From the WSJ Opinion Archives
Unhappy Days
Has Arnold Schwarzenegger jumped the shark?
When politicians break their pledges not to raise taxes, they come up with the darnedest evasions. Take Gov. Arnold Schwarzenegger, who wants to levy new charges on California doctors, hospitals and employers to help pay for his $12 billion health-care plan. "It is not a tax, just a loan, because it does not go for general [expenditures]," he told the Sacramento Bee last Thursday. "It goes back to health care."
A loan? The first reaction of many Californians was: What state office will I be able to go to and get my loan back--perhaps with interest? It's preposterous, for example, to characterize as a "loan" the 4% payroll levy the governor wants to impose on employers who don't offer health benefits. California's gas taxes are dedicated to transportation but no one would call them "gas loans." Property taxes go to local education. Are they not taxes?
The over-the-top absurdity of the Schwarzenegger statement led Rush Limbaugh into fits of laughter last Friday "Bill Clinton calling [tax increases] 'investments' was bad enough," Mr. Limbaugh says. Bruce Bartlett, a free-market economist and harsh critic of the Bush administration, thought he'd heard all the euphemisms for a tax hike ("revenue enhancements" and "solidarity payments" are classics), but he allows that "calling one a 'loan' is new."
State legislators were buzzing last week about the governor's doublespeak. One quipped that the governor was using the "loan gambit" because his previous descriptions of the charges he's promoting--"coverage dividends" and "in-lieu fees"--weren't flying. GOP Assembly leader Mike Villines says the governor is in a political box because California 's constitution requires a two-thirds vote of both houses to pass a tax increase. The Democratic Legislature couldn't muster that level of support when it passed a similar employer mandate in 2003, only to have voters repeal their handiwork the next year. That's why both the governor and Democratic leaders insist the new mandate only needs a majority vote. "I'm sure Arnold has been advised that if he uses the 'T word,' he will provide legal fodder for those challenging the plan in court on grounds it doesn't meet the two-thirds test," says one health-care analyst.
All this, sadly, has led the governor into bizarre defenses about why he's not breaking his ironclad promise from last year's campaign not to raise taxes. Last year, he savaged Phil Angelides, his Democratic opponent, for proposing what he called a "job-killing health-care tax." In a memorable debate moment, the governor taunted Mr. Angelides: "I can tell by the joy in your eyes when you talk about taxes, you just love to increase taxes. Look out there right now and just say, 'I love increasing your taxes.' "
Yet whereas Mr. Angelides's plan would have spent $7 billion to require employers with more than 200 workers to provide health benefits, Gov. Schwarzenegger's new plan calls on employers with 10 or more workers to provide coverage or pay into a state fund, and would represent the second largest tax increase in California 's history. "The governor ended up dreaming up more taxes than ever popped in my head," a bemused Mr. Angelides told reporters this month.
So how does the governor explain away the difference between what he said last year and what he's doing now? He doesn't want to talk about it. He told the Bee last week it would be "a waste of space" for reporters to raise questions about his campaign promises. "It doesn't go anywhere," he said. "You write about the things that can move the agenda forward rather than moving it back. . . . It is irrelevant now if you talk about what he proposed."
But is it? Gov. Schwarzenegger won landslide re-election last November in part because his opposition to new taxes convinced 93% of Republicans to back him. Even after the election, he was singing from his no-tax songbook. He told NBC's "Meet the Press" he would "never raise taxes; it wouldn't happen."
On Nov. 13, the San Jose Mercury-News quoted Schwarzenegger spokesman Adam Mendelsohn: "The governor made no new taxes a centerpiece of his re-election." The paper reported that Mr. Mendelsohn "insisted that the no-tax pledge isn't open to negotiation." But it was, just as soon as the governor sat down to negotiate with himself.
So what happened? One Sacramento wag notes that the free-market economist Milton Friedman, whom the governor described in a 2004 interview with Daniel Weintraub as "my mentor, and the king," died just three days after the Mercury-News article. "The coincidence is just that, but it's worth noting things really changed after that," says a friend of the governor's. Even former congressman Tom Campbell, a moderate Republican who served as Mr. Schwarzenegger's finance director for a year, is nonplussed. "God rest his soul, but would Milton Friedman have been putting forward mandates for health care?" he told the San Francisco Chronicle.
The linguistic tricks the governor is now using to sell his tax increase are reminiscent of Assembly Speaker Fabian Nunez, a Democrat famous for advocating "flexibility." Last year, the speaker worried that Gov. Schwarzenegger might feel hemmed in by his antitax promises and thus be unable to meet the needs of state government. "You never draw a line in the sand," Mr. Nunez said. "Certainly if you do it during the campaign, when it's time to govern, put that aside."
This month, as Mr. Schwarzeneger gave his State of the State speech outlining his ambitious spending agenda and proclaiming an era of "postpartisanship," the Sacramento Bee reported that Speaker Nunez . "looked giddy." He even reached out and grabbed the hands of a less enthusiastic Mr. Villines, the GOP Assembly leader, and began "clapping them together to applaud."
Many health-care analysts worry that Mr. Schwarzenegger's Rube Goldberg scheme of insurance mandates will create so many failures and frustrations that adoption of a single-payer government system will be inevitable. The governor insists that's nonsense. He claims he will rescue Californians from crushing health-care costs and insure millions who now lack coverage (including, he concedes, many illegal aliens). He promotes his plan as a way to end what he calls a "hidden tax" that the currently insured pay to cover the medical costs of the uninsured. He believes that the doctors, hospitals and employers he is asking to pony up are "all going to benefit and they're going to make more money because of it, because hospitals are not going to have all the uninsured people there." What'll he do next, claim that the "loan" he is asking for is actually a "tax cut"?
But the truth is that free-riders in emergency rooms aren't a major driver of health care costs. Studies show they account for less than 3% of overall health-care spending. Far more consequential is the expense of the 49 mandates California insists all health insurance policies cover, ranging from chiropractic and mental health care to treatment for alcoholism and infertility. The governor's plan does almost nothing to reduce the burden of those mandates or to allow consumers to buy insurance on the Internet from other less expensive states the way they now do with car insurance.
It's not wise to bet against someone as tenacious as Mr. Schwarzenegger. He has already had one miraculous political recovery, after voters defeated his "reform agenda" in 2005. But he should be careful. Since he lacks a firm ideological base in the electorate, much of his support flows out of his perceived strength of character. When he cratered in the polls in 2005, it was after relentless charges that he had broken his word to support more education funding. Should he reach a point where his about-face on taxes becomes a serious issue, he may find the political floor he's standing on falling precipitously. Or, as they say in Hollywood, the health-care plan may prove to be the moment Mr. Schwarzenegger jumped the shark.
