After the crushing defeat of his reform initiatives last November, I expected to see a downcast, disillusioned and embittered Arnold Schwarzenegger at the recent meeting of his Council of Economic Advisors.
Quite the contrary, an enthusiastic governor seemed more committed and resolved than ever to be a leading agent for positive change. I was struck by his passion, the rigor of his questions and his focus on the long-run challenges facing the state.
Still, some Republicans are furious with the governor. His backing of an increase in the minimum wage, infrastructure spending proposals that rely in part on increased bond indebtedness and the appointment of Democrat Susan Kennedy as his chief of staff as well as other supposed party transgressions has a small fraction of the party in near-revolt.
Many GOP stalwarts are calling for delegates to pass four resolutions critical of the governor’s policies at this week’s statewide Republican convention. A minority of activists even considered a resolution withdrawing support for the governor’s re-election.
But maybe they should ask: Are we better off than we were 27 months ago when Gov. Schwarzenegger took over from Gray Davis?
Consider the following:
In spite of the fiscal nightmare ($16 billion structural deficit) that existed when Schwarzenegger took the helm, he has not raised state taxes. In fact, as promised, he rescinded the $4 billion auto tax.
We’ve had real workers’ comp reform.
In part because of that reform, the state’s economy is strong and vibrant. So strong that the governor has been able to start paying off the state’s recovery bonds sooner than expected as well as putting money away into a “rainy day” fund. Moreover, the budget allows for $4.3 billion in additional Proposition 98 spending and pays off more than $1 billion in loans from Proposition 42 and other special funds.
For the first time, sales taxes on gasoline went for roads, not general spending.
On the higher education front, student fee increases have been eliminated at public schools while the highly regarded Cal Grants have been expanded.
And as for the governor’s rather innocuous $1 increase in the minimum wage over two years, that’s a lot less damaging than a much higher minimum wage with an escalator going on the ballot.
All of this and still a balanced budget. Not bad at all, especially when one considers the alternatives.
Although one can only speculate how things would be under a Davis administration, it’s fairly likely that taxes would be higher. Certainly, the $4 billion in auto taxes would still be in play.
Where would we be now if we didn’t have a governor willing to veto job-killing legislation? And it’s hard to see how there would have been workers’ comp reform.
In light of that, the California economy would likely be much weaker now and yielding far less revenue to the state’s coffers.
About the only thing that would have been the same in a Davis administration is that Susan Kennedy would be chief of staff.
Kidding aside, I was quite impressed with Ms. Kennedy, who attended the council meeting. No doubt, she knows her way around the halls of state government. More to the point, I was pleased to hear her perspective on the governor’s plan to increase infrastructure spending.
That perspective, in fact, gives us a glimpse into the governor’s future priorities. In the past, whenever authority for bond financing became available, legislators would fight over the pickings. As a result, bond revenues would often go to fund local pork projects. The governor wants to break that cycle. He seeks to establish a long-run strategy with bond funds going to those infrastructure projects that have a high priority in terms of the state’s infrastructure needs such as highway expenditures.
In the 1960s, average annual expenditures on California highways exceeded $200 per capita. They are now less than $100 per capita, as adjusted for inflation. By 2016, the governor would like to get back to the $200 annual rate.
If nothing is done to increase the current pace of investment, total daily hours of vehicle delay is projected to increase 35%, from 550,000 to more than 750,000 hours. By contrast, under the governor’s plan, there would be a reduction in vehicle delay, to 454,000 hours a day.
To do that requires a long-term strategic plan, not piecemeal funding authorizations that are based on political clout rather than any clear economic rationale.
No wonder the governor’s 20-year Strategic Growth Plan, calling for $222.6 billion in infrastructure spending with about half ($107 billion) going to fund transportation projects, is falling on deaf ears in the Assembly and Senate.
Since the governor is also proposing a constitutional amendment that would impose a 6% cap on the cost of servicing the state bonds, legislators are rightfully worried about how their beloved pork projects will be funded. It should be noted that only $12 billion of the $107 billion in the governor’s Strategic Growth Plan for transportation projects would be funded by general obligation bonds.
This is leadership,a governor ready and willing to set the agenda with the fortitude to tackle tough long-term issues.
After the governor’s reform initiatives went down hard last fall, I wrote him a letter that I concluded with a favorite quote of mine: “Everyone gets knocked down,champions get back up.”
Rather than working against Gov. Schwarzenegger, perhaps the GOP’s “restless natives” should be spending their time figuring out how to get more Republicans on the ballot capable of getting elected to the Assembly and Senate.
Doti is president of Chapman University and a member of Gov. Schwarzenegger’s Council of Economic Advisors.
