Zing Along with Mitch: The Reaganite new budget chief.

In the 19th century, the Secretary of War occupied a three-room suite on the second floor of what is now the Eisenhower Executive Office Building, adjacent to the White House on Pennsylvania Avenue. But since 1939, the ornate quarters have housed each administration's budget director, including such notables as George Shultz, Caspar Weinberger, Bert Lance, and David Stockman. It is now Mitch Daniels who cordially greets visitors to the offices of the director of the Office of Management and Budget, where he will be waging war against high taxes- and congressional spending binges-on behalf of a president whom Daniels describes as "resolute" in his determination to control federal spending. Mitch Daniels's own determination is underscored by his recognition that before the year is out, the administration could have a civil war on its hands with a spendthrift Republican Congress.

Returning to Washington from the corporate world in Indianapolis, Daniels feels like "a reservist called up for active duty," and his old conservative colleagues are delighted that President Bush sounded the call for this veteran of the Reagan White House. "Mitch's appointment is a total home run," in the opinion of Stephen Moore, who has left the Cato Institute to run the Club for Growth, a free-market advocacy group on whose board Daniels served along with Arthur Laffer, former Delaware governor Pete DuPont, National Review contributing editor Lawrence Kudlow, and NR president Thomas L. "Dusty" Rhodes. Daniels, says Moore, is "very much a supply-sider" and "as eloquent as anyone in the administration on tax cuts."

The new OMB director himself describes his political philosophy succinctly, varying only the modifiers: "I'm a Reagan conservative, I'm a Lugar conservative, I'm a Bush conservative." He is now in unfriendly territory, and acquitting himself well. On a recent Sunday-morning TV show, Daniels made the case for the president's budget agenda, in a match-up with Sen. Joe Lieberman. When challenged on whether Bush's pessimism about the economy was intended to build support for his tax cut, Daniels replied, "Well, that would be a pretty good reason, by the way," and pointed out the historically high level of income taxes. When asked about the administration's view of a proposed "trigger" to halt tax cuts if the surplus shrinks, Daniels called the idea-promoted by some GOP senators-unnecessary and unwise, noted that taxpayers' interests always seem to come last, and wondered why there was no mechanism to slow spending in the face of an economic downturn.

Former congressman David McIntosh, an Indiana Republican, credits Daniels-"one of the smartest people I've ever met"-with the fact that Washington's current budget debate so favors Republicans. He points out that Daniels, who cochaired McIntosh's unsuccessful campaign for governor last year, put together a budget for the president that supported his tax cuts without making the kind of program cuts that would provide Democrats with ammunition against the plan.

As a veteran GOP political strategist, Daniels has engaged in most of Washington's major debates over the last few decades. Following his 1971 graduation from Princeton, he returned home to Indianapolis to work for Mayor Richard Lugar. After Lugar's 1976 election to the Senate, Daniels joined him in Washington, where he became the senator's chief of staff, and finished his law degree at Georgetown University. During the 1984 election cycle, Daniels ran the Republican Senate campaign committee, and then served in the Reagan White House, first as liaison to state and local officials, and later as political director.

In Daniels's view, Reagan was the kind of great political leader who, in Disraeli's words, "knew himself and knew his times." He talks about Reagan's "sunny disposition, his resolution, and his unwavering concentration on the big issues." Here, he sees some similarities with his current boss: "President Bush has a superb balance in terms of management style. He's very engaged with the things that matter, but he will not be distracted by the trivial." The "Hoosier modesty" his friends attribute to Daniels shows itself in his respect for the president's busy schedule: He has a private meeting reserved on Bush's calendar weekly, but doesn't always use it because "I'm not one to take his time just to see my smiling face."

Getting caught up in the fine points of the budget is a workplace hazard at the OMB, and it caused some of Daniels's predecessors-notably David Stockman-to lose sight of major policy goals. Those who know Mitch Daniels see little chance of that happening to him: Despite his long years of political experience, Daniels has more claim than most to the coveted titles of "Beltway outsider" and "big-picture thinker." He left Washington in 1987 to run the Hudson Institute in Indianapolis. Leslie Lenkowsky, who took over the conservative think tank from Daniels in 1990, explains that Daniels is a voracious reader and "a bit of a futurist" who has always been interested in big ideas.

For the past ten years, while a senior vice president for the Eli Lilly pharmaceutical company, Daniels remained engaged in public policy at both national and local levels-serving on the boards of the conservative Bradley Foundation and the Milton and Rose Friedman Foundation. He also worked with Indianapolis mayor Steve Goldsmith's task force on deregulation, and joined with minority community activists to help create a school devoted to "academic excellence and racial reconciliation" in Indiana's capital-a school whose success would be a reproach to the education bureaucrats. (Daniels explains that he's "lighting one little candle" for the 150 students at the school.)

In his commitment to the importance of public policy, Daniels has been willing to be unsparing of himself. In 1989, he wrote an op-ed for the Washington Post entitled "Bennett Knows Best," calling for the enforcement of drug laws against even casual users-and disclosing his own undergraduate arrest, detention, and fine for marijuana use. He shrugs off his uncommon willingness to publicly reveal the transgression he describes as "my big lesson in personal responsibility," because he views the disclosure as a way to make a serious argument.

Friends who predict a political future in Indiana for Daniels were surprised that he decided to return to Washington, but Daniels explains that he was drawn by this president, whom he had met only a few times, and the Republicans' opportunity to govern. "I've been waiting," he says, "for a Republican to go toe to toe with powerful opponents about whose policies are superior for the least advantaged in society." His family will remain in Indiana so the youngest of his four daughters can finish high school there.

In a recent meeting with Republicans on the House Appropriations Committee, Daniels was told how difficult it will be for Congress to draw the line at 4 percent growth in discretionary spending-a target on which the president insists. According to an administration aide, the White House intends to help like-minded lawmakers by providing "constant downward pressure" on spending. Hill conservatives and OMB staff alike are convinced that Daniels would recommend a veto of spending bills out of line with the administration's goal of fiscal discipline. Daniels himself avoids the V-word, but firmly insists that the president's budget is realistic, and that Congress should be able to "scrimp along on an extra $103 billion this year."

Steve Moore is convinced that Daniels will, and must, take on the big spenders in the Republican party. "I've been convinced that spending will go up faster under Bush than Clinton because of these surpluses. The White House will have to give Tom DeLay the ability to tell his members, 'I can't send this to the White House, they'll veto it unless you take out some of this pork.'" As far as Daniels is concerned, there's no need to contemplate vetoes, "if Republicans here in Washington act as a governing party.

"The president is practical," says Daniels, "but he's very resolute about spending, and he has ways of getting that across."