Washington — Growing up in Bamberg, S.C., Nikki Haley was a frank girl — for good reason. By age 13, she was doing the accounting for her family’s fashion-retail business and had to keep a close eye on the bottom line. Two decades later, Haley, the Palmetto State’s 38-year-old governor-elect, pledges to bring that same business-friendly, just-the-facts approach to the state capital. This week, she sat down with National Review for a wide-ranging interview about her gubernatorial goals and the future of the Republican party.

Haley, before having even taken office, is widely considered to be one of the GOP’s rising national stars. With her wide smile, Sikh-American heritage, southern charm, and conservative values, she has been cited in Beltway circles as a potential 2012 vice-presidential pick. Haley shrugs off the big-ticket buzz. “I can’t even imagine that,” she chuckles. Governing — not veep chatter — is on her agenda. The new gig, she notes, is “not a stepping stone.”

But Haley does hope to play a role in moving her party to the right in coming years. Already she has been tapped as the next recruitment chair for the Republican Governors Association. Top congressional leaders have noticed her, too. On Wednesday, she huddled with Speaker-elect John Boehner of Ohio and Senate GOP Leader Mitch McConnell of Kentucky at the Capitol.

At a press conference following the meeting, GOP brass made sure that Haley was standing front-and-center at the media stakeout. As Boehner beamed behind her, Haley said now is the time “to start conversations about why we don’t need mandated health care and what we as states can do with solutions instead. . . . We are not just going to say no, but we’re actually going to tell our federal leaders what we can do instead so that they can go back and fight for why states should have more rights.”

SHE MEANS BUSINESS Haley says states need to rethink their relationships with the federal government. “They have gotten to where they take federal funding because they just think, ‘It’s there,’” she says. “We want to go back to the idea that you don’t take federal dollars just because they’re matching something; if it doesn’t meet the core functions of your agency, we don’t want it.”

“People have lost faith in Congress, and it’s up to the governors to really step up and show what good reforms are,” Haley says. “You will see me fight to eliminate the corporate-income tax in our state. We are already a right-to-work state. If we can eliminate the corporate-income tax, we will be a magnet for companies that want to move here.”

Washington can also do its part. On extending the Bush-era tax rates, Haley argues that failing to extend the current tax rates would amount to raising taxes — terrible policy during tough economic times. “We can’t have [that],” she says. “You are going to increase unemployment by doing that. You’re going to close down businesses by doing that.”

“I think we have to understand that if you take care of your small businesses, you take care of jobs, the economy, and everything else,” Haley says.“If you give small businesses cash flow, if you give them profit margins, they don’t go out and go on vacation — they hire people, they expand their businesses. That’s the key.”

She urges congressional Republicans to stand firm and not accept anything less than a full extension of the current rates. “This is not a time for D.C. to buckle and compromise. This is the time when you say, ‘This is our tax structure, keep it in its place, let us see where we go from here, and balance out our economy again.’”

Repealing Obamacare is another issue at the top of her list — and crucial to her state’s economy. She promises to challenge Obamacare in “as many different ways as I can.” At the state level, she is supporting attorney general Henry McMaster, who has a backed a federal lawsuit against the new health-care law.

“This is not about compromise, this is about the fact that this is actually going to run all of our states into debt,” Haley says. “[Washington] has got to step up. We really need them to fight for us.”

Is there a way for states to help repeal Obamacare? “It’s telling them ‘We need you to do this’ and saying it forcefully and often. It’s getting other governors to understand we have to be loud as a group, not Nikki Haley standing as a lone governor,” she continues. “We need a group of governors saying ‘No, we won’t do this, and this is what we will do instead, as states.’”

CHALLENGES IN COLUMBIA Republicans currently hold a 75- to 48-seat majority in the state House and a 27-to-19-seat majority in the state Senate. Most governors would be thrilled with those numbers, but Haley’s aspirations go beyond simple partisan advantage.

“I’m not going to settle for a Republican House, a Republican Senate, and a Republican governor,” Haley says. “It’s about a conservative House, a conservative Senate, and a conservative governor. It doesn’t matter how many Republicans seats you take if you don’t have conservative seats. So we have to watch the officials being elected.”

For example, Haley says, if any pols coasted on the Tea Party wave in 2010 but do not live up to their conservative billing in coming months, the GOP should “get rid of them.”

Conservatives, Haley continues, must do everything they can to rise to the occasion. “Being conservative for me is just going back to the basics of government,” she says. “Our Founding Fathers said it should be families first, then communities, then state, then federal. We’ve watched it turn totally upside down.”

When it comes to dealing with legislators, Haley says predictability is a must. She thinks Gov. Mark Sanford (R.), her predecessor, was “reactionary by nature.” “The legislature would pass something, he would react,” she recalls. “I will let them know what I will do before I do it. . . . I’m going to hold their hand to the fire.”

“I’m fighting to get my legislators to vote on the record, to show all spending online, to pass term limits and spending caps — doing all that we can to hold officials accountable.”

That will also include annual report cards for every legislator, detailing their records on “good-government, pro-business issues,” and town-hall forums across the state, where she intends to let their constituents know how well they scored. “It is through providing that education to the people that I think we’re going to get the right response from the legislature,” she says.

And so far, so good: “They are very responsive right now. We’ll have to see what happens, but right now they’re working with us pretty well.”

Tackling her state’s $1 billion shortfall — nearly 20 percent of the entire budget — will be another huge challenge, but Haley sees a silver lining: “I think it’s a great opportunity for every state. . . . Now we can define what the core functions of government are.”

The key is looking beyond the crisis in order to come up with long-term solutions. “My fear is that government really is in crisis mode,” Haley says. “They’ll deal with something one year, sweep it off, and start again the next year.”

“When you look at a $1 billion shortfall, you can’t just go for the low-hanging fruit,” Haley says. “You can’t just go for what you think is wasteful spending.” So she has commissioned a Fiscal Crisis Task Force to do just that — to dig deep into the state’s budget, to “go into every agency” and “look at all the things that government shouldn’t be paying for,” starting with her very own cabinet. Real reform will require making “drastic decisions.”

“Frankly, I’ve told the state, ‘This is going to hurt,’ but if we make the right decisions, we will come out more competitive and stronger than we started,” she says.“Now it’s time to make the hard decisions, not just to get through this year, not just to get through crisis mode, but to really think about year three and five and seven and where we want our state to be.”

Another hurdle is education. Refreshingly, when Haley discusses her state’s problems with teacher tenure and retirement programs — for instance, South Carolina’s Teacher and Employee Retention Incentive (TERI) program, which allows teachers to retire and receive benefits, then to come back and teach again at their pre-retirement pay rate — she sounds, in tone and substance, a lot like Gov. Chris Christie of New Jersey, who’s gained national notice for his political confrontations with teachers’ unions. Indeed, Haley calls Christie a “rock star.”

“[We’ll have to] look at retired employees and say, ‘Thank you for your service, but we’ve got 10.7 percent unemployment; we need to allow these people to come in,’” Haley predicts. She promises she won’t avoid shining a light on the state’s fiscal reality in her negotiations. “Will that upset a lot of people? Probably,” she says. “Is it the right thing to do? Absolutely.”

LOOKING TOWARD 2012 South Carolina’s early primary will be one of the key battle fronts in the race for the GOP presidential nomination in 2012. “You will absolutely see me weigh in,” Haley says. “I think it’s the responsibility of a governor to say, ‘This is the kind of president I need if I’m going to lead as a governor.’”

Haley heaps praise on former Alaska governor Sarah Palin, who was an early and vocal supporter of Haley’s candidacy. “I think that she has been amazing at getting people to find the power of their voice,” she says. “Regardless of what anybody thinks about Governor Palin, she has gotten real people to care, and when you get real people to care, when you get them to understand that they have a role in government, that’s an amazing thing. . . . I think that it’s anybody’s pick right now. She’s a great candidate.”

Mitt Romney, the former Massachusetts governor, is another prominent Haley booster. Like Palin, he endorsed her before the primary, “when times were tough.” Does she think that he can overcome conservative dissent over the Bay State’s health-care program? “Every candidate is going to have their albatross,” Haley says. “I think he needs to answer for [the state’s insurance mandate]. If I were him, I’d say, ‘Look, we attempted it, we tried it.’ If it worked, he needs to rave about it; if it didn’t work, he needs to say it was a mistake and that we shouldn’t have done it. People will appreciate that he at least attempted and tried. It actually could be a great lesson on why mandates don’t work, and why you instead need options in your state.”

“I think a state health-care mandate is very different than a federal health-care mandate,” Haley continues. “What I will tell you is that it’s not something you’ll see me do in my state — that’s not something I want. But he had the right as governor to do that. It’s up to the people of his state to look at what’s happened and see if it’s actually working.”

What about a presidential bid by her state’s most prominent Tea Party darling, Sen. Jim DeMint? “I think anybody is a viable candidate at this point,” Haley says. “Jim DeMint’s been great when it comes to earmark reform; he’s been great at showing what a true conservative looks like.”

IRON LADY “If you want to talk about someone I love, it’s Margaret Thatcher,” Haley says. The former British prime minister “said things that needed to be said; she did things that needed to be done. She didn’t worry about hurting people’s feelings.”

In this regard, Haley is encouraged by new GOP state leadership. “You know, what’s interesting about this group of governors is that we don’t care about reelection,” Haley says. But that’s not the only thing that makes them unique.

“You’re seeing governors who — we’ve run business, we know how it is.”

“Government tends to talk about a problem, then they create a committee to talk about it, and then they keep on talking about it. They wait until the public gets quiet and then they move to something else. In business, we talk about the problem for five minutes, then we go straight to the solution,” she observes. “Well, time is money. Not just in business, in government, too. We need to get back to that.”

— Robert Costa is a political reporter for National Review. Andrew Stiles is a Franklin Fellow. Katelynd Mahoney, an NR intern, contributed reporting.