Schwarzenegger’s Economic Plan


As a child my family was concerned about the state of my mental health. My grandmother would tell me not to read so much, I would crazy; my mother was also concerned because I talked to myself, a habit that has followed me into my twilight years. As far as I can see, my reading and my talking to myself have not driven me crazy, although I might say that it has increased my frustration.

Take the contradictory approaches of George W. Bush and Arnold Schwarzenegger to the budget. According to Bush a national debt of $7 trillion, a debt of $23,919.62 per U.S. resident, is healthy. The national deficit of around $500 billion is necessary to stimulate the economy – it is necessary to give tax breaks to the richest 1 percent.

As proof of his genius Bush says the economy is already reviving itself; that there has been growth. Bush even claims that his policies have created jobs; forget that we have lost a total of 2.7 million in private sector jobs since President Bush took office.

Excuse me! I want to reduce this equation to its lowest common denominator. I once had a student who after graduating from law school ran up $200,000 in credit card debts within a year. Her style of living certainly went up. She bought more than a hundred pairs of new shoes, new furniture, rented an expensive condo in Santa Monica, and purchased a new car. However, she went bankrupt.

It seems as if Bush’s solution is to rob the social security fund and shift the national debt to future generations, after all he won’t be in office when it comes due down in ten years.

Enter Schwarzenegger! His thinking is even simpler than Bush’s: the Democrats have spent us into debt so we have to cut spending. Cut the unpopular state car tax, and promise to sweep aside areas of waste. Borrow $15 billion.

Let’s talk this one out:

* Schwarzenegger says it would be unfair to tax corporations because they will leave California. It doesn’t matter that deregulation of energy and worker’s compensation allowed the oil companies and the insurance companies to gouge the state. Giant energy traders, above all Enron, cost the state government $10 billion.

* It doesn’t matter that Bush’s massive reduction in federal aid to the states has led to 38 states facing bankruptcy.

* Back in 1978 Proposition 13, severely limited the levying of property taxes. Proposition 13th created drop in taxes for corporations, resulting in higher taxes for first-time home buyers. Billionaires like Warren Buffet pay a one tenth of 1 percent tax rate on multi million dollar homes while many working people pay more than ten times this rate. The main beneficiaries of Prop 13 are not struggling homeowners but big corporations and the wealthy.

* The collapse of the dot.com bubble in 2000 contributed to a statewide and nationwide recession of 2001. Have these corporations been moving out of California because of taxes? Come on. Have you ever called a dot.com for technical services? Someone from Bombay, India, answers. Literally, thousands of these high paying jobs have left the state, not because of taxes but greed.

It seems logical that if Schwarzenegger wants “structural reform” that he should look at the facts: The root of the problem is not wasteful social programs. Gray Davis was a conservative Democrat; his 2003 budget consisted of reductions in services and increased fees.

The Schwarzenegger solution is to impose some $239 million in new fees (taxes) on hundreds of thousands of students, handicapped people and other ordinary Californians. Sure the governor makes cuts but on whom:

* $4.6 billion in cuts, $1 billion in fund shifts from gasoline taxes (let the roads rot), and an additional $2 billion reduction in public education spending.

* Cuts $729 million from higher education. Tuition and fees for California university students will increase 10 percent for undergraduates and about 40 percent for graduate students. Community college fees will increase by a whopping 44 percent, on top of last year’s 64 percent increase.

* Cuts $165 million from childcare programs for school goers.

* State employees pay an additional 5 percent of their wages into their pensions, to pay off state borrowing.

* $1.3 billion in property taxes due to cities and counties are shifted to the state.

Let’s face it: the burden is on the poor. Six million Californians have no health insurance; another 110,000 poor Californians will lose health insurance due to the cuts. The budget reduces public assistance benefits for 481,000 poor families. It will be a domino effect: Counties will be forced to lay off thousands of employees, leading to bankruptcy and family breakups, while stiffening work requirements. Lastly, a $15 billion bond issue to pay off short term notes to the banks will be will be borne by California residents over the next nine years as additional budget cuts and layoffs.

Because Latinos make up a disproportionate share of the poor, they carry the greatest burden. The “structural reforms” must start at the top, for instance: There are loopholes under Prop.13 on commercial property. Disneyland pays only a nickel per square foot in property taxes; Capitol Records pays a dime per square foot in taxes. Close corporate and business loopholes; corporate income taxes supplied 14.5 percent in 1979 and only 7.9 percent of state tax revenue in 2000.

What has me talking to myself is that the cuts tear down 35 years of struggle in higher education. It eliminates the Education Opportunities Program, which has brought taken Chicanos and other Latinos out of sal si puedes barrios, and given them the opportunity to go to college. Thousands have become teachers, lawyers, doctors, and engineers. Under both Bush’s and Schwarzenegger approach they will not have this opportunity but will be left with the tab.

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