Arnold Schwartznegger may have been able to bench press 400 pounds when he was Mr. Universe, but he’s about to face his most Herculean task ever: lifting California out of its severe economic rut. California today may well be the most fiscally disabled state in American history. When Schwartzenegger is sworn in as governor in a few weeks, he will inherit a $100-billion budget that has grown by nearly 40% in the last five years. He will inherit a state budget deficit that is larger than all the deficits of the other states combined. He will inherit a state industrial base that has lost one-quarter of a million manufacturing jobs since 1999. Worst of all, he will inherit an entrenched left-wing Democrat-dominated legislature whose members, by comparison, make U.S. Representatives Charlie Rangel (D.-N.Y.) and Barney Frank (D.-Mass.) seem like guardians of conservative values and free markets. Says former California GOP State Chairman Shawn Steel: “The Democrats in Sacramento are the most left-wing collection of people ever to gather in one place at one time in North America.” That’s no exaggeration. California State Assemblyman Ray Haines has assembled a Bad Business Bill Watchlist containing all the anti-capitalist legislation that has been proposed in the California house and senate. It runs on for so many pages that it resembles a medium-sized city phone book. On it are such absurdities as so-called living wage requirements, anti-global warming tax hikes, mandatory employer health coverage, paid parental leave requirements for employees, domestic partnership employee benefit laws, and even anti-discrimination laws that cover cross dressers. This last proposal is symptomatic of the looney leftist culture that has captured Sacramento over recent years. The bill would impose fines of up to $150,000 on employers (including, for example, religious businesses and Boy Scout councils) if they “refuse to hire individuals on the basis of gender or perceived gender, which could include cross dressers, and transsexuals.” Honest, I am not making this up. In fact, this utterly absurd bill actually passed the senate this past July. Difficult Role So, as he prepares to take over the statehouse, Schwarzenegger is taking on the most difficult role of his career. There is much skepticism among many of my conservative friends as to whether Arnold will adopt the right economic policy course for the state. I believe that he will. I have consulted with Schwarzenegger on several occasions over recent months and I believe he is committed to keeping his word to lower, rather than raise taxes, in the Golden State. Though he is socially liberal, I am persuaded that he is instinctively a believer in the power of free markets—though some of the people he consults with, such as Warren Buffet, most certainly are not. His favorite economist, however, is Milton Friedman, and he even filmed an introduction to Friedman’s classic video “Free to Choose.” The economic rebuilding job ahead is daunting, but far from hopeless. In the 1980s and throughout most of the 1990s, California was the most dynamic place on the globe. The economy grew to become the 6th largest in the world; the state GDP surpassed $1 trillion. It became the high-tech, international trade, and entertainment capitals of the world. The economic slide began in Gray Davis’s term and although the bursting of the high technology bubble contributed to the resulting depression, Davis bloated the state budget, raised taxes repeatedly, passed scores of new business regulations, badly fumbled the electricity crisis, converted the governors office into a campaign financing operation, and allowed the leftists in the legislature to rule the roost. Arnold was right when he said during the last days of the campaign that “the good news is our economic problems are not due to a failure of our people, but of a resounding breakdown of our political leadership in Sacramento.” What should Arnold do to fix the budget mess and reclaim the prosperity of the’80s and ‘90s? Here is a partial list of “must do” economic reform items:
If he does all of these things, Arnold has a chance to put the bloom back in the rose in the state that was once California.