Action Figure

The heavy lifting begins for California Gov. Arnold Schwarzenegger.

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There’s no going back. A bodybuilder is governor of the most important state in the Union! So expect, at the very least, to hear a lot more of this kind of stuff:

“We are stronger than we know. There’s a massive weight we must lift off our state. Alone, I cannot lift it. But together, we can.”

Thus Arnold Schwarzenegger, speaking on Monday at his swearing-in as governor of California. It was a nice, if obvious, gag, and a rare note of faux modesty from a man who built his career on being more-Alpha-than-thou. But jokes aside, there is a massive weight on California — a multi-billion dollar budget deficit — and it’s far from clear that Schwarzenegger, with any amount of help, can do a whole lot about it. What is clear is that the new governor, who this week kicks off a three-year term, will stand or fall by his success in dealing with the state’s fiscal mess.

By most accounts, the atmosphere at the swearing-in was optimistic, and there was talk, from the stridently anti-recall Los Angeles Times, no less, of  “seizing the political moment” and of “reinventing” California politics. Voters seem willing to take Schwarzenegger’s mantra of action, action, action, action on faith, for now, and there’s a palpable sense of relief among Californians that the recall is behind them and that Gray Davis, hated symbol of political and economic dysfunction, has crawled back under his rock. And while Schwarzenegger’s positions on many issues are still foggy (to us, and, probably, to him), he’s already scored points for creating a conciliatory atmosphere by drawing senior appointees from both sides of the political map.

The people of California, to the extent that they’re still paying attention, seem to appreciate this. A recent survey of Californians found that 47 percent approved of Schwarzenegger’s stated plans and policies, while 25 percent disapproved (and 28 percent said they didn’t know enough to judge).

On Tuesday Schwarzenegger will call the California legislature to a special session, at which he’ll demand a repeal of the car tax and the law allowing illegal immigrants to have drivers’ licenses, and take a first stab at the daunting budget challenge.

A new audit by Donna Arduin, Schwarzenegger’s designated finance director, comes up with a figure of $62 billion (which she calls “staggering”) for where the budget deficit would stand if the governor, after reversing the car tax, left all other state spending untouched for the length of his term. This dramatic figure, says Daniel Weintraub of the Sacramento Bee is a little overdramatic; the immediate reality, after all, is dramatic enough.

“The more useful number is $14 billion. That’s the amount of the structural gap between spending and revenues that Arduin says will exist in 2004-05 if Schwarzenegger rolls back the car tax, makes local governments whole for the money they’d lose in the deal, and leaves everything else as is.”

And that gap, even in a moderately healthy economy, will continue to grow. Again, Weintraub:

“And so, if Schwarzenegger is somehow going to balance the budget while cutting the car tax and increasing no other taxes, he must cut $4 billion, or about 5 percent, from this year’s spending (with half the year already gone), and then freeze spending for the following year. But programmed spending, absent any changes in law, is already projected to rise on its own to $87 billion in the fiscal year that begins July 1. So he must cut $14 billion, or 16 percent, from that number. And if he is going to leave untouched school spending dictated by Proposition 98, he must cut his $14 billion from $56 billion, which is the projected spending for the non-education part of the budget. That’s a reduction of 25 percent.

There is no way Schwarzenegger is going to do this. So his only way out, if he really is not going to raise taxes, is to do some kind of borrowing. …

Spending could grow by a total of 8 percent, or about 2.7 percent per year. Limiting the spending growth to that pace would be no easy task, given the growth in caseloads, inflation, employee compensation and the burden of temporary measures already adopted that will drive up costs in future years. It would translate into a serious reduction in state services.”

Schwarzenegger’s transition staff has proposed issuing $20 billion in bonds, which would end the deficit. In effect, he wants to borrow $20 million dollars. To pull it off, Schwarzenegger will need the support of Dems in the legislature, as well as voters, and he can be sure that neither will want to take on more debt. But it would also, according to state Treasurer Phil Angelides, doom California’s bonds to high interest rates. The San Jose Mercury News writes:

“A $20 billion general obligation bond to be paid back over 30 years would saddle future generations with debt, leaving less money to pay for other programs. According to Angelides, a $20 billion bond would actually cost $40 billion in principal and interest, and, on average, cost each California household $3,400 over the life of the bond.”

So clearly Schwarzenegger is going to have to build up quite a store of goodwill, which means making nice with people on both sides of the political spectrum. He ran as a centrist — fiscally conservative and moderate on social and (allegedly) environmental issues — and the 20 staff appointments he has already made in his six-week transition reflect his general stance. He was commended by Greens for naming a Democratic environmentalist, Terry Tamminen, to head of the state EPA. (Note, however, that he named James Branham, a Republican timber company executive as her deputy.) He also appointed a self-proclaimed liberal as senior advisor, and a Democrat as his top legal advisor. A political scientist from Claremont McKenna College said that his appointments were politically smart:

“His appointments indicate a lesson he learned from years as a bodybuilder, which is you do some arm curls with the right arm, then the left arm. He is clearly making openings to Democrats and liberals in his administration, which is quieting discontent even as it creates better expectations by those on the other side of the aisle.”

Compared to Gray Davis’ administration, which was often described as “aloof” toward state legislators, Schwarzenegger appears willing to take a shot at getting along. When Schwarzenegger crossed the hall to Lt. Gov. Bustamante’s office, one member of Schwarzenegger’s transition team commented that it was something that “had never happened before” under Davis’s reign. Weintraub of the Sacramento Bee writes that he is making steps to befriend the heavily Democratic state legislature:

“Schwarzenegger is also making a point to do something that Davis rarely did: reach out to his opponents. During the transition, he visited the Democratic leaders of the Assembly and Senate in their offices, and also paid courtesy calls on two labor leaders….”

But of course the happy talk is likely to die away at the first whiff of a spending cut or an unhappy tradeoff. The Los Angeles Times notes the challenges inherent in fixing California’s problems in a way that appeals to both Democrats and Republicans:

“Schwarzenegger campaigned as a centrist, and he’s been putting together an administration that reflects his ideology — conservative on fiscal issues, moderate on environmental and social matters. But moving forward, his greatest challenge will be steering a middle course between extremists on both ends of the political spectrum for whom patience and gratitude are alien concepts and compromise is synonymous with surrender.”

So it’s not going to be easy. And, in the dark days ahead, Schwarzenegger may even manage to work up some sympathy for the man he booted out of office; the now former governor, after all, however many of his wounds were self-inflicted, was finally done in by California’s economic woes. Davis, meanwhile, is already hinting at a return to politics. Recall, anyone?


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