The Golden State Meets the Iron Lady

The Los Angeles Times reports that Governor Schwarzenegger has released his proposed plan to deal with California’s steep budget deficit. The plan, the Times ominously reports, “proposes tax hikes” and “steep cuts” as a harsh bit of medicine for the profligacy that put California in the place it is today.

The more one reads of the plan, the harsher it seems, as Schwarzenegger apparently plans to increase sales-taxes, tax alcoholic beverages more harshly, charge higher vehicle registration fees and charge a new “severance” tax for oil companies. And that’s just the taxation side of things. Along with this harsh bit of anti-growth behavior, Schwarzenegger is also proposing to cut back the offerings from state universities and community colleges, as well as slashing funds for healthcare programs and welfare for the poor, elderly and disabled.

As budget plans go, this one would send shivers up the spine of most Americans, regardless of political affiliation. Unfortunately, given that its purpose is to extricate California from a budget crisis, it is also the only way to go. The message it sends is loud and clear – if you want to pass countless humanitarian spending projects you can’t afford, be prepared to pay dearly out of your own pockets while simultaneously watching those projects shrivel up and die. Reality can be cold and cruel, and this budget certainly intends to play along. To that end, while Schwarzenegger’s plan may sound like something fresh from the brain of Ebenezer Scrooge or Snidely Whiplash to most Californians, to this author it is reminiscent of nothing so much as the plans of one much more admirable public eminence: Margaret Thatcher.

When Thatcher took office in 1979, she faced a similar problem to the one Schwarzenegger faces – a budget out of control, a state dominated by special interests and a dropping confidence in the currency. Her remedy was pure brimstone and treacle – raise taxes, raise interest rates and shred the excess revenue to cut inflation. It was nothing less than economic chemotherapy of only the variety that someone with the nickname Maggie Milk-Snatcher could have pulled off – cold, callous and viciously utilitarian.

It also worked. Thatcher resurrected Britain from its status as the “sick man of Europe” and sent the former Empire careening back to its days as a world power. Thatcher’s legacy influenced the rise of contemporary politicians like Tony Blair and effectively decimated the stain of socialism on Britain.

Now, the key question is, can this sort of harsh medicine work in America? The answer is not clear. Schwarzenegger may be channeling Lady Thatcher, but his home state is nowhere near as reliably pro-conservative as Britain was during her time. Moreover, the economic recovery of Britain took Thatcher 11 years to mastermind, and Schwarzenegger only has two years left to make his mark. California’s economy is also much larger and more diverse than Britain’s, and not nearly so much is nationalized, which means that deregulation rather than outright privatization will be the order of the day. However, the first thing Schwarzenegger must do in order to carry off a Thatcher-esque recovery is to keep his own government solvent, and he is doing that with this budget.

Naturally, one hopes it will be adopted, and because of Schwarzenegger’s reputation and his built-up political capital, it probably stands a strong chance of being adopted. In a previous article, I may have dismissed Schwarzenegger as a gutless Jimmy Carter imitation, but now it seems I may have to ingest my own words, for this budget shows that Schwarzenegger may never have been the gutless sell-out that so many of us who hankered after decisive leadership could occasionally see him as.

Rather, much like the budget he has introduced, Schwarzenegger seems to have been saving his proverbial pennies – accumulating political capital piece by piece, waiting for his opportunity to decisively change California’s government. He now has his opportunity.

So like Margaret Thatcher, let’s hope Arnold strikes while the iron is hot. Then perhaps the Governator can enter the pantheon alongside the Iron Lady.