Schwarzenegger Squanders Opportunity

The economic summit that Arnold Schwarzenegger sponsored last week could have been a turning point in this vacuous recall campaign, but you wouldn’t know that from the speed with which everybody, from the media to the candidate himself, seems to have forgotten it ever happened.

I don’t include the summit participants, who emerged from the Aug. 20 meeting genuinely impressed by Schwarzenegger’s intellectual grasp and shocked down to their socks about the state’s financial condition. According to several of the businesspeople and academicians who were there, this is because billionaire investor Warren E. Buffett, the summit co-chair, scared the bejesus out of everyone at the U-shaped table with a crisp warning that California’s credit could soon be extinguished if the state fails to get its fiscal house in order.

Not everyone in state government or public finance agrees that Buffett’s dire words are entirely accurate, but his presentation was potent enough to drive what one participant estimated as 80% of the two-hour discussion. And that leads to the question of what the candidate intends to do with the information he received from this eminent gathering.

Has Schwarzenegger communicated the seriousness of the situation to the public? At the open news conference after the closed-door meeting, he mentioned the possibility that the state faces a larger-than-forecast deficit and that this might affect its credit standing. But the message was lost in the moment, and in any case mentioning the credit issue is not the same as crusading about it, much less placing it at the center of what is supposed to be a new-style, no-politics campaign.

That’s a shame, because if there was one recall candidate who entered the lists in a perfect position to deliver home truths to the California electorate, it was Schwarzenegger. People were prepared to hang on his every word.

He had such a huge advantage in popularity and name recognition over the rest of the field that he could lose huge chunks of both by challenging decades of received wisdom without giving up his lead. Who knows? A blast of candor might even have enhanced his lead.

But thus far, Schwarzenegger has squandered the opportunity. He hasn’t marked out new ground, and he’s already mired in the same political swamp as his rivals: charged with accepting corporate campaign donations after forswearing “special interest” money, and with childishly belittling his main opponent, Cruz Bustamante, after forswearing negative campaigning. Meanwhile, his campaign literature bristles with the sort of premasticated political bromides and slogans that always go in one ear and out the other (“Let’s Bring California Back”).

Even worse, he has avoided political land mines just like a conventional office seeker; instead, he should poke some of them with a sharp stick and let them blow up. When, at last week’s news conference, he placed Proposition 13 and tax increases hors de combat for the duration of his campaign, he tagged himself as yet another politician unwilling to reexamine the self-destructive policies that have brought the state to its sorry pass.

None of this was preordained when Schwarzenegger convened the 18 members of his California Economic Recovery Council at an airport hotel last Wednesday. Most of the members I’ve talked to say that Schwarzenegger and former Secretary of State George P. Shultz, the meeting chairs, placed no limitation on topics to be discussed at the outset.

But the boundary lines were quickly drawn. When UCLA economics professor Edward Leamer proposed enacting temporary, self-expiring tax increases to cover the few years needed to pare down the state payroll, participants say, Schwarzenegger and several other panelists rejected it in what was one of the few heated moments of the event. (Leamer says only that Schwarzenegger was “very clear about his commitment to not raise taxes” and that there was “sentiment expressed” by others along the same lines.)

It’s true that a couple of ideas raised at the meeting have made it into Schwarzenegger’s formal platform. One is the proposal by Stanford economics professor and Hoover Institution fellow Michael Boskin for an external audit of the entire state government.

The point, Boskin explains, is to figure out how much of the state’s deficit comes from its annual shortfall of revenue compared with spending, and how much is due to borrowing aimed at covering previous deficits. “Part of the purpose is to separate out the ongoing deficit from the tens of billions of dollars of debt inherited from the deficit spending of the past few years,” he told me. But his idea also entails a performance audit to find where money is being wasted. “Even without the financial problem, there’s still an issue of what is being done effectively.”

But where are the signs that the campaign means to use its economic brain trust to generate a continuing flow of new ideas? Participants say that no arrangements have been made for a second meeting, and they’re not sure if and when the group will convene again. Although some campaign aides sat at the fringes of the room during the meeting and took notes, no transcript or issue papers will be disseminated to the public for open discussion. (A campaign spokesman says it’s “entirely possible” that the group will meet again before the election, and “likely” that it will meet after a Schwarzenegger inauguration.)

Schwarzenegger did convince many of the participants that he has absorbed their lessons and intends to do something in response, and they give him credit for being the only candidate who has gone even this far to solicit the business community’s viewpoint.

“What was discussed in there goes into Arnold’s head,” says Ray Lane, a Silicon Valley venture capitalist and the former president of Oracle Corp. who says he was encouraged and impressed by the session. “It was a two-hour meeting, and I don’t think we had any expectation that we were going to formulate a plan that was going to go on paper.”

But why wait to place some of these issues before the voters? UCLA’s Leamer, who says he opposed the recall at first and later decided that it might have the beneficial effect of allowing “a real discussion of all the issues,” says that expectation has been deflated by the way all the campaigns have unfolded.

“Term limits, Proposition 13, Prop. 98” -- that’s the 1988 voter initiative requiring the Legislature to spend about 40% of the state budget on education -- “there’s a whole list of things that are tying the hands of state government. Now it looks as though that discussion isn’t going to happen.” (He blames politicians and the news media together.)

There’s an old politician’s saw about how the best way to shove a troublesome issue off the front burner is to appoint a task force to study it to death. As I write, word arrives, ominously, that Schwarzenegger will shortly appoint a committee of luminaries to study education issues. Since he’s already said he’ll never touch education spending, whatever will they do with their time?

Golden State appears every Monday and Thursday. Michael Hiltzik can be reached at golden.state@latimes.com.