The next few months should determine whether Gov. Arnold Schwarzenegger can, in any reasonable sense, continue to be considered a Republican.
Until now, the socially liberal governor has shared the GOP's anti-tax mania, which was essentially the lone bond he maintained with his party. In fact, the most interesting thing about Schwarzenegger's political career has been the degree to which it has highlighted the GOP's true credo: Dissent can be tolerated on abortion, gay rights and gun control, but even a mega-celebrity such as Schwarzenegger toes the line on taxes.
But today the governor faces twin challenges that could stretch to the limit the relationship of politician and party. Schwarzenegger wants to reform healthcare and has to fill a huge budget deficit, both of which will take lots of money. He already teamed up with Democrats and agreed to increases in payroll and tobacco taxes (subject to voter approval) to help pay for his healthcare deal, riling his fellow Republicans. If he also agrees to broader-based tax increases to close the budget hole, estimated at $14 billion, it will be hard to tease out even the thinnest ideological connection between Schwarzenegger and the GOP.
On almost everything save taxes, Schwarzenegger puts a finger in the eye of Republican dogma. He is flatly pro-choice. He favors gun control and the legalization of medical marijuana. He is more sympathetic to gay rights and environmental concerns than the vast majority of his fellow Republicans. Yet despite all this, Schwarzenegger has been embraced by the national party. In 2004, he spoke at the Republican National Convention, and he campaigned for President Bush in Ohio. He has certainly been criticized by those on his right, but usually it is Schwarzenegger holding the national party at arm's length rather than the other way around.
Why the party's affection for this dissident? Partly it's his celebrity, charisma and ability to win votes. But it's also because he has stood by the party's no-new-taxes mantra. That has been one of the few consistent hallmarks of his time in politics. When Schwarzenegger first took office in 2003 and the state was awash in red ink, he rolled back an earlier increase in the vehicle license fee and then rejected a Democratic proposal to hike income taxes for the rich even though the result was to shortchange public schools. Mind you, the nonpartisan California Budget Project calculated at the time that the increase would have affected less than 2% of California taxpayers, and 95% of the increase would have been paid by the top 1%, a group that then had an average annual income of $1.3 million. Still, Schwarzenegger said no.
Then when the governor ran for reelection in 2006, he ridiculed challenger Phil Angelides as a man who took glee in raising people's taxes, although Angelides' proposal was also limited to high-rollers.
Schwarzenegger has been immovable, in other words, even about increasing taxes only on those who could afford it and even when the state desperately needed the money. On this issue, he isn't the Terminator, he's Dr. No.
At least until now. Looking to hit a public-policy home run and secure his legacy, Schwarzenegger negotiated a healthcare reform package with Assembly Speaker Fabian Nuñez (D-Los Angeles) that, at first blush, seems to break the no-new-taxes mold. To cover the cost of extending medical coverage to virtually all Californians, the plan would create a payroll tax for employers, increase the cigarette levy and slap a new tax on hospitals.
Republicans in the Legislature immediately protested that the governor has gone down the wrong fiscal road. When the plan passed the Assembly last week, not a single GOP member voted for what they denounced as the biggest proposed tax increase on business in state history.
Schwarzenegger, of course, has an explanation. He argues that the new taxes and fees won't go into effect unless they're approved by voters in an initiative on the November ballot. In other words, Californians, if they approve the ballot measure, would be raising their own taxes rather than having politicians do it to them.
But while that's a nice rhetorical twist, the real reason the plan is headed for the ballot is that a tax increase requires a two-thirds vote in the Legislature, and with Republican opposition solid, the bill would never have enough votes. By stripping out the tax increases and referring them to the ballot, a simple (all-Democratic) majority will be all that's needed in the Legislature.
Anyway, the whole episode may be for show. Senate President Pro Tem Don Perata (D-Oakland) is reluctant to act on the healthcare package until the state's budget deficit is addressed, and without Senate action, the Schwarzenegger- Nuñez deal is an empty gesture.
In trying to close the budget deficit, Schwarzenegger's anti-tax credentials will be even more sternly put to the test because he really can't pass the ball to voters again. Nor can the shortfall of $14 billion simply be eliminated through trimming wasteful spending. Even closing every state prison in California and releasing all the criminals wouldn't produce $14 billion in savings. It would seem that some form of tax increase must be part of the solution.
Would that really be such a bad thing? If Schwarzenegger were to propose a tax increase, he would be following footsteps he should like. Pat Brown and Ronald Reagan -- Schwarzenegger's model governor and his personal hero, respectively -- both pushed big tax increases through the Legislature. Brown and Reagan each faced a looming budget hole on taking office, and both responded by raising income tax rates for people, corporations and banks. In today's dollars, the Brown proposal totaled almost $2 billion, Reagan's about $6 billion. The money staved off the kind of horrific budget cuts the state may now have to consider.
The problem for Schwarzenegger is that no modern Republican could get away with such a wild transgression, or perhaps it's better to say that none would dare want to. The GOP may seem like a party that would use its self-proclaimed big tent solely for a revival meeting, but it is economic issues, rather than social ones, that actually knit the party together -- and none is more important than taxes.
Opposition to tax increases is certainly terrific politics. Nobody likes paying taxes, and voters reward politicians who promise them they don't have to pay for anything. A new poll from the Public Policy Institute of California says voters oppose tax increases as a solution to the budget problem by almost a 2-1 margin. I sympathize, but then I also wish I could avoid paying bar tabs. Alas, consumption has costs, whether we're talking beer or public services.
Perhaps Schwarzenegger will stay the anti-tax course and come up with enough alternatives to close the budget deficit. The administration's spokesman on budget issues has said Schwarzenegger will consider a range of options -- except new or increased taxes.
If so -- if the governor won't budge even in this kind of crisis -- it will be the plainest proof yet that he shares his party's obsession with taxes.
But if not -- if instead he bows to fiscal reality and acknowledges that Californians must pay more for the public services they use -- he will have broken the final intellectual cord lashing him to the GOP.
Ethan Rarick is the author of "California Rising: The Life and Times of Pat Brown" and the forthcoming "Desperate Passage: The Donner Party's Perilous Journey West."
If the governor goes through with his proposed tax hikes, it will be even harder to tell him from a Democrat.
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