"Hello, this is Governor Arnold Schwarzenegger with another California Report.
This week I want to discuss our budget crisis, and two very different philosophies about how best to close our deficit and get our economy back on track.
I believe in lower taxes, in small government and in helping our employers and entrepreneurs create jobs and grow revenue.
The other side believes in higher taxes, in bigger government, and in protecting public sector employees at the expense of the private sector.
For example, the other side wants to raise taxes by billions and billions of dollars; on income, on property and of course on businesses and corporations.
In fact, they say "business" and "corporation" as if they’re four-letter words.
I think some of the legislators forget completely that it is businesses and taxpayers that generate the tax revenue that pays their salaries.
Businesses create the 16 million private-sector jobs that pay for our healthcare programs, our public safety, our parks, our schools and the list goes on.
Our economy will not come back, and state revenues will not come back, until private-sector jobs come back.
Now, higher taxes mean fewer jobs. It’s very simple.
Also, some have suggested that business tax incentives, like our tax credit for homebuyers, or our credit for companies that hire new workers, are to blame for our deficit.
How absurd is that. Look at the numbers.
Over the last decade, changes to our tax structure have not led to a decrease in corporate revenues but rather to an increase of $9 billion.
In the meantime, salaries and benefits for public sector employees will cost us $32 billion this year alone.
That is up 65 percent from just ten years ago, even though our revenues went up only 24 percent over the last ten years.
And what is hurting California is the same thing hurting governments and economies around the world.
Ask yourself: is it the tax incentives that are strangling Greece, France, Spain, England and those countries?
Or is it unsustainable costs and entitlements of growing governments?
As former Speaker Willie Brown has pointed out, 80 percent of every government dollar in California is spent on public employee compensation and benefits.
He hit the nail on the head.
For the sake of our economy, for the sake of our budget, for the sake of our children and grandchildren’s future, it is those things that must be brought under control.
So anyway, now let me tell you a little story about when I visited Israel five years ago.
I ran into and had a meeting with then Finance Minister Netanyahu, who now is Prime Minister.
I told him, "Since you have been Finance Minister, the revenues are coming back in Israel. The economy is coming back. Things are going really well. What is the secret?" Because I have just become Governor of the great state of California, and I can maybe use the same methods and principles.
He said "the most important thing is, you have to let government shrink and you have to let the private sector get bigger and stronger."
Then he said, "Let me tell you a story."
He said "When I was in the army, our commander had us line up and pick each other up, and then run through the finish line.
The first guy was a little guy, who had a big guy on his shoulder.
I weighed around 200 pounds, and I had to pick up a guy also around 200 pounds.
The guy next to me was a big strong guy, weighed around 220 to 230, and he picked up a guy who was 160 pounds.
Then we took off toward the finish line.
The first guy, the little guy, was stumbling all over, falling, couldn’t make it.
I moved toward the finish line with big strides.
But the big guy next to me, with the little guy on his shoulders, he ran through the finish line and finished first."
I said, "That is a really great story. But what does that have to do with revenues and the economy?"
He said to me, "It is very simple. The bottom guy represents the private sector and the top guy represents the public sector. If the public sector is bigger than the private sector, the private sector has no chance. That is why the first guy stumbled, and the other guy ran through the finish line because he had the little guy on top. You have to make the public sector shrink. That is the bottom line."
So, I wanted to tell you this story because for the rest of my time as Governor, I can assure you, that I will continue to fight with all my power to make sure government in California lives within its means.
That is the important thing: to keep it contained and not allow it to squish or destroy the private sector.
That is the bottom line.
So anyway, thank you for watching and thank you for listening."
The KVML "Newsmaker of the Day" is heard each weekday morning on AM 1450 KVML at 6:47, 7:47 and 8:47am.
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