>> In 2013, a prominent Republican governor left politics to lead Purdue University.

Some say Purdue got the president America needed.

Governor Mitch Daniels this week on "Firing Line."

>> "Firing Line with Margaret Hoover" is made possible by... Corporate funding is provided by... >> Mitch Daniels is, today, the 12th president of Purdue University.

He was the 49th governor of the state of Indiana and the 33rd director of The White House Office of Management and Budget, where he was dubbed "The Blade" by president George G.W.

Bush for his ruthless fiscal conservatism.

He broke a Conservative heart when he announced he wasn't running for the Republican nomination for president in 2012.

Applications and enrollment at Purdue are on the rise since he arrived five years ago.

He is putting his fiscally conservative philosophy into practice by freezing tuition costs through 2020 and trying to tackle the student-debt crisis.

A proud motorcycle enthusiast, he owns and can be seen riding a Dyna Low Rider and a Fat Boy, both Harley-Davidsons.

The freedom of the open road, along with personal responsibility are recurring themes in his books, speeches, and columns.

A constant commentator on the state of the republic, Governor Daniels wonders whether we are capable of self-governance.

Perhaps, but only if we wear a helmet.

Governor Daniels, welcome to "Firing Line."

>> Thanks, Margaret.

>> I'm delighted you're here, because you defined much of your political career, from the Reagan administration to the Bush administration to your tenure as governor in Indiana, by a fiscal conservatism that we don't hear much about these days.

And, so, I'm wondering if we could start by just pretending like we're in a complete political void.

And if politics weren't a reality, how you would approach certain policy problems, void of the political reality.

So, I'd like to take a couple at a time and just go back and forth with you in here.

If you were to tackle the entitlement problem that we have in this country, first starting with Social Security, which we all consider the easy one, how would you go about making it solvent?

>> The ways to do it are not too hard to define.

We got to stop funding rich people.

We don't have nearly enough to go around, so we shouldn't send Warren Buffett a retirement check.

We raise the retirement age in some gradual way.

We all -- We live so much longer now than we did when the system was set up, and the age has only been raised very slightly.

So, those are the first steps you ought to take.

And if you took some combination of those, you could get that -- The trust fund would be trustworthy once again.

>> What we also know is that the biggest drivers of our debt is the healthcare spending.

So if you were to tackle Medicare and Medicaid, again, aside from the political realities, what's your ideal sort of set of solutions?

>> We will never have cost control in healthcare until everybody is a cost controller.

We're all human.

We will always consume more than we might otherwise if we were making the decisions.

So you would go, as quickly and as fully as possible, to a system in which everyone is protected, in true insurance fashion, against ruinous or catastrophic expenses, but people pay their own bills, and you help low-income people, not everybody, as we do today.

You couldn't have designed -- If you set out to design a system that costs too much, it would look pretty much like our healthcare system does today.

>> How about the national debt?

How would you go about solving this?

>> How about that national debt?

>> How about that national debt?

$21 trillion.

>> Yeah.

No, it is an enormous default of responsibility by both political parties.

You know, no entity -- public, private, or otherwise -- can stay self-governing as deeply in hock as we are.

And it is a cruel dereliction of duty to dump these bills on younger people.

That's worse than dumb policy.

It's really immoral.

>> But if you were gonna wave a wand, how would you fix it?

Say you fixed entitlements already.

How would you go about paying down the debt?

>> You know, if you had seriously addressed those questions and you had any sort of a pro-growth economic policy over a sustained period, we'd get out of the corner that we're headed into.

>> So, we're still in a world devoid of political realities.

How would you approach the ideal balance for trade?

>> Trade will find its own correct balance.

You know, hopefully we'll remain a country that people want to invest in.

>> How about tariffs?

>> Well, I won't say there are never, ever a role for them, but they ought to be as minimal as possible.

>> Tax policy.

What's the best approach to taxing our corporations and our individuals?

>> Well, corporations don't pay taxes.

They collect them.

So the level of those ought to be just seen as part of the -- I think as part of the overall level.

They will pass.

That's a pass-through, and everybody knows it.

I think we've seen empirical evidence, not a matter of philosophy, that lower marginal rates on income spur work and initiative and investment and are a good idea.

So, the formula has always been the same, and it used to be bipartisan agreement that the broadest-possible base, that is to say the fewest loopholes and the lowest rates, is the right way to tax income.

You know, with the bills we've got coming, either willingly or against the wall, there are probably gonna be some tax increases in the future.

>> All right.

Now we're back to reality.

We're in a political reality.

And here's what I'd like to know.

You're the president of a university.

You teach students.

You give out grades.

>> Mm-hmm.

>> If you were to grade how we're doing on each of these policies, how are we doing on our entitlement?

>> Can I make this easy?

Everything we've discussed is an "F." >> Every single thing.

Taxes are an "F"?

>> Well, at Purdue, we don't believe in grade inflation, so -- >> Okay.

>> Yeah.

Well, no.

I'm sorry.

We did talk about taxes, and I think, in general, we've made some improvements out of that.

>> An "F" on trade?

>> I think the jury's out.

I don't know where that's all gonna settle.

I can't tell how much of today's activity and controversy there is tactical and how much is strategic.

In other words, if it's tactical to get a better deal under free-trade conditions, that would be a positive outcome.

>> What about the national debt?

That's an "F?"

>> That's an easy "F." >> Healthcare?

>> Yeah, same.

>> Medicare, Medicaid?

Yeah.

>> Yeah.

No, no.

They're out of control.

Everyone knows it.

>> Here's what catches my attention.

You just said that spending is out of control, and everyone knows it.

And the problem I see is that there actually aren't enough people that know it, or if they know it, they're not saying what you just said.

And so I wonder whether there is a political constituency anymore for the ideas that you've just articulated.

>> Evidence says no.

And it's human.

You know, nobody wants to stop the party before the -- >> That's not true.

>> Mm-hmm.

>> Because when you were governor of Indiana, you did some things to stop the party.

>> Well, I'm thinking about the federal arrangement.

>> All right.

>> There's a fundamental difference between the two levels, as you know.

I used to say, when I took up elected office, you know, that I immediately looked around in all the closets for the printing press, and there wasn't one.

The big difference between, you know, federal government and everywhere else is -- they can print the money they want to spend a day, and other levels can't.

>> But you took -- I mean, you did a couple of things to encourage investment in your state, which generated revenues for your state.

>> Right.

>> And they were not politically easy things to do.

They were politically courageous things to do.

Indiana became the 23rd Right-to-Work state when you were governor.

You suffered or endured major labor protests when you were governor because of that.

In other words, there are politically difficult things that can be done that it seems like people these days are unwilling to do.

>> I think the central question for our democracy -- Not to get too metaphysical here with you, Margaret.

But all these great questions really service the big one to me or sum up to the big one, which is -- are we really going to be able to be a self-governing people for the long term?

Democracy is not the natural state.

Tyranny and autocracy and military tyrants and monarchs are the rule in history, not free people governing by consent of the governed.

And the skeptics have always said that it's a cute little idea, but it won't last, for various reasons.

And I still believe that there is an opportunity for people to speak to the American people about a future that is more respectful of their children's interest.

You know, nobody knowingly wants to plunder their children and that generation.

Most folks today simply don't know -- People in power and people in authority know, but most citizens -- too many are not aware of the realities we're discussing.

>> Are the set of ideas that you have expressed becoming politically extinct?

>> Well, time will tell.

You know, right now, clearly, freedom -- There's some premises under all the answers I'm giving you, which is that the primary objective of our politics and our system ought to be the protection of individual liberty.

As I always used to say, we should never take a dollar from a free citizen without really good reason to do so.

So it's not really about dollars and cents and so-called fiscal policy.

It's about freedom.

>> And it's a moral responsibility.

>> I think so, too.

And a second, I think, presupposition of our system is that people will be responsible, somewhat responsible, in their own lives and in their collective governance of the country, that we won't print money in unbelievable quantities, spend it on ourselves today, and pass the bills to our children.

Most people haven't been encouraged to think about it that way, and if they did, I still believe many more would say, "Enough's enough."

>> I would hope that that's the case.

It's just that we have now had a Republican House, a Republican Senate, and a Republican president, and fiscal conservatives have been waiting for this moment for 20, 30 years, and we've seen very little realization of the ideas that we've espoused for so long.

>> Life's full of surprises.

In fairness, this president did not campaign that way, did not win election on those ideas.

And so you can't blame him for not -- >> Absolutely not.

It just -- It's striking that the modern American Conservative movement that has pinned itself so strongly to one of its three pillars as fiscal conservatism seems to have evaporated that pillar in the last several couple years.

>> Well, maybe it's just been overtaken.

There was a different coalition or assembly of voters that came together to so narrowly elect our current president.

And, in all honesty, he, I think, probably read them as not particularly interested in hearing about getting our bills paid and changing these programs.

And it was just never part of his agenda.

>> No.

He made it very clear when he ran that Social Security wasn't something that he was going to touch.

He had no interest in touching entitlement spending or any of these programs.

So that's certainly true, if disappointing.

Maybe we're at an inflection point, maybe we're not.

Maybe the Republican Party continues to be the party of fiscal conservatism, but maybe it doesn't.

What is your view about what is the vehicle going to be for the ideas that you've espoused throughout your career?

>> I'm not certain.

You know, I'm in -- For the last six years, I've been an active member of no political party.

It wouldn't be consistent -- >> What a luxury.

>> Well, it's had its advantages, absolutely.

No.

To be consistent with my responsibility at a public university, I have no comments ever on partisan matters.

But not to duck the question.

You're quite right.

Neither of our existing parties and no third movement that I see wants to pick up this particular set of issues.

>> Does character matter in leadership?

>> Sure, it does.

Everywhere.

It matters in business, where I spent more years than I did, certainly, in elected office or anywhere else.

And we've seen it matters in our other institutions -- our faith institutions and so forth and, obviously, in government.

And, right now, we have very low levels of trust and confidence in our institutions.

I've always believed and said skepticism -- let's just say about Big Government for a moment -- that's as American as it gets, a healthy skepticism.

But we don't want it to become contempt for all government or for other institutions either.

But as, you know, someone has recently written, if people don't trust these institutions, maybe they've got a good reason, and it should start with leadership that people can have some confidence in and can have some respect or even admiration for.

>> Well, the political climate has become so polarized and, I think, tribal.

And you gave a commencement address where you addressed the topic of tribalism.

>> But over these last few years, this new self-segregation has taken on a new and even-more-worrisome dimension.

It's no longer just a matter of Americans not knowing and understanding each other.

We've seen these clusters deepen and harden until separation has led to anger, misunderstanding, turned into hostility.

At the individual level, it's a formula for bitterness and negativity.

For a self-governing people, it's poison.

A minute ago, you said that both sides find they can garner short-term wins, and that's absolutely right, but it depends what you call winning.

If you want long-term success for the country, then this is poison to divide into roughly equal armed camps who come to believe that disagreements represent some sort of character defect in the other side, maybe even should be criminalize in the more extreme cases.

That may be a formula for somebody winning an election somewhere or one side winning a majority somewhere, but it's also, as we've seen, a pretty good formula for paralysis when we've got issues that we ought to act on if we want a better future.

>> Is the Republican Party now the party of Trump or is this an aberration?

>> I'm not the one to ask.

That's been the right question since, really, he locked up the nomination.

And I guess, for the moment, it does appear -- I mean, it seems clear that Republicans, in general, have associated with that set of views and policies that he represents.

>> All right, let's go to Purdue.

Let's start with the student-debt crisis.

$1.6 trillion in student debt hitting students across the country.

The average student has around -- that has student debt has around $33,000 in student debt.

Why is college so expensive?

>> I said some things about healthcare being -- If you had designed it to cost too much, you could hardly have done better.

It's a very close parallel.

Let's think about higher education.

People have come to believe it's a necessity.

Just got to have that diploma.

There's no measurement of quality.

You can't really tell where students are learning more and not.

In the absence of any evidence, people have associated a sticker price.

If it costs more, it must be a better school.

Then you pour in third-party support, which we did with the very best of intentions -- grants and loans and all the rest -- which makes it feel less expensive than it is or -- >> So, this is a point that gets very little airtime, though.

I think what you're saying is -- the federal government has some role and responsibility in the inflated tuition costs in universities across the country.

Explain that.

>> Every time we add another dollar of federal subsidy to the system, the schools pocket something like 2/3, or 70 cents of it, and raise their prices.

>> In other words, they count on those federal grants and, knowing that that revenue will be coming in, increase their tuition costs.

>> That's right.

And families and students pay it because it doesn't feel more expensive, at least till the debt bills start coming in.

>> So, what you're saying is -- there's a way around an expensive college education.

>> I think so.

At, you know, Purdue University, we try to ask the question a little differently.

I said, on arrival, that, "Why don't we try at least a one-year time-out from annual tuition increases?"

They had been going on for 36 years, like everywhere else.

And we found out we could not only do it once but multiple times.

We've done it -- It will be seven times by the end of next year, seven straight years of no increase.

We lowered the cost of room, books, and board, and so it will be less expensive to attend our school, in nominal, unadjusted dollars, in 2020 than it was in 2012.

So it can be done.

Instead of asking families to adjust their budgets to our spending, how about we try to adjust our spending to their budgets, and it's worked out okay so far.

>> So, it was simply eliminating inefficiencies?

>> You know, honestly, part of it was reforming of healthcare and pension systems, along the lines we talked about, a rough parallel to the federal arrangement.

There were some big savings there.

And it turns out that having a reputation for caring about affordability, plus a reputation for academic quality is pretty attractive.

So we've had record applications and we have the biggest student body we've ever had this fall.

>> I mean, the next generation is concerned about the student-debt crisis, because, obviously, they're the ones that have to endure paying the debt obligation.

The Democratic Party, the progressive Left is in favor of waving a wand and having the federal government take on the costs.

Is there anything about your strategy and solution that might offer a broader policy solution shy of the government pays for it all?

>> We're not prescribing what Purdue has done for anybody else.

We believe it fits us.

We're a land-grant school.

Many people don't know this, but land-grant schools were created by Abe Lincoln and his allies to democratize higher education, at a time in which only 1% or 2% of the wealthy and privileged went.

We take that very seriously today, and that's why keeping the cost down is so central to us.

>> As you have stepped away from politics, you have engaged with the next generation of Americans in a new and more meaningful way than I think you had before, at least on a larger scale.

And I wonder if you think that they are well-prepared or sufficiently prepared to take on the weighty responsibility of self-governance.

>> The young people at Purdue are tremendously purposeful.

If every young person in America looked anything like that, I'd have no worries whatsoever.

I can't say for sure that they do, although I'm very, very hopeful.

And the story of this country has been one -- We've had all kinds of troubles before.

We've had very deep divisions before.

And subsequent generations have worked their way out.

In that speech, I said, at the end to the students -- I said, "You know, the biggest challenge you may have is bringing this country back together around some common purpose and some sense of mutuality."

And I said, "I think your elders may be too dug in to do it, so let's hope so."

>> Why do you think that is?

Can you characterize that problem a little more or put a finer point on it?

Why have we become more -- I don't know -- separated?

Why is there a lack of a national sense of identity or purpose that you've described?

What has hardened us?

>> Yeah.

It's clearly multi-variate.

Yes, there has been some economic separation, in which traditional sectors of the economy have struggled.

Now, many seem to be doing a little better recently, and maybe a sustained period of that would help bring a little greater harmony.

But I really have always thought that the bigger issue was the manifest cultural disdain of some people for their fellow Americans.

And it's very visible in a mass-media world.

And, you know, there's no doubt in my mind that it had a lot to do with the tumultuous election that we saw last cycle.

>> The First Amendment is a touchstone right now in our national debates, and college campuses seem to be a hotbed for debate about the First Amendment.

>> Mm-hmm.

>> How do you understand some of the controversy around free speech on campuses as a university president?

>> It's been pretty alarming.

Now, I'm gonna tell you that I think it's getting better.

But there have been some really unacceptable, egregious trespasses, first of all, of individual people's freedom and then, secondly, of the principle of free expression.

You know, free expression is not only fundamental to our political discourse, on college campuses, it ought to be the most sacrosanct of principles, because knowledge can't advance where everybody thinks exactly the same thing.

All the great scientific discoveries and other advances in human understanding have come because people argued about them.

More and more schools have, I believe, begun to do what we did at Purdue, which is to adopt very clear speech codes that say -- free-speech codes that say that we will -- Essentially, we may punish actions, but not words.

>> So, one of my favorite parts of the show is that we always show a clip from the original "Firing Line."

William F. Buckley, who I know you admire and was a galvanizing personality behind the modern American Conservative Movement, had this to say about personal responsibility.

How do you respond to that?

>> With deference to two of the wisest people of the last century, I don't think it's quite that bad.

I come from a part of the country where I guarantee you people still are volunteering and still are looking out for their neighbors and still feel some real responsibility to lead their own lives in an upright way and in a way that respects the future.

And so I'm not giving up on that.

I still -- I think the untested appeal in our politics is to say to the American people, "These other folks don't think you can cut it, but we do.

And we want to trust you to, you know, make your own healthcare decision, to decide where your kids go to school."

I still believe most Americans think of themselves as responsible individuals and could be addressed that way in a fashion that, right now, neither of our parties seems to do.

>> Governor Daniels, thank you for coming to "Firing Line."

>> Appreciate the invitation.

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