White House Budget Director Says He’ll Resign

White House Budget Director Mitchell E. Daniels Jr. said Tuesday that he will resign, completing a clean sweep of President Bush’s original economic team on the eve of a legislative fight over Bush’s latest tax cut proposals and only months before the start of the 2004 presidential election season.

Daniels, a conservative favorite and former political operative for President Reagan, told Bush of his plans to step down within 30 days in a phone call and later a short letter Tuesday morning. It is widely thought he is preparing to run for governor of Indiana.

The odds-on favorite to replace Daniels is Clay Johnson III, a longtime friend of Bush who is a nominee to become the budget agency’s deputy director for management. Other names mentioned for the position are White House Deputy Chief of Staff Josh Bolton, Federal Trade Commission Chairman Timothy J. Muris and Senate budget veteran G. William Hoagland.

Daniels’ tenure as budget director was marked by an abrupt swing from surpluses, which were expected to run $5.6 trillion over 10 years when he took office, to deficits, which the White House now says will total $2.2 trillion over the next decade.

It was also marked by strained relations between the White House and key lawmakers, both Republican and Democrat, over budget issues.

But unlike other members of the administration’s economic team, Daniels never seemed to lose the confidence of the president, who nicknamed him “The Blade” for his enthusiasm for budget cuts, or of the administration’s many conservative supporters.

Bush unceremoniously dumped Treasury Secretary Paul H. O’Neill and top economic aide Lawrence B. Lindsey in December. Their departures were followed in February by that of Council of Economic Advisor Chairman R. Glenn Hubbard.

Daniels’ supporters argue that the 54-year-old former drug company executive has been unfairly saddled with the switch from surpluses to deficits, which they assert are largely the product of recession, the aftermath of the Sept. 11 terrorist attacks and war with Iraq.

Daniels had a knack for infuriating his opponents. He accused New Yorkers of engaging in “a little money-grubbing game” in seeking $20 billion in emergency aid after the attacks on the World Trade Center.

In one of the few instances in which he backed away from an off-the-cuff jab, he explained that “my brain went on vacation and left my mouth in charge.”

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Times staff writer Janet Hook contributed to this report.