'This Week' Transcript: Arnold Schwarzenegger

SCHWARZENEGGER: No, absolutely not. I mean, there's quite a difference, because remember one thing: When the last time they had the crisis in 2003, nothing was accomplished. Now we have this crisis, we got the legislators together, the Democrats and the Republicans.

We had the biggest budget deficit, $42 billion, got them together and met in the middle, that not only did we have, you know, had the cuts all for about $15 billion, but we had a revenue increase of around $12 billion, and on top of that we got huge reforms out of that, reforms that no one has ever dreamt of for the last 60 years in California.

The reason why we went through this roller coaster ride, financial roller coaster ride in California was because we didn't have a great budget system. We never had a rainy day fund; we didn't have a cap; we didn't have mid-year cutting authority or any of those things. For the first time in 60 years, we got all of this now as part of the budget negotiations. This is a huge coup.


SCHWARZENEGGER: And it is a great, great asset for the people of California.

STEPHANOPOULOS: But you're not out of the woods yet. A lot of those reforms still have to pass in referendums. And if the bond issue, for example, doesn't pass, you're going to be right back in negotiations.

SCHWARZENEGGER: I can tell you one thing, that when you go and gather signatures for a referendum, then there is, you know, kind of a 50-50 shot. But usually when you have both parties pass a referendum, that means that both parties are going to go out and campaign for those referendums.

If it's the budget reform, if is the lottery, all the kind of things -- and the open primaries -- I think all of those things, you will see that both parties will go out there and -- and -- and campaign, even though the parties sometimes are against some of those initiatives.

STEPHANOPOULOS: But back in 2003, you were unequivocal, "I will not raise taxes." You ran that car tax issue so hard. So -- so as you look back, was it wrong to make the promise?

SCHWARZENEGGER: No, absolutely not, because you...


SCHWARZENEGGER: I'll tell you why. Because I made it very clear that I'm against raising taxes, and even today I hate tax increases. But I also made it very clear...

STEPHANOPOULOS: But so did Gray Davis. And he just felt the budget crisis made it necessary.

SCHWARZENEGGER: But -- but I also made it very clear that I will never sign a pledge that I will not raise taxes. Why? Because I said, if there's an emergency, I want to have the options to raise taxes if there's an emergency.

Right now, you have to admit, we have a fiscal emergency. We have a financial crisis. We have a housing crisis, all of those things. And we had a $42 billion deficit. That's the same as having an earthquake or some other disaster.

It's an emergency. And under those circumstances, we can raise taxes. And remember one thing: It has nothing to do with Gray Davis or any other specific politicians. You had people like Ronald Reagan increasing taxes and increasing spending by 13 percent. You had Wilson increase taxes. You had Deukmejian increase taxes. And I had to increase taxes.

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