Schwarzenegger’s First Mistake?

Arnold Schwarzenegger has reached out to billionaire Warren Buffett to be one of his top economic advisors. This is an extremely worrying sign for fiscal conservatives who had been looking to Schwarzenegger as a staunch supply-sider.

Schwarzenegger has stated that one his economic idols was Milton Friedman, the Nobel Prize-winning economist famous for such important economic works as Free to Choose and Capitalism and Freedom. Friedman’s sense of economic was based on combating inflation and creating economic growth through job creation and fiscal responsibility.

On the other hand, Warren Buffett is the kind of billionaire who seems to think that because a tax increase is a pittance to him that whenever there’s an economic problem a tax increase is a sure-fire answer.

The problem with such a strategy is that it goes against Schwarzenegger’s own pro-job growth rhetoric and against basic principles of supply-side economics. California is already over-taxed. The tax situation in California has created a situation in which job growth is retreating even faster than the national average. Because of the punitive tax and regulatory environment it is exceptionally difficult for new small business to start and existing small businesses to expand.

Schwarzenegger’s pro-business stance is one of the reasons why he has a lead on the Latino vote in California despite the entrance of Lt. Gov. Cruz Bustamante in the recall race. One of the discoveries pollsters are making in California is that many Latinos, especially young Latinos are being attracted to Schwarzenegger’s message. Racial stereotypes bely the often industrious nature of Latino immigrants, especially second-generation immigrants. The Latino vote is not monolithic, and if Schwarzenegger can make the connection between a more friendly business climate and increased jobs for Latinos in small business, he can easily defray Bustamante’s ethnic appeal.

However, in order to do that, Schwarzenegger needs to stick to his guns and place economic growth above the same old tax increases that have bankrupted California. The appointment of Warren Buffett is not a reassuring sign of things to come. If Schwarzenegger puts his foot down on tax increases and uses Buffet’s skills on finding ways of making California more friendly to small business, he has more than a fighting chance. However, if he decides to become yet another RINO (Republican In Name Only) on fiscal policy, he may lose the conservatives who are supporting him on a financial policy basis – and that may be enough to Terminate his chances in the cutthroat California race.

13 thoughts on “Schwarzenegger’s First Mistake?

  1. I’m sure you’ve hit the nail directly on the head regarding Schwarzenegger’s appeal to young Hispanics. What else could it possibly be other than his admission that supply-side economist Milton Friedman is his hero? I’m sure that as 22-year-old Hispanic males are picking strawberries, grapes and tomatoes from the fields of the Napa Valley at the same rate of pay their fathers and grandfathers earned while toxic insecticides are being sprayed nearby, their top priority is making sure Gray Davis is replaced with a California Governor who is sufficiently pro-business enough to ensure that the white male property owner class sees the tentacles of its entrenched power grow stronger.

    And as young Hispanic voters lust for a more pro-business Governor, they are surely also hoping Schwarzenegger renews his support for Proposition 187, so that their neighbors and family can be denied public education and medical treatment. Having a pro-business Governor clearly won’t be enough to satisfy the young Hispanic field hands and pool boys. They will also insist upon cracking down on their own with the sorts of anti-immigrant policies that Schwarzenegger enthusiastically supported in the past.

    As for the Schwarzenegger-Buffett alliance, they do seem to make strange bedfellows. Perhaps the tryst will be beneficial for Schwarzenegger because his being thrust into the real-world of politics will force him to re-evaluate his ideological allegiance to supply side theory. Supply side economic ideology is a luxury alloted only to economics professors, authors of certain economic textbooks, and Presidents who can operate on perpetual deficits that they will force future generations to pay back while hailing the success of never-ending tax cuts targeted to the wealthy. State governments are required to operate in the real world, a place where this is no room for supply-side fables because budgets are required to be balanced. Schwarzenegger wouldn’t have the option of practicing supply-side economics even if he wanted to since he is forced to balance the budget one way or another. He could take the Tim Pawlenty cuts-only approach, but it would be political suicide in California. Hopefully, Buffet will be able to provide Schwarzenegger some solid tips on cleaning up the current mess in the unfortunate event that he becomes Governor. It surely would have to work out better than the disastrous free-market advice that Milton Friedman and University of Chicago free-market ideologues gave to Yeltsin in post-Communism Russia.

    Just think. This entire circus could have been avoided if the California Republican Party hadn’t taken Gray Davis bait last year and chose the unelectable conservative Bill Simon instead of moderate Richard Riordan as their gubernatorial nominee. If the clueless California GOP had went with Riordan, he would’ve easily beaten Davis last November and the Republicans would be able to more effectively point their finger at the mess Riordan inherited and blame it on Davis. Now, as a result of pandering to the right wing fringe of the party, California Republicans have created a mess of their own that may end up making Davis’ budgetary mess look downright modest by comparison.

    The beauty part is that the lunatic fringe of the party may be able to be sabotaged again with Schwarzie. The Dems will spend no end of time tearing him apart and if they can convince the right-wing that he’s a RINO, they will lobby just as hard to sink him and not come to the recall election unified behind him. At the end of the day, Davis may either not be recalled or else be replaced by Bustamante since conservatives “couldn’t bring themselves to vote for a liberal like Schwarzenegger” and end up voting for Simon or any of the other talking right-wing heads on the ballot instead. California Republicans seem intent on falling face first on the sword at every turn, and I get no end of pleasure at seeing them decapitate themselves. In other words, PLEASE keep up the RINO charges against Schwarzenegger…PLEASE! :))

  2. Thank you for your racist assumption that all Latinos are farm workers.

    In fact, many Latinos are small business owners, work hard, and find it exceptionally annoying that the Democratic Party simply assumes that they can’t speak English or make their own way in life without government handouts. They also tend to see illegal immigration as harming their ability to have successful and thriving communities. Of course, the Democrats still have the racist attitude that Hispanics are all poor farm workers rather than small business owners, engineers, writers, businessmen, and scientists.

    The blatantly racist and patronizing attitude that you just displayed is why the Democratic Party will lose the Hispanic vote, and rightly so.

  3. Go Lord, Jay. You could say the sky is blue and this guy would jump all over you.

    I hate to disabuse Mark of what looks to be a rathe racist notion, but all Hispanics in California do not all pick “strawberries, grapes and tomatoes from the fields of the Napa Valley”. Jeez. And if you are going to blame the “clueless GOP” for nominating Simon, at least be clear that it was a little more than taking “the bait” from Davis. He spent millions slamming Riordan during the primaries. By the time the Davis machine was done, there was no chance for Riordan.

  4. Jay: “On the other hand, Warren Buffet is the kind of billionaire who seems to think that because a tax increase is a pittance to him that whenever there’s an economic problem a tax increase is a sure-fire answer.”

    Buffet: “Now the Senate says that dividends should be tax-free to recipients. Suppose this measure goes through and the directors of Berkshire Hathaway (which does not now pay a dividend) therefore decide to pay $1 billion in dividends next year. Owning 31 percent of Berkshire, I would receive $310 million in additional income, owe not another dime in federal tax, and see my tax rate plunge to 3 percent.

    And our receptionist? She’d still be paying about 30 percent, which means she would be contributing about 10 times the proportion of her income that I would to such government pursuits as fighting terrorism, waging wars and supporting the elderly. Let me repeat the point: Her overall federal tax rate would be 10 times what my rate would be.”


  5. I understand that most California Hispanics are not farm workers, and I figured you’d play the racial prejudice card for my using that as an example. As with any ethnic group, there are factions of California Hispanics who are professionals who worship at the shrine of the supply-side doctrine. By and large, however, California Hispanics are a working-class voting bloc, and electing a Governor who is “pro-business” (translate–big tax cuts for those with the largest portfolios) is not likely to be high on their list of priorities as they step into that voting booth.

    Furthermore, most Hispanics do not share the Schwarzenegger and Reding-supported theories that illegal immigrants should be denied education and health-care services. This entire debate eludes me. If we know they’re illegal, isn’t it our policy to deport them? If so, why is this even an issue? The only explanation I can come up with is that California Republicans want illegal immigrants (the more, the merrier)to “do the jobs Californians won’t do” at 30-some cents on the dollar what these same jobs paid several decades ago.

    California Republicans want to extract illegal immigrants generous and substantial contribution to their economy, but then pretend that they’re bankrupting the state. Of course, denying an education to the children of these 100-hour-a-week-working “freeloading parasites” will ensure a whole new generation of “degenerate bloodsucking leeches” to prop up the California economy with their cheap labor for decades to come. Denying these immigrants’ health care treatment is dumb policy simply on the grounds of disease control and the welfare of the public. Even conservative Hispanics in California (at least most) don’t want to see their former neighbors dying of untreated tuberculosis, or see their 8-year-old kid roaming the strawberry fields and not receiving an education. That’s why I think Arnold’s past support of Proposition 187, especially with him being an immigrant himself, along with Proposition-engineer Pete Wilson being a top Schwarzenegger cheerleader, is gonna be a huge problem for Schwarzie in retaining the Hispanic vote.

    Whichever the case, the RINO charge is already out of the bag, and if recent history is any indicator, the Dems should be able to sit back, relax, and let the GOP right-wing do all the heavy lifting for them in demonizing the Schwarzenegger campaign. Either the GOP proves yet again they are unworthy of running California government and Davis is spared, or the Republicans split their vote between Arnold, Simon and others giving Bustamante the small opening he needs. Personally, I thought it would take a little longer for the RINO accusations to start flying, but I consistently overestimate the intelligence of the California Republican party who seems intent on destroying a sure thing, just as they did last year with Riordan.

  6. Barney: Buffett’s logic is shoddy, as he’s arguing from an extreme case. As I’ve argued before, changes in the tax code don’t effect the super rich like Warren Buffett. If marginal tax rates go up dramatically, they can compensate. If they go down, they benefit – as does everyone else in the system.

    His entire argument doesn’t deal with the core of the issue, which is how would divident cuts effect those people who aren’t filthy rich like Warren Buffett. Recent data has shown that more companies are offering dividends, and more investors are taking them. This means that average investors are getting more money because of this policy change.

    Buffett’s argument proves my point as it is based on a false comparison. The effects of cutting dividend taxes help spur investment. The effects of Bush’s marginal rate cuts are designed to boost overall income. It doesn’t matter than Buffett’s effective tax rate is 3%, as most people don’t get that much of their income from dividends in the first place. It’s an argument that didn’t work then, and it’s no more relevent now, no matter how many accusations you make in ALL CAPS.

    Mark: If you knew it was a racist argument and would be instantly identified in such, then what the hell was the point of making it?

    The fact remains that many Hispanics work in small business, many own small business, and many find the Democrats’ pandering rhetoric insulting. They also have to pay the costs for illegal immigrants recieving services that they are not entitled to, and they have just as much interest as any other group in combating illegal immigration.

    As for Schwarzenegger’s policy prescriptions, he may not be a social conservative, but his pro-growth rhetoric matches policies that could help California. However, if he starts backing away from those positions he will lose on policy grounds – although at this point I think he will have enough of a "Jesse Effect" to win the election regardless of his policies.

  7. My argument was not racist. It merely described a group of young Hispanic males in a profession where they are well represented, and sarcastically explained why “supply side” ideology was unlikely to win them over. The numbers of Hispanics insulted by Republican rhetoric appears to double the number of them insulted by Democratic rhetoric since Democrats almost always win the Hispanic vote by a 2-1 or better margin.

    Also, please explain to me why, in California, immigrants who are discovered that are illegal are not simply deported, rather than silly restrictions on public education and health services? This should be a real treat seeing you try to worm your way out of this corner.

    As for Arnold and the “Jesse effect”, nobody saw Jesse coming and didn’t put him under the microscope because of it. Schwarzenegger won’t have that luxury, and will either have to answer some hard questions he’s not likely prepared to answer, or else make himself look even more incompetent by evading the questions. Either way, “the Jesse effect” has a good chance of mirroring Minnesota’s Jesse effect of 2002 rather than 1998.

  8. "Also, please explain to me why, in California, immigrants who are discovered that are illegal are not simply deported, rather than silly restrictions on public education and health services? This should be a real treat seeing you try to worm your way out of this corner."

    Short version: they should be.

    Long version: because liberal interest groups want to pursue an open-border policy under the idea that a continually improverished and racially Balkanized underclass is – gasp! – an ideal Democratic voting bloc.

  9. “Long version: because liberal interest groups…”

    It’s hardly the liberal interest groups who hire the cheap labor, who want wages low.

    You’re tax code nonsense is a complete non sequitur, starting with the poor don’t pay the majority of their taxes as income tax.

    And, just to twist your titties:

    The facts, however, are that the Hizbollah pretty much follows the rules of good neighbourliness; it is Israel that breaches them. Since Israel’s withdrawal from South Lebanon, Hizbollah has been concentrating on two kinds of actions: anti-aircraft fire, and a limited fighting against Israel confined to the Shaba Farms.

  10. There are elements of both the Democratic and Republican party constituencies that want to see an open-border policy come to fruition. The Dems perceive that the more the immigrants move here, the more vote they’ll get, and also see an unregulated immigrant influx as a way of preserving retirement entitlement programs that will otherwise go bankrupt. The Republican’s Chamber of Commerce wing wants it just as bad to “fill the jobs that Americans won’t do” with disempowered illegal aliens, yet then pretend that these immigrants fattening their wallets are actually draining them when we put their kids through grade school and treat their tuberculosis.

    You cleverly, but transparently, evaded my question in relation to why illegal immigrants who are caught are not simply deported. Your response: Uh, well, the Democrats want an open border policy to expand the underclass. X + Y = Z, not H. You’re gonna have to do better than blaming what the “Democrats have in mind for the future” to justify a policy supported by Republicans (present-tense) where illegal aliens are not deported when caught, just stripped of education for their children and health care treatment.

  11. Barney: My comment was germane to the subject. Buffett was using himself as an example for how tax code changes effect individuals when he is an unrepresentative sample of how tax code changes work.

    Second, if you want to equate terrorist groups that kill Israeli civilians as being "good neighbors" you do so at your own peril. Osama bin Laden build hospitals and roads in the Sudan, but that in no way excuses his actions either.

    Mark: Exactly where can you show me one credible example that points to a Republican desire to maintain populations of illegals for cheap labor? I can guarantee you such evidence does not exist, as that is not the view of the GOP.

  12. One example of a Republican desire to maintain populations of illegals for cheap labor?

    How about Dubya’s pre 9-11 support of an agreement with Vicente Fox to grant amnesty for illegal aliens, allowing them to work here indefinitely without the chance of citizenship or representation to go along with their taxation. There’s a method to the GOP’s madness. They’re not simply ignorant about the simple prospect of deporting illegal aliens, but it’s so much more beneficial to craft this elaborate scheme to deny illegals social services yet still allow their campaign contributors to take advantage of the illegals’ cheap labor. One would think a reasonably intelligent conservative (a bit of an oxymoron I know) like yourself would at least be able to concede that a policy of denying all health services to illegals is a stunningly irresponsible threat to human health, but then again it’s amazing how much destructive treachery one is capable of if they allow themselves to be married to an ideology.

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