Schwarzenegger orchestrates a compromise

Gov. Arnold Schwarzenegger and the Legislature reached agreement on a fairly significant deal last week, and it showed three things:

* There is hope yet. Yes, these people can come together and compromise with a minimum of showboating and temper tantrums.

* Schwarzenegger isn’t nearly as lame a duck in his waning days in office as lousy poll numbers would suggest. He still possesses the power to sign and veto bills. And he’s still a celluloid celebrity with a powerful personality.

* Legislating is a lot easier for politicians when they’re giving away money. It’s a natural instinct. That goes for whether they’re spending tax dollars or granting tax breaks.

Spending and tax cuts both deepen budget deficits. They make it harder for governments to live within their means. One eats up the means. The other reduces the means.

Yes, but. There’s a long-running argument over whether reducing taxes actually increases tax revenue by stimulating the economy. Scant evidence exists that it does. This “supply side” theory is based mostly on myth. But that discussion is for another day.

Today’s is about the governor and Legislature -- Democrats and Republicans -- getting together and doing something, relatively calmly. As in textbooks.

Schwarzenegger coerced Democrats into providing some targeted tax breaks for the housing and green-technology industries in the name of jobs creation.

In return, Democrats got a better shake for schools, transit and road work than the governor had proposed.

“My No. 1 priority is jobs, jobs, jobs,” Schwarzenegger declared as he signed legislation granting a sales tax exemption for purchases of green-tech manufacturing equipment.

Schwarzenegger said he hears a lot of expansion talk by businesses, especially green-tech firms. “But they talk about sometimes expanding outside the state. We don’t want anyone to expand outside the state. . . . We want to create the jobs here.”

And, he added, “green technology is where the action is.”

The housing break would provide a $10,000 tax credit for a first-time home buyer or anyone who purchases a newly built home and lives in it. A $200-million cap was placed on the total amount of tax credits that will be spread over three years.

“When you build new homes, that means that you have to hire carpenters, cement workers, electricians, plumbers and roofers and the list goes on and on,” Schwarzenegger noted.

But a Democratic policy analyst, who asked not to be identified for fear of angering his legislator boss, commented: “You could take that money and light it on fire and it probably would be put to better use.”

That’s because there already are ample government incentives to buy homes, the staffer asserted, and the housing market is starting to rebound on its own.

The bill sailed through the Legislature, however, with only three “no” votes.

The green-tech measure whipped through without anyone’s voting “no.”

“Globally we are at the crossroads,” Republican Assemblyman Sam Blakeslee of San Luis Obispo proclaimed during a bill love-fest on the house floor. Citing “carbon buildup,” he said the legislation was “important not only for jobs and our children, but for the planet.”

Democrats privately were ambivalent about the bill. It matches their environmental hue and might even eventually generate more revenue than tax losses. But it’s unpredictable.

They really had hoped to save the green-tech and housing bills for the summer’s tough budget negotiations. If the governor wanted their votes for the tax breaks, he’d have to give in on their demands. But Schwarzenegger forced them to use those valuable bargaining chips last week.

He did that by first vetoing a bill that Democrats claimed would have reduced the projected $20-billion state budget deficit by $2.2 billion. He called the savings illusionary.

In a vetoing mood, Schwarzenegger then threatened to scuttle a complex gas-tax swap -- substituting an excise tax for a sales tax -- that wouldn’t cost motorists a cent but would save the general fund $1.1 billion.

Sparing you the weedy details of unfathomable tax and spending formulas, suffice it that after all the compromising, Schwarz- enegger signed the bill and -- in rough figures -- schools benefited by $800 million, road works by $650 million and transit by $400 million.

These represent redirections of revenue and the axing of a nickel-a-gallon gas tax cut proposed by the governor.

“You’ve got to keep your eye on the prize,” says Senate leader Darrell Steinberg (D-Sacramento). “Part of the prize for me was to capture that nickel, avoid cutting education, rescue transit and provide money for transportation infrastructure. That’s also job creation. . . . We achieved our goals.”

But a Democratic strategist, who didn’t want to be identified because he was offering a slightly different take, said: “Lame duck or not, this governor still wields a lot of authority because he still gets to veto stuff.

“So when he says he wants something and is going to be resolute, and because he’s an international movie star, getting in fights with him should be reserved for things you’ll die for.”

Here, take the tax breaks. We’ll take part credit.

And pray the economy bounces back enough to help replenish the treasury before summer.

george.skelton

@latimes.com