Arnold Schwarzenegger

The 'Governator' was elected to knock heads together. Unlike a previous actor-governor, Ronald Reagan, however, he will leave California bankrupt

He should have stayed in the movies. Arnold Schwarzenegger, now limping through his last year as Governor of California, is still wildly popular — outside California. European leaders, especially, remain eager to have photo-ops with the Governator. Perhaps it’s the residual Hollywood glamour. It cannot be because he is successful.

While his tenure has been a huge disaster, it didn’t start out that way. Schwarzenegger, a Republican, was elected in 2003 to replace Governor Gray Davis, a Democrat, in an unprecedented recall election. Davis was completely discredited immediately after winning re-election in 2002 when it was revealed that the state had a $38 billion budget deficit.

Davis’s recall evoked memories of Democratic Governor Pat Brown’s stunning loss to Ronald Reagan in 1966. The state was in a mess and voters gambled on a politically untested Hollywood star. With a bigger mess in 2003, Schwarzenegger ran as the super action hero he so often played. Voters decided that he was just the kind of tough outsider needed to knock heads together.

The new Governor thus began with strong popular support to cut spending and take on the powerful unions. He was making modest progress until he placed several significant reform measures before the voters in a 2005 special election. The unions raised $160 million and defeated them all.

How should a super action hero respond to his first defeat? Surely, like Reagan, by fighting back. Unfortunately, Schwarzenegger was no Reagan. It’s easier to play a super hero on the screen than to be one in real life. Schwarzenegger responded by becoming just another politician. He gave up on cutting spending or fighting the unions. He moved abruptly to the Left, abandoned his Republican allies, and brought in Democrats as senior advisers.

The Governor worked with Democratic majorities in the legislature to raise spending through the roof and grant huge, new pension benefits to public employees. To top it off, Schwarzenegger became America’s most successful promoter of the global-warming fad. The measures that he signed into law to reduce greenhouse gas emissions by raising energy prices are popular with hip Californians, but even before going into effect they are driving investment and manufacturing jobs out of the state.

This U-turn was enough to get Schwarzenegger re-elected in 2006. But the consequences have been catastrophic. The global economic recession that began in 2008 has been especially painful in California precisely because of its irresponsible fiscal policies. In early 2009, the state faced a $40 billion budget deficit. Schwarzenegger again worked with Democrats to balance the budget, largely with phony cuts and tax rises. However, the state needs voter approval for new taxes. In May 2009, the voters said no.

This rejection spurred another U-turn. Since last summer, Schwarzenegger has been stressing fiscal discipline and arguing that the state’s unfunded pension obligations, now estimated at $237 billion, must be addressed.

No one is buying it this time. His approval rating is a well-deserved 27 per cent. California was in a terrible mess when he became Governor, but it is far worse off today. It confronts an additional $28 billion deficit this year. Unemployment, at 12.5 per cent, is far above the national average. California, which has gained seats in Congress after every census since 1850, could lose a seat after the 2010 census because of emigration. The irony is that many of the great grandchildren of the Okies who fled the Dustbowl in the 1930s to seek opportunity in California are moving back to Texas and Oklahoma, where taxes and regulations are low enough to encourage growth.

California truly is a golden land, blessed beyond nearly any other by spectacular scenery, wonderfully mild climates, magnificent ports and ridiculously abundant natural resources. Californians are among the world’s most creative, enterprising and technologically sophisticated people. For 50 years after the Second World War, California was America’s economic engine.

Yet today, the question is whether California has a future. As the middle-class flees, California is in danger of becoming a third-world country with a small class of very wealthy people and millions of poor dependent on government. Although Schwarzenegger is clearly not solely to blame for the mess, Joel Kotkin, the most astute observer of California’s collapse, ranks him first among five major culprits.

On the other hand, President Barack Obama and House Speaker Nancy Pelosi (Democrat of California) are holding up California as a model for the nation to emulate. As Tom McClintock, a long-time conservative Republican member of the California legislature and now a member of the US Congress, said: “The good news is there is still time for the nation to avoid California’s fate.” It will require leadership of a different order to that of Governor Arnold Schwarzenegger.

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