Terminating California's Future

Apparently everybody’s heard of this Arnold Schwarzenegger fellow, my home-state elected governor.

And everybody’s heard how he dead-lifted that hapless girly-man Gray Davis from office in an historic recall campaign, and promised to be The People’s Governor.

And we’ve heard how California’s der gropen fuehrer has turned his considerable charms on sleepy, star-struck Sacramento—that under a canvas tent outside the state capitol, surrounded by sculptures and pictures of himself, the self-described “biggest star in the world” shares Cuban cigars with assemblymen from places like Oxnard and Fullerton. Occasionally, he even offers them rides back to their districts on his Gulfstream jet, and lets them bask in the light of his Hollywood-produced 67 percent approval rating in front of a hometown crowd, and to glowing media reviews.

Unfortunately, almost nobody sees that Arnold has already squandered his chance to meet California’s most serious challenge: paying off over $22 billion in debt—caused not only by the (Texas power company-induced) energy crisis, and the collapse of capital gains revenue from Silicon Valley, but also by costly voter initiatives, promoted by selfish special-interests, that mandated an uncontrollable spending explosion. By law, no California governor can touch the Prop 98-guaranteed 40 percent of the budget directed to an ineffective—and ever-growing—education bureaucracy, and the teachers’ unions it benefits. And, by law, no governor can raise revenue by modernizing the Prop 13-mandated property tax unfairness that leaves Warren Buffett paying a lower rate on his beach house than a janitor does on his apartment.

Rather than using his extraordinary popularity to fix California’s biggest problem, Arnold has used it to make the problem last longer.

Arnold requested—and the Democrat-dominated Legislature passed—a bill that pushed Propositions 57 and 58 onto California’s ballots last March. And almost as soon as it became known that Governor Honeymoon supported them, both measures passed comfortably.

The latter rather toothlessly required balanced budgets and a “rainy-day” fund going forward—just the sort of sweet-tasting cotton candy the voters were sure to devour. Knowing that, Arnold’s political team forced the electorate to swallow manure with their dessert. 58 would only go into effect if 57 passed.

And what is 57? The “California Economic Recovery Bond Act” actually adds at least $6 billion to California’s debt—burning the state in order to save it. Arnold’s plan? Pandering to his party’s base and sticking with no new taxes, not even tax reform that could actually lower rates in exchange for fewer loopholes and higher revenues. And (at least temporarily) surrendering to the legislature by limiting spending cuts to about $5 billion. And what of the extra $17 billion in debt? Paper over some with rosy economic forecasts and accounting tricks, but borrow $15 billion to keep the creditors at bay. Yes, borrow in order to fund…borrowing. This comes after Arnold attacked Gray Davis in the recall campaign for the “fiscal mess” that his predecessor’s plan to borrow $10 billion would cause.

Arnold’s Prop 57 was sold as a means of refinancing debt at a time when interest rates were at historic lows. But here’s another idea: Why not avoid the additional $6 billion in interest and simply pay off the debt? Why not spare the next generation of Californians from sacrificing to solve a problem we played no role creating?

Surely, the commentators have argued, such a radical move would require gutting essential services, closing schools and firehouses, abolishing environmental protection—as one assemblyman told me, “returning California to the Wild West.” Well, only if one believes the Gold Rush occurred in 1999.

As Republican State Senator Tom McClintock argued in a recent Wall Street Journal op-ed, “if the current rate of state spending were reduced 13.4 percent on January 1st and frozen through Gov. Schwarzenegger’s first budget, the state would be back in the black, free and clear of external debt, and able to start the Governor’s second year in 2005 with a clean slate.” To be clear: an emergency 13.4 percent budget cut would leave spending 15.2 percent higher than when Gray Davis took office five years ago. Surely Californians can find it within ourselves to survive one year with Sacramento spending about one-sixth more than it did in 1999.

That spending cut (which should mostly attack pre-programmed budget increases) could actually be an opportunity for government reform—an assault on some of the rampant bloat and mismanagement, and 339 taxpayer-funded state boards and commissions, identified by the governor’s California Performance Review.

And if Arnold were less ambitious for the Republican presidential nomination (28th Amendment, here we come!), he would also violate the right-wing shibboleth against ever seeking more revenue and fight for a fairer, simpler, and less capital-gains-dependent California tax code. And he would cash in October’s Ohio campaign trip and demand that President Bush return some of the $60 billion a year in federal taxes that California fails to get back in federal spending.

Once the debt is gone, once the tax code is reformed, once California gets its fair share from Washington, Arnold could direct the klieg lights where they really belong—on preparing California for the future, and abolishing confusing voter initiatives that mandate irresponsible spending increases and guarantee fiscal insanity. And he could target investments in classrooms and mass transit, fix a broken workers’ compensation system, and help attract back the jobs that are fleeing for less expensive states. But he cannot be The People’s Governor until he stops just acting to fix the people’s government.

Brian M. Goldsmith ’05 is a government concentrator in Lowell House. His column appears on alternate Thursdays.