i believe fervently, that americans, all stations of life, are fully capable and which should help and encourage them to make their own choices. they do not need the government to do it for them. host: very quickly, the department of labor has released its weekly unemployment statistics. the number rose back above 400,000 last week. the average number of applications over the past four weeks fell to its lowest level since mid april. the current unemployment rate in in indiana -- 8.3%? guest: that is right. host: how did it go to 8.3%? guest: a lot of the improvement has been in manufacturing. it is a bigger part of our economy than other states. agriculture has been very strong. but we just believe we have created here one of the best business environment in america, so we think we are holding our own better than other states. you know, it is just far too high. i am sure you know that the unemployment situation in this country is not as bad as it looks. it is worse. one in five males in this country is not going to work this morning. it is a terrible situation and one that the national policy is not improving. here is the cover of the book. it comes out in about a month or so. this is a preview. "keeping the republic." springfield, va., you are on with governor daniels. caller: good morning. governor daniels, i have to tell you i was so tickled when i heard that you were on because i had the chance in 2008 to visit the indianapolis area. i am a budding artist. one of the things i noticed about the downtown area was a beautiful fountain memorial. you have some real gems in that city. when i went inside the fountain gift shop, you have no gift cards or post cards of all of the great sights in indianapolis or anything around 8. i wanted to know why there is not a bigger push to market to people who come to that area. guest: thank you. that is a great tip and i will pass it along to the mayor of the city and to our tourism people to try to make certain that we are sharing the good news. there is a lot of beautiful architecture and nature all over the state. i am not convinced that we have done as expert of a job in getting the word out. i appreciate the tip, and we will act on it. host: next call. caller: is not just the crushing economy. we have one in seven americans in prison in this country which is ridiculous. most of them are therefore making a safer choice then using alcohol or tobacco. i would like to say this quickly and get a response. last year in america, 400,000 americans died as a result of smoking tobacco. 80,000 americans died as a result of drinking alcohol. zero americans died from smoking marijuana last year. host: i think we got the point of. any thoughts? guest: first of all, as unfortunate as it is, it is clearly a factor in the declining crime rates which continue to surprise all sorts of people back there were people who believed that somehow crime and unemployment or directly linked. that has exploded in the last 20 or 30 years because they are not moving in sync with each other. one factor of keeping crime done in this country is we got more serious about repeat criminals and keeping them with a cannot hurt other people. however, greg is on to something here. we want to try to revise our sentencing so that those whose violent, non-whi low level drug offense where no violence was involved, low level property offenses, still need to be incarcerated, but maybe there can be done closer to home in their community bank there is evidence that a repeat at lower rates when they do that. so, we are working here in indiana to reform criminal sentencing. host: any estimates on what obesity and smoking cost the state of indiana? guest: there are estimates all over the place. i do not know if anybody has claimed precision about this, but we can all agree that they are large and is a real problem. we made a very concerted effort here. indiana has not been a very healthy state. high rates of obesity and smoking. we have been working on it very hard. there has been some real progress, but a long way to go. host: the next call comes from florida. please go ahead with your question or comment. caller: my question has changed since i called in because you guys are talking about other things. i think this entitlement program, welfare, should be wrapped together. when you go to the social security office, it is like four tigers in 1 k to. if we had a liaison to where people could go to one place to get everything they needed, it would be a lot better and would be able to catch fraud. i wanted to get your opinion on child tax credits. people are running to the banks to cash these checks. i think we ought to put this money on cards so this money is not spend on drugs. maybe trade that money for insurance sunday on not on medicaid after they tojust got an $8,000 check. guest: david, you come see us any time. you will find we have some of the lowest property taxes here. david raises i think at least two fascinating questions and ones that i have tried to think about a lot. he talks about this hodgepodge of welfare programs that we have created. each one of them have started with high intentions. destruction of family formation or personal i float the idea in the book. it is not original with me. it has been around a long time. i love the idea that you might merge all of these into what is called a negative income tax. get rid of not simply all the redundancy, complexity that david asks about, but get rid of all the bureaucracy and waste of administrative money that goes with operating dozens of programs that transfer income from some americans to others. it is not a perfect answer, but if you did simply have -- what this would amount to is those who earn less than what we consider a living amount of income, they would be topped above that level with an incentive to keep most of the money they earned if they were able to get above that level. i think it is a lot to recommend in contrast with the mess that david was describing today. it runs counter to david's other point. david was talking about the misuse of some of this money. i hear about it from hoosiers all the time. things that were not really necessary or perhaps were unhealthy or that sort of thing. here is where we have to decide what kind of people we want to be. i would rather place the trust and responsibility in americans to make those decisions for themselves, live with the consequences if they made them poorly, then to have government constantly playing nanny, constantly trying -- fuel, by the way -- trying to steer, control the behavior of americans. host: in your chapter "taking on the statist quo," you have a subchapter "saying oops," about the indian a welfare state. guest: my position from day one is we believe in -- about the indiana welfare state. guest: my position from day one -- within the sphere of government, we believe government is active and always tries to excel and improve service. you are 98% likely to be satisfied and you will be out the door and less than eight minutes. we believe in government that is effective and does those necessary things very well. now, if you are trying new things all the time -- and we are -- inevitably, some of them are not going to work out. i make the point all the time, i have never found "oops" to be a hard word to say. if we try to improve something in indiana, we will learn from that and immediately try to do it better. you asked about welfare changes, and that is a great example. we had a heck of a mess, one of the worst in america, that had to be fixed. we took the best of the old, best of the new, and now we are well better than the national average and vastly ahead of where we started. the larger point here is that i believe the american people -- for sure, hoosiers -- have the maturity and the common sense to accept something like that, and they will appreciate and support policies that work. as long as you deliver results, if you stumble along the way in a good-faith effort to do better, people will understand it. and overlook it. host: what do you mean by "taking on the statist quo" rather than the status quo? ak pun probably a wee on my part. the state believe sincerely that the decision making in this country should be in the hands of wise people who will look out for the rest of us and protect us from creditors on all sides and from our own bad decisions -- from predators on all sides and from our own bad decisions. they're going to have the light bulb rule. they will ban the lightbulb we have all known. the secretary of energy when challenged says we are taking away people's freedom to waste their money. that is a mentality that is really in place in much of our government, and that is what i referred to as "the statist quo ." those who are challenging it, as far as i'm concerned, represent progress in thought in this country. and those -- represent progress thought in this country. they are the reactionary's looking backwards to a past -- they are the reactionaries looking backwards to a past, and they will work a terrible injustice on young people if we do not change it. guest: next call for governor dean of comes from theresa, florida, a democrat. caller: my concern with all the protection of the future, the future of medicaid, i have a problem really trusting where the republicans are coming from. because almost like allowing the croaked to enter back into the cookie jar -- and allowing the crook to enter back into the cookie jar -- i think the word i would like to refer to is integrity. i like hearing "integrity" in between the parties. being a democrat and even looking over into the republican party to said well, if i wanted 2012 for a 200 republican, where do i for help for the lower class? i am afraid we are getting ready to erase the realities of that poor population. host: governor daniels? guest: teresa, i share very much your concern. i appreciate your question. frankly, i believe my party has to do a better job of speaking the language of unity to america. we will not solve the problems we have if we stay divided 51/49 the way we have been. second, i would say to you, as i try to say to every audience -- i believe what i believe about changing these programs so that they do last. i believe what i believe about leaving more dollars in the pockets of people who might hire somebody with those dollars. i believe what i believe about pleasing growth in jobs ahead of every other priority until americans are able to have the sort of employment that they deserve and can support families with. i believe that physically, because i believe the american project starts with those who have nothing, with those who do not have means today but have a dream and the will to work hard to achieve it. that is exactly what i believe the policies of this administration in the last few years have jeopardized the most. i think they are cruelly and least effective on the behalf of low-income people. we are talking about the best means to get to a goal that you expressed and that i share. host: this is the cover of mitch daniels' new book. any regrets about not getting into the 2012 presidential race? guest: i am not a rearview mirror type of person. it was a decision we made as a family, and i am at peace with it. i think my family is pleased with it. that is a priority that i do not have a higher one. host: paul bedard is wondering if mitch daniels is waiting to get drafted into the presidential race of 2012. guest: no no. i will share something with you. you read in the opening of the introduction, initially it said so many books are written because the author gets to run for president. this one is written specifically because i do not. but i love our country, i am worried, and here is my thoughts about it. the book was written back in 2010, touched up a little bit this spring. it has no intention of starting talk like that you just reported. host: this is not in bookstores yet, but it can be ordered on amazon or any of the other book- buying sources online. about five minutes left with our guest. tampa, florida, earl, a republican. you are on with governor mitch dales of indiana -- mitch daniels of indiana. caller: it is a pleasure to talk to you. a friend of mine quit because he could not look in the mirror in the morning. he told me that eventually in the united states, the tax code was going to turn into our nation into a nation of liars and cheats. everybody knows it is a mess. i'm not so sure that governors should not understand that they have to change totally our tax system. it just will not work. it is crooked. there are 67,000 pages. nobody knows what is in it, and both parties take advantage of it to stay elected. host: governor? guest: i agree completely. frankly, it is an essential change, one of the big ones that must come that we ought to come together around. first of all, for the reasons that the caller gives, and secondly because it is perhaps the single best step we can take to a stronger economy, more jobs, and growth. with regard to the tax code, it is a mess. i read quote -- by quote bill simon -- it looks like -- i quote bill simon -- it looks like somebody designed it on purpose. one of the things that troubles me about it, it further diminishes the citizen in this country. i freely admit i have not been able to do my own tax form for a long time. now fewer than all americans can cope with it. that all by itself is a bothersome thing in a free society. here is a little bit of hope for you. there is a lot of disagreement, of course, about what the best way forward is on all these other questions, but there is a lot of agreement across the spectrum, among economists and others, about the kind of tax code that would strengthen this economy. it would start by wiping out many of the special preferences and exemptions and so forth, allowing their for the rates to come down. we know that lower rates on the next hour of work, the next dollar invested, means the more people get tired. this would be, i think, a terrific -- the more people get hired. this would be, i think, a terrific initiative that would get us on the right track. this is one i would hope democrats and republicans can get together on. democrats would see that most of these preferences benefit upper- income people disproportionately. republicans would see a much lower, flatter, much simpler code that the citizen can cope with that encourages rather than discourages job-creating investment. host: mitch daniels rights, "i do not happen to favor a vat, not because it is bad economic or social policy but because of the pearly practical risk that it might be increased to easily. given the shape we are in, no solution should be dismissed out of hand," is what governor daniels rights. you also mentioned the invaluable paul ryan. guest: he has one of the most courageous, principled minds that we have in our country. he has felt, with a young family and his own public career still being pretty young, this was not the time. but if he rethinks that, he would in rich this a lot. this is a guy with a great heart, that the average person and the average american, all the things that the average american thinks would be more -- said more eloquently about whatever it takes to restore a portability in this country, to restore the conditions for a stable, broad middle class. his is a very important voice. host: there are pictures in the book as well. here's a picture of mitch daniels in 1972. yes, this is him right there. two to the right of him, senator dick lugar, who faces a primary this year. what does that challenge look like from the state level, governor daniels? guest: it looks like a spirited race between two credible and elected officials. i personally will vote for senator lugar. he has been one of the few people i would say in the past few decades who genuinely deserve the title of statesmen. continueg that he will to serve, but it will be a g hef governor mitch daniels' upcoming book that publishes and about a month or so. what are you reading this summer? book tv wants to know. >> i have a whole wall list of books that some hour own financial and some are new. the first book i'm working on is monsoon, which is a book by robert kaplan how about the whole issue of central lisa where i think most of the politics of the next years are going to occur and i have read chapters of it when i traveled to various parts like indonesia but i want to read the whole book. i started in february. another book that was given to me by a fellow in my office from the american academy of mechanical engineers who worked with me on the question of water. i said to him tell me what the problems with water are going to be over the next 20 or 50 years and this book he gave me and he said i want you to read it. i never was able to write a perfect report but it's a good book to read about the whole question of water and it's an issue that in congress we really do need to think about in the future. george friedman wrote a book called quote code the next hundred years," which is a fascinating book that looks out 100 years and looks at where our major allies will be. most countries were involved in and have trouble with and so when he came out with the next book which is called the next decade i figured that's within my lifetime so maybe i'd better get that one read and see what's going to happen at least from the perspective of people who look at the trends. one of the fascinating things in the first book was that he said the countries will be involved with will be turkey and poland, and i thought wow i never thought about that. i thought about turkey but i never thought about poland. then he said we are going to have a war in the next 100 years with mexico, so there was a whole lot of things in the dhaka were very fascinating. so i decided i'm going to read the second book which is a little more down to earth. the other thing is as congressman, everybody that writes a book sends one to the office and says you all to read this book and so we get all kind of books many of which i send out to my office in seattle. but i also get people who recommend books to me and say you should read this book, friends and so forth, and one of the books was sent to me by a long time secretary and it's about china the man who left china. this is a