'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?