Part of the reason Daniels is attracting Republican interest is that his record of competence and fiscal restraint represents a refreshing change of pace from George W. Bush’s big-government conservatism. After five years in the statehouse, admirers point out, Daniels has managed to lower property taxes by an average of 30 percent; transform a $200 million budget deficit into a $1.3 billion surplus; and insure 45,000 low-income Hoosiers through a budget-neutral combination of health savings accounts and catastrophic coverage. His approval ratings routinely top 65 percent…

Let’s raise the retirement age, he says. Let’s reduce Social Security for the rich. And let’s reconsider our military commitments, too. When I ask about taxes—in 2005 Daniels proposed a hike on the $100,000-plus crowd, which his own party promptly torpedoed—he refuses to revert to Republican talking points. “At some stage there could well be a tax increase,” he says with a sigh. “They say we can’t have grown-up conversations anymore. I think we can.”…

But Daniels’s decision to “conduct government like a business” has one major virtue: it forces him to rely on results instead of ideology. As we drive to the Miami Correctional Facility, the governor points out that many of his key policy initiatives—instituting a “pay for performance” scheme for state employees, doubling the number of child-welfare caseworkers—defy tidy partisan labels. He even spends 10 minutes telling me how he “never use[s] the word ‘conservative’ ” to describe himself. At first, this sounds like shtik; politicians love to claim they’re above the fray. But his prison remarks—words of encouragement to recent graduates of a faith-based inmate rehab program—actually reinforce his point. Where a typical Republican might gorge on Bible quotes, Daniels praises the prisoners without referencing religion. This isn’t an oversight. In June, Daniels, a devout, pro-life Christian who believes that “atheism leads to brutality,” told The Weekly Standard that the next president will “have to call a truce on the so-called social issues” until the nation’s economic problems are resolved; now he’s walking the walk. Try to imagine Sarah Palin doing the same.