'This Week' Transcript: Arnold Schwarzenegger

California Governor on the budget, the stimulus plan, and the future of the GOP.

ByABC News
February 22, 2009, 8:57 AM

Feb. 22, 2009 — -- Get George Stephanopoulos' latest tweets and reporting by following him on Twitter, Facebook, and George's Bottom Line blog.


FEBRUARY 22, 2009




STEPHANOPOULOS: Good morning, and welcome to "This Week." Ourheadliner today, Arnold Schwarzenegger on California's narrow escapefrom budget disaster, his reversal on taxes...

SCHWARZENEGGER: I say this again: I will not raise taxes.

STEPHANOPOULOS: ... working with President Obama, and wrestlingwith his own party.

SCHWARZENEGGER: We've got to bring people to the center.

STEPHANOPOULOS: Is California's crisis the rest of the country'sfuture? Then...

FEDERAL RESERVE CHAIRMAN BEN BERNANKE: If we do not stabilizethe financial system, the fiscal policy will not lead to a sustainedrecovery.

STEPHANOPOULOS: ... can the banks be saved? Will thepresident's stimulus and housing plans work? What's next for theeconomy? A powerhouse roundtable on the challenges ahead, with GeorgeWill, Nobel Prize-winner Paul Krugman, BusinessWeek columnist SuzyWelch, and the economist called "Dr. Doom" for predicting the crash,Nouriel Roubini.

And, as always, the Sunday funnies.

JAY LENO, TALK SHOW HOST: They're leaning towards the Swedishmodel for banks. It's -- and I've got another idea. How aboutopening banks with all Swedish models? See, that's a bank I could goto.


ANNOUNCER: From the heart of the nation's capital, "This Week"with ABC News chief Washington correspondent George Stephanopoulos,live from the Newseum on Pennsylvania Avenue.

STEPHANOPOULOS: Hello again. Our headliner this morning, stilllooking fresh after a week of all-nighters dealing with the Californiabudget crisis, Governor Arnold Schwarzenegger.

Welcome back.


STEPHANOPOULOS: So back in Sacramento, you're getting it fromboth sides. Democrats say you cut spending too much; Republicans sayyou raised taxes too much. Is D.C. the safest place for you thisweekend?

SCHWARZENEGGER: Well, I think that it is always terrific. And Ihave told you that many times that, when you're in the center, you getattacked from the left and you get attacked from the right. And thisis a good sign, actually, because that means that you're in the rightplace.

Because remember one thing: What is good for the people is notalways good for politics. That's the important thing here. STEPHANOPOULOS: But it seems like the most anger you're gettingcomes from your own party, the Republican Party. There's a petitioncirculated at the California convention -- Republican Party conventionthis weekend bashing you for going back on taxes and saying you oweformer Governor Gray Davis an apology for the recall campaign you ranagainst the car tax back in 2003.

I want to show people a little bit of that campaign.


SCHWARZENEGGER: When I get to Sacramento, I will immediatelydestroy the car tax, so watch what's going to happen over there to acar. Watch over there.


Hasta la vista, baby, to the car tax!


STEPHANOPOULOS: So do you owe Gray Davis an apology?

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

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

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


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

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

SCHWARZENEGGER: I can tell you one thing, that when you go andgather signatures for a referendum, then there is, you know, kind of a50-50 shot. But usually when you have both parties pass a referendum,that means that both parties are going to go out and campaign forthose referendums.

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

STEPHANOPOULOS: But back in 2003, you were unequivocal, "I willnot raise taxes." You ran that car tax issue so hard. So -- so asyou 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 clearthat 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 thebudget crisis made it necessary.

SCHWARZENEGGER: But -- but I also made it very clear that I willnever sign a pledge that I will not raise taxes. Why? Because Isaid, if there's an emergency, I want to have the options to raisetaxes if there's an emergency.

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

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

SCHWARZENEGGER: You do the kind of things that are right for thepeople, that are right for the state, rather than what is right foryour party. It was not right for my party. The Republicans, theparty itself hates it, even though I had other Republicans vote rightalong on that budget. That's how we got it passed, because we needtwo-thirds of the votes in order to pass a budget.

STEPHANOPOULOS: So when you -- we're looking at a similar budgetcrisis in the coming years here in the United States. Does theRepublican Party have to re-think its absolute opposition to taxincreases of any kind?

SCHWARZENEGGER: Well, no, I think that the Republican Party orany party has to always think, when you make a decision, "Do I want tomake a decision that's based -- that's best for the party? Or am I apublic servant and have to serve the people, what is best for thepeople?"

And in this particular case, in order to solve a $42 billiondeficit, the only way you can do that is a combination of makingsevere cuts and also having some revenue increases.

STEPHANOPOULOS: How -- how long is it going to take Californiato dig itself out of this hole?

SCHWARZENEGGER: I think that you will see that there's anationwide and a worldwide crisis right now. I think every country inthe world is scrambling right now and does really have some seriousproblems with revenues with their businesses, with their housing, andwith all of those things. I mean, it's -- it's worldwide. All theother states have the same kind of problem.

So I think that it would take -- and yesterday we had somebriefings where Bernanke was to give a speech and other people,experts. It is very clear that we will see kind of a pick-up again,if you will, beginning of next year, that we will...

STEPHANOPOULOS: But not this year?

SCHWARZENEGGER: ... when we -- when will we come back to normalagain? I think that could take years from now to get back to where wewere.

STEPHANOPOULOS: And you think President Obama's stimulus packageis an important component of that. You are at odds with a lot ofRepublicans, especially here in Washington. They almost all votedagainst it. The chair of the Republican Governors Association, MarkSanford, Governor Mark Sanford of South Carolina, said it's a hugemistake.


GOV. MARK SANFORD, R-S.C.: We're a nation that has $52 trillionof accumulated liability, $52 trillion of political promises that havebeen made, but not paid for. And the idea of stacking up anothertrillion, another trillion, another trillion, we really do get to thattipping point.


STEPHANOPOULOS: What's your response to him?

SCHWARZENEGGER: Well, Governor Sanford says that he does notwant to take the money, the federal stimulus package money. And Iwant to say to him: I'll take it. I'm more than happy to take hismoney or any other governor in this country that doesn't want to takethis money, I take it, because we in California can need it.

I think that it is a terrific package. I think that, if you ask1,000 people for their opinion what is their ideal stimulus package,you will have a 1,000 different answers. So everyone's is a littledifferent.

I think that he has done a great job. And I think Californiabenefits tremendously from that $80 billion that is tax benefits thereof around $35 billion. There's other advantages, $45 billion ofmonies that go to transportation, to education, to health care, andall those different areas.

And there's even some money in there that could benefit our --our revenues or, I should say, our budget itself. We have a triggerlanguage built in there so that, if some money comes to that, then wewill reduce the cuts and we will increase the spending.

STEPHANOPOULOS: But Governor -- Governor Sanford and GovernorJindal and several other Republican governors are not only against thestimulus package in principle, because it's going to add to our debt,they say that some of the specific provisions, like some of theunemployment provisions, are going to guarantee -- make tax increasesnecessary in their states in future years. Is that what's going tohappen in California?

SCHWARZENEGGER: Well, no, I don't see it this way. I see only abenefit to the state of California. That President Obama is going toeventually do a tax increase on the wealthier people, I think thatwriting is on the wall. I think he has talked about that during hiscampaign.

STEPHANOPOULOS: It's in the budget now.

SCHWARZENEGGER: And I don't like that, of course, but, I mean, Iunderstand that he is to do what he thinks is best for the -- for thecountry, as much as I had to make decision what is best for the stateof California. So I think there are certain things that areinevitable, especially when you have a crisis like this.

STEPHANOPOULOS: So when you see Governor Sanford, when you seethe Republican leadership here in Capitol Hill absolutely opposed tothis, are they being unrealistic?

SCHWARZENEGGER: No, I think that people have different opinions.I mean, I think that Governor Sanford is a very, very smart guy, buthe has a different way of looking at that. And a lot of my colleagueslook at this differently.

I look at it in a more optimistic way, and I feel very stronglythat I think that President Obama right now needs team players. He --this is why we're here in Washington right now. We have, you know,more than 40 governors coming together here in Washington, and ouridea is to get together with the White House, with thisadministration, and to work together, to have Congress, the WhiteHouse, and the governors, and everyone work together, because it's avery difficult time now, where we have to play together, rather thanusing politics and always attacking everything...


STEPHANOPOULOS: You know, Senator Arlen Specter of Pennsylvaniaagrees with you. And he was one of the Republicans who voted for thepresident's package. And he says that the rest of the party risksbecoming the party of Herbert Hoover. Are you worried about that?

SCHWARZENEGGER: Well, you know, people always, you know, saythat the Republicans are always the party of no and, you know,attacking the Democrats. You know, I don't think that the RepublicanParty is any different than the Democratic Party. I think thatpolitics -- the horrible thing about politics is that, the more theyattack each other, the more that they try to derail each other, theworse it is for the people. That's why...

STEPHANOPOULOS: But these are real differences of principle.

SCHWARZENEGGER: I know, but that's why I said, you know, you'vegot to go beyond just the principles. You've got to go and say, "Whatis right for the country right now?" I mean, I see that as kind oflike, you go to a doctor, the doctor's office, and say, "Look, can youexamine me?" The doctor says, "You have cancer."

What you want to do at that point is you want to see this team ofdoctors around you, have their act together, be very clear, and say,"This is what we need to do," rather than see a bunch of doctorsfighting in front of you and arguing about the treatment. I mean,that is the worse thing. It creates insecurity in the patient.

The same is with the people in America. That creates insecuritywhen you have those two parties always arguing and attacking eachother, rather than coming together and saying to the American people,"Here's the recipe. This is going to be tough, but this is what weneed to do for the next two years. And we both believe in that."That will bring calmness to the market and stability to the market.

STEPHANOPOULOS: So you think Republican leaders in Washingtonshould be cooperating more with President Obama?

SCHWARZENEGGER: I think that, if they -- they should make aneffort to work together and to find what is best for the people,because by derailing everything, it's not going to help anybody, andit creates instability and insecurity.

And I think, also, the Obama administration -- I mean, as youknow, the president is very clear when -- in his message. And he's avery great speaker and articulates really well. But there's peoplearound him that they -- they also have to have that same clarity whenthey go out there, and make people feel at ease and that they havetheir act together.

And I think that, all together, we can really bring this countryback, because I tell you, no matter where you look, this is still byfar the best country in the world. There is no one that can come evenclose to us.

STEPHANOPOULOS: Yet California has one of the worst foreclosurecrises in the country right now. President Obama laid out his plan todeal with that this week. And a lot of critics said that this is, youknow, creating a moral hazard, it's bailing out people when those whowere responsible with their mortgage, they're getting no governmenthelp.

SCHWARZENEGGER: Well, you know, there is people that are failingwith their mortgages because they have been laid off, they've losttheir jobs. There's others that they signed up to a deal where theydidn't know there will be this bump in the interest rate and all this.

What we have in -- in California is we have sat down with thelenders and we have worked out a voluntary agreement with them to goand do modifications, loan modifications, where we had them reduce theinterest rate or where we amortized the -- the loans out further,another extra 10 years.

And so I think that's what the -- the federal government -- as amatter of fact, Sheila Bair has recommended that already more than ayear ago, and she has been terrific with that housing crisis.

So I think that everyone is making the effort, but things change,also, all the time. Right now, for instance, the big thing is that weknow that in -- in commercial real estate, there will be a shoedropping very soon, because I think all of those companies that arenow, you know, having financial trouble or getting bankrupt, they willnot be able to make their payments, the lease payments and so on, andthey will pull out. And all of a sudden, you have a real estatebuilding with only half of the places rented.

STEPHANOPOULOS: But on this question of fairness, what do yousay to the homeowner who didn't buy too much house, who took an extrajob to make sure they -- they made their mortgage payments, and theysee their next-door neighbor getting bailed out?

SCHWARZENEGGER: Well, first of all, every situation isdifferent, as you know, that maybe have a job, you can still affordyour house. Maybe your neighbor has just lost their job. Isn't itnice when you, for instance, work something out with the bank, wherethe bank says, "Look, while you're in this situation, we're going tostop you from having to pay. I mean, we understand that you cannotmake the payment. We don't want to throw you out of the house. Forthe next six months, we will not charge you for your -- for yourmortgage payment"?

So I think that people just need a little bit of help. What doesthe bank do when they get stuck with a house that is 40 percent -- has40 percent less value? I mean, that has been a huge problem in thiscountry in general, because eventually they think that the banks haveto -- and the lending institutions have to figure out what to do withthat asset. You know, should it be written off, those trillions ofdollars of assets?

STEPHANOPOULOS: You've talked often about how you first came tothe United States in part because of your hatred of socialism, of thewhole socialist system. So I wonder, when you look at governmentcoming in, taking over mortgage companies, taking over insurancecompanies, the prospect now of nationalization of banks, is thatsomething you now see as necessary?

SCHWARZENEGGER: Well, I -- first of all, I think that we have areally good system here in America. You don't have to talk aboutnationalization. All it basically says is that if a bank doesn't havethe money to -- to give their customers, so if it, you know, defaultsin some way, that the federal government comes in, because it securesthose moneys.

SCHWARZENEGGER: And so they come in, and they help out, thatthey go with the bank, because they cannot make the payments anymore,and -- and to business. So the federal government always had thatright to take over. So it's not nationalizing anything. I don't seeit as such. There's a difference of the way it is in Europe, wherethe -- where the federal government owns some of those banks, whereashere only if there is a problem financially that the federalgovernment comes in and takes over and helps out.

STEPHANOPOULOS: Well, and we're seeing that now...

SCHWARZENEGGER: And that's a huge service to the people ofAmerica, to have that security to know that, no matter what happens,the federal government will step in and will get your money.

STEPHANOPOULOS: But then the question is, these -- these capitalinfusions from the federal government may give them essentiallymajority stake in some of the biggest banks in the country. Is thatsomething you're prepared to accept?

SCHWARZENEGGER: Well, with some banks, that's maybe necessary.I think the most important thing is, how do we create stability inthis country? And I think this is why it is very important that theadministration has a very clear message and not change it.

I think that what America has really gone through, a hugechallenge just this last year, because we have had a differentadministration. They have a different way of thinking. No -- no onehere is right or wrong, but a different way of thinking.

Then, in the middle of this crisis, you had a change ofadministration. Now this administration is in for a month. You can'texpect them all of a sudden to have all the answers and all of thosethings. They need still time to warm up and to get going.

And he has some -- Obama has some terrific people there in thoseleadership positions. And so I have total confidence in them.

STEPHANOPOULOS: You've had a lot of praise for the president andhis team and his plans over the last several weeks. And a lot ofRepublicans hear that and say, "Wait a second. You don't agree withus on the stimulus. You're supporting President Obama on energy andthe environment and his budget plans. You don't agree with us onabortion or gay rights. So why are you still a Republican?"

SCHWARZENEGGER: Well, because I still believe in the Republicanprinciples, but remember one thing, that it doesn't really matter ifyou're a Republican or Democrat. I think that so many people getcaught up with this whole thing.

We are elected to be public servants. So what does it matter ifyou're a Democrat or a Republican? When people need to have roadsbuilt, when we talk about infrastructure in America, we need $1.7trillion to $2 trillion of infrastructure in America. Who cares ifyou're a Republican or Democrat? Everyone is using the roads.Everyone would use high-speed rail. Everyone uses the infrastructureand all of those things, the schools, the kids.

It doesn't matter. We should go beyond all this. Is it aRepublican idea or is it a Democratic idea? Which philosophy does itfall under? It doesn't matter.

STEPHANOPOULOS: You're trying...

SCHWARZENEGGER: We've got to rebuild America. And we've got tohelp people, be public servants, not party servants.

STEPHANOPOULOS: You're trying to further that by having thissystem of open primaries...


STEPHANOPOULOS: ... in California. Whoever -- everyone runs,the top two finishers, whatever party they come from, they're on theballot in the general election. You seem to have unified both partieswith that idea, the Republican Party leadership, Democratic Partyleadership both against it. Do you really think it can make adifference?

SCHWARZENEGGER: It will make a huge difference. And rememberone thing: It's always great when the Democratic Party and theRepublican Party is against something, because that means it's goodfor the people. That is the bottom line.

Open primaries is good for the people because then people don'thave to make decision and say things to appeal with their party sothey can win the primary and then, all of a sudden, they have to cometo the middle. So to say something totally different that is onecampaign and, later on, they have to campaign for the overall to -- to-- to win the election.

So I think it's horrible to have to move around. Let's open upthe primaries, no different than when you have a mayoral race. Likein Los Angeles right now, Villaraigosa -- there's an open primary.There's an open election, where you have the first two -- the two topcandidates then have a run-off election. That's the way to do it. Itdoesn't matter which party it is.

If the people choose one, if they're Democrat, then so be it. Ifthey choose the Republican, if they choose a Democrat and aRepublican, and they have them go for the run-off election, that's theway it ought to be. STEPHANOPOULOS: Yet you still call yourself a Republican. Andyou're here with a lot of your fellow Republican governors this week.And I wonder what you think the prescription is for the RepublicanParty to go now from minority status to get the majorities back in theHouse and the Senate, to get the White House back.

SCHWARZENEGGER: It's very simple. Listen to the people. Thebest thing you can do, no matter what party you're in, listen to thepeople. In California, we know that 64 percent of the people havesaid that we should solve this budget crisis, the $42 billion deficit,with tax increases and with spending cuts. So what I have done iswhat the majority of Californians want to do.

The Republican there were not in touch with of what the majorityof people want to do in California. And the same is nationwide.You've got to listen to the people. If the nation is screaming outloud, "We need health care reform. We want to have universal healthcare. We want to have everyone insured. We want to bring the costsdown. We want everyone to have access." I mean, that's what theywant; that's what you do.

STEPHANOPOULOS: Even if it requires tax increases?

SCHWARZENEGGER: Even -- if -- no, even though it maybe isagainst your principles or philosophy, you still have to go, becausethat's what the people want you to do. And the same is in California.So I will go again after health care reform. I will be going after,you know, education reform, which, of course, we've got some good one,because of the categoricals dropped by $6 billion, our categoricals,so more money goes into the classroom now.

So you've got to do what the people want you to do rather thangetting stuck in your ideology.

STEPHANOPOULOS: There was also a report on the Web site TMZ thisweek about your own future. It said you might be taking a bit part inSly Stallone's movie. Then you came back the next day and said, no,I've got to get through the budget crisis first. You're through thebudget crisis now. Are you going to do it?

SCHWARZENEGGER: Well, no. As you know, since I've becomegovernor, I've done three cameos when friends asked me. And Sly askedme if I would do a cameo. I said, "Of course I'll help you and do acameo. There's no two ways about that."

But it had nothing to do with the budget crisis or with thebudget negotiations, because that will be done some times in April,May or June. I have no idea.

STEPHANOPOULOS: OK. So you still might do it?

SCHWARZENEGGER: Oh, yes, no, absolutely. I enjoy him. He's aterrific director and writer and a great actor. And we hang out a lotof times together.

STEPHANOPOULOS: How about after 2010? You're term-limited. Doyou run for Senate or do you go back to the movies?

SCHWARZENEGGER: I have no idea. You know, I'm not thinking nowabout what I'm going to do, because remember one thing: As soon as Istepped into this political arena, when I became governor, it was notabout "me." It was about "we." We turned that "me" upside-down. Itwas about "we."

I mean, it's all about California. It's all about the people. Ihave been very successful in creating some of the reforms that weneeded. If it is worker's comp reform, if it is rebuilding Californiaand their infrastructure, if it is the open primary, if it is theredistricting that we won just last November, I'm a reformist. I wantto go in there and reform and fix what is broken in California. And Iwill be relentless with that, and I never, ever give up.

STEPHANOPOULOS: We're out of time. What's your Oscar picktonight?

SCHWARZENEGGER: I really don't know. I mean, I think that "TheReader" to me was one of the best movies, you know, one of the bestmovies that I've ever seen. I think that movie has a great shot.And, of course, "The Wrestler," my buddy, you know...


SCHWARZENEGGER: ... Mickey Rourke is a terrific actor. I wishthat he will be successful and do as well tonight. So there are somereally good movies...


STEPHANOPOULOS: And we asked all of our viewers for theirfavorite political movie. Yours?

SCHWARZENEGGER: I think "The Reader."

STEPHANOPOULOS: "The Reader." Oh, political movies.

SCHWARZENEGGER: You mean all-time?


SCHWARZENEGGER: Oh, political movie. "The Candidate," maybe, Ithink, is -- is one of those great movies.

STEPHANOPOULOS: Governor Schwarzenegger, thanks very much.

SCHWARZENEGGER: Thank you very much. Thank you.

STEPHANOPOULOS: So "The Candidate" from Arnold Schwarzenegger.All of you picked "All the President's Men."

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