The accepted legal term in the United States is “Indians” or “American Indians.” Witness the Indian Health Service and the Bureau of Indian Affairs. Therefore, I think one can argue that “Indian” is in fact the “politically correct” term.
However, in the past fifteen years or so, the term “Native American” has on occasion found its way into legislation. Legal purists fear that term does not convey the legal rights inherent in the original term, and also fear the day when some asshole delays a project for a decade because it used “Native American” instead of “Indian” in the title. It’s probably already happened.
In addition to the fallacious definition inherent in the term, there is another, more disturbing reason why I do not personally use “Native American” for official purposes. There are two basic kinds of Indian bills in Congress: those that help Indians, and those drafted by ignorant, hateful individuals with the intent of restricting, marginalizing, and exploiting American Indians. Yes, this does still happen, all the time.
For whatever reason, the bad bills almost always use the term “Native American” in the title or description of the bill, perhaps in the naive assumption that the intent of the bill will be masked by the use of the supposedly “PC” term.
This of course doesn’t mean that good bills don’t use that term, or that all bad bills do, but it is still a valuable rule of thumb.
There are over 550 federally recognized tribes, bands, and native villages in the United States, and almost 2 million Americans who identify themselves as either Indians or Alaska Natives. Each tribe is at least as different from one another politically as the various states differ from each other, and we all know that no two people’s sensibilities are alike. Therefore, I’m not going to try to guess who prefers what term when. “Indian” is perfectly acceptable, even preferred, among federal lawmakers and lobbyists, and among a vast number of tribes themselves for legal purposes.