By David Lawder
GREENFIELD, Indiana (Reuters) - To understand why so many conservatives in Congress are willing to risk a government shutdown in their quest to cut spending and derail "Obamacare," take a look at Indiana and the state's crop of young Republicans in the U.S. House Representatives.
The congressional delegation sprouted up from a Midwestern state whose Republican governor and legislature spent much of the last eight years making painful budget cuts, including hundreds of millions of dollars to education, to wipe out deficits.
Now, whipped on by voters and conservative groups urging them to do the same in Washington - or step aside, the seven House Republicans from Indiana see little alternative to budget brinkmanship.
First elected in 2010 and 2012, the Indiana Republicans personify the party's younger, harder-line vanguard that has been willing to challenge House Speaker John Boehner's leadership in a quest for smaller government.
And the voters in their home districts gave them a simple message at town hall meetings in August: stand up to President Barack Obama and block his health insurance reforms.
"You act like you're the minority," retired General Motors worker Paul Neal told U.S. Representative Luke Messer at a town hall meeting in Greenfield, a farm town east of Indianapolis. "We control the House. You ought to act like it."
Messer, a former state legislator who is president of the House Republican freshman class, pledged to do just that.
"We always knew the bill was eventually going to come due," said Messer. "We were going to have to stand up and fight for something."
The Indiana Republicans have been at the front of the pack as House conservatives demanded a tougher stance against Obamacare, persuading colleagues to back a stopgap government spending measure that directly withholds money from the healthcare reform law.
This week, Boehner bowed to the pressure and agreed to let House Republicans pass a measure on Obamacare defunding that keeps government agencies open through December 15. He also vowed to use an increase in the $16.7 trillion U.S. debt limit to try to stop the healthcare law.
The efforts are certain to be rejected by Democrats and Obama has already issued a veto threat, so the ensuing fight will heighten the risk of a government shutdown or debt default and likely unnerve financial markets.
That is a risk that many conservatives see as essential, with key parts of the law due to take effect in October.
"The American people want this law stopped one way or another," Representative Marlin Stutzman of northeast Indiana told Reuters. "Many of us are willing to hold out on this one."
The rhetoric over Obamacare's fiscal impact is fiercely partisan. Republicans, who argue the law will cost jobs, reduce employee working hours and increase health premiums, focus on its $1.3 trillion expenditure cost over a decade.
Democrats, who tout that it will extend affordable health coverage to 30 million uninsured Americans, focus on a Congressional Budget Office estimate that overall, it will reduce the 10-year U.S. deficit by $105 billion.
NOT TEA PARTY CREATIONS
These Republicans do not fit the Democratic caricature of conservative Tea Party novices who are holding the House hostage. Several have experience in Indiana state government, making tough budget choices under former Republican Governor Mitch Daniels.
His success in turning around the state's finances prompted speculation that Daniels might make a presidential bid in 2012, but he opted against running.
Indiana cut taxes and built up a surplus. Now it consistently ranks highest in the Midwest in business climate surveys, while neighbors Illinois and Michigan struggle financially. But Indiana's unemployment rate, at 8.3 percent, is a full percentage point above the national average as its manufacturing base struggles to recover from the recession.
The experience at the state level has driven the Indiana Republicans in Congress to try to replicate the same formula in Washington.
Three members - Todd Rokita, Messer and Jackie Walorski - now serve on the House Budget Committee, a big presence for a state with only 6.5 million residents. Todd Young switched from that panel to the tax-writing Ways and Means Committee. And Stutzman, another Budget Committee alumnus, saw his standing in the caucus rise after the House passed his plan to separate the $74 billion food stamp program from a long-stalled farm bill, a move aimed at shrinking the nutrition subsidies.
"I think we've been able to prove in this state, statistically, that balanced budgets create stable economies, create jobs, and there is a way out of the mess we're in at the federal level," said Walorski, who once described herself as a "pit bull" in the state capitol.
Freshman Representative Susan Brooks, a former U.S. attorney in Indiana, has local, state and federal government experience, most recently as general counsel for the state's network of community colleges.
The group often repeats a Daniels mantra: "You'd be amazed at how much government you won't miss."
But Daniels himself has admitted that it would not be easy to apply the strategy of Indiana to the federal budget, with its entitlement programs and other entrenched spending.
"I think there's limited application. I wish I could tell you otherwise," he told CNN in 2011. "The huge changes we need for the nation to get out of its fiscal ditch are not going to be achieved in this way."
THE RIGHT IS WATCHING
The seven Indiana Republicans face little threat of losing their seats to Democrats in 2014 if they dig in on the budget and Obamacare. The congressional boundaries some of them helped redraw in 2011 concentrated the state's two Democrats into central Indianapolis and the industrial northwest corner. The Republican districts are now largely carpeted in corn and soybeans, giving them a naturally conservative rural base.
"Indiana is an agrarian state. A bumper crop one year could be met with drought the next, so you better focus on long-term goals," said Wendy Dant Chesser, president of One Southern Indiana, the chamber of commerce in New Albany, Indiana.
Instead, any threat is more likely to come from the right if they are too soft on spending. The influential conservative group Club for Growth, headed by former Indiana Republican congressman Chris Chocola, is watching their every vote.
Take Representative Larry Bucshon, a heart surgeon from southwest Indiana. An avowed opponent of Obamacare, he has supported Boehner more often than his class of 2010 colleagues and is being targeted by Club for Growth for a primary challenge next year from a more conservative candidate.
"I don't feel like they fight for anything anymore," 60-year-old Theresa Wheeler said of House Republicans at the town hall. "It's so frustrating, I'm looking for another party."
Similar sentiments expressed in conservative Republican districts across the country have put members in no mood to compromise on the fiscal deadlines.
Rokita, a second-term congressman who boasts that his 2010 budget as Indiana secretary of state was at 1987 levels, said the Obamacare defunding vote was "a reasonable reflection of what my constituents wanted of me."
"I think we're best when we're bold," he said. "I keep trying to preach that to our leadership."
(Reporting by David Lawder; Editing by Fred Barbash, Peter Henderson, Doina Chiacu and Eric Beech)