FTN - 10/12/03

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BOB SCHIEFFER, Chief Washington Correspondent: Today on Face The Nation, the Arnold election.

Will recall fever spread? Last week, former bodybuilding Arnold Schwarzenegger was elected governor of California in a recall election. How can he fix the state's fiscal problems without raising taxes and should President Bush and the rest of us bail out California? What does this election mean for the Republican Party? Those are the questions for the governor's transition chief, Congressman David Dreier, John Burton, the Democratic leader of the California Senate and Leon Panetta, the former White House chief of staff.

We'll also talk about it with David Brooks of "The New York Times" and Dan Balz of "The Washington Post."

Finally, did California get too much coverage? I'll have a final word on that.

But, first, the Arnold election on Face The Nation.

ANNOUNCER: Face The Nation with CBS News Chief Washington Correspondent Bob Schieffer. And now from CBS News in Washington, Bob Schieffer.

SCHIEFFER: And good morning again.

Joining us from Los Angeles this morning Congressman Dreier, from San Francisco, the Democratic leader of the state Senate John Burton, and with us in Monterey, Leon Panetta.

I want to start with you, Congressman Dreier because you're heading up Arnold Schwarzenegger's transition team. He said throughout the campaign that he would not raise taxes. In fact, he promises to repeal the car tax. Is that an airtight promise?

REP. DAVID DREIER, R-CA, Chairman, Schwarzenegger Transition Team: Well, he's very committed to that goal, and he talked about it consistently throughout the campaign. In fact, that's one of the reasons, the tripling of the car tax, that I believe Gray Davis was recalled.

What we really need to do is focus on economic growth and one of the things that I've argued about Arnold Schwarzenegger -- and by the way, we were very pleased to spend time with John Burton on Thursday night up in Sacramento and he looks forward to working together with him to deal with these challenges -- is that Arnold will be able to, through his personal skills, I believe, draw the kind of investment to California that is going to be essential to getting the economy growing and creating jobs and thereby getting the revenues that...

SCHIEFFER: So -- but...

DREIER: ...are important to help us avoid the increase in taxes.

SCHIEFFER: But you're saying here that -- that is a hard and fast promise, that he is not going to raise taxes period...

DREIER: Well...

SCHIEFFER: ...paragraph.

DREIER: ...Bob, you followed the campaign and you know that that's something that he stands by and, obviously, increasing taxes during an economic slowdown is very poor economic policy. And economists across the board recognize that. It's not going to be easy, and he's going to have to work closely with John Burton and his counterpart Jim Brulte, Tom McClintock and others in the state Senate as well as those in the Assembly to make sure that this happens. I think that Californians, Democrats...

SCHIEFFER: Well...

DREIER: ...Republicans and Independents very much want these groups to come together, and I think John knows that well.

SCHIEFFER: All right. Well, let me ask you about this part then. If that's the case, if he's not going to raise taxes to pay California's bills, how he is going to come to Washington and ask for a federal bailout? Because we keep hearing that that's one of the things he might do. And how could anyone in the Congress possibly vote for something like that when he's not willing to do California's part? I mean, these are California's bills.

DREIER: Well, Bob...

SCHIEFFER: How do you ask for a federal bailout?

DREIER: Yeah. Well, Bob, I mean, I don't know about asking for a federal bailout. I do know that on Thursday -- on Wednesday and Thursday of this week President Bush is going to be in California, in Fresno and in Riverside. And in Riverside the plan is for Governor-elect Schwarzenegger to meet with President Bush. And obviously California is the largest, most-important state in the Union. Leon and John certainly understand that very well. An extraordinary economic power and very important for the future of the United States of America and the world because of the trade component that comes into play here. And so everyone in Washington obviously understands that, but I don't think that a federal bailout is on the horizon here. I think that John Burton can work very, very well with Governor Schwarzenegger.

SCHIEFFER: OK.

DREIER: And they seemed to hit it off really well when we got together Thursday night in Sacramento.

SCHIEFFER: Well, let's see how well they hit it off right now. Senator Burton, do you think that Arnold Schwarzenegger can keep spending at the current levels on education? He says he's not going to -- he's not going to cut there, and then repeal the car tax. Is there that much waste, fraud and abuse, as Ronald Reagan used to call it, in the California budget to make all this come out right at the end of the day?

JOHN BURTON, Democratic Leader, California State Senate: Well, actually we put a line item in the state budget years ago when Ronald Reagan was governor and it was a waste, fraud and abuse line item. And every year we keep eliminating a lot of money in the name of waste, fraud and abuse, whatever that might be. It's going to be a very difficult, if not impossible, task for Mr. Schwarzenegger. We just have to see.

My concern and one of the things that I will not do is allow this budget to be balanced on the back of the aged, the blind, the disabled and...

DREIER: And he agrees with you on that, John.

BURTON: ...single poor women with children.

DREIER: You know he agrees with you on that.

BURTON: OK. Well -- no, that's OK. I mean, I'm not saying he Doesn't agree. I'm just saying it's going to be tough. I think his plan to repeal the VLF is going to take $4 billion out of local government that he's going to have to...

SCHIEFFER: What's the VLF?

DREIER: The car tax.

SCHIEFFER: OK.

DREIER: That car tax.

BURTON: Well, it's the vehicle license fee is the proper name.

SCHIEFFER: I see.

DREIER: Yeah.

BURTON: Car tax is the political name. But he's going to have to deal with local government, with cops and sheriffs and firefighters on that. And I think his plan to get $1.5 billion to $2 billion out of the Indian tribes is going to be very difficult because under federal law we cannot tax them. So that's something that has to be mutually agreed upon and negotiated. And I think -- and I'm not being critical -- but a big part of the governor-elect's TV commercials were aimed at the Indian tribes. So I don't know if they're going to feel in a mood to be cooperative. I certainly hope they will step up to the plate, but that really is a total matter of negotiation.

SCHIEFFER: Senator, are you going to be for repealing the car tax?

BURTON: That's up to -- I don't think -- I mean, my local -- I have 13 cities, several special districts, three counties. And I'd get shot by either the sheriffs, the police chiefs or the firefighters, the health professionals and the people who like libraries and after-school programs. So that's a proposal of the governor's, not mine -- governor-elect. And we're going to let him deal with the local government and the local people because it's between the locals and governor-elect.

It will not affect the state budget because we are not going to backfill the money because we don't have it. So, you know, let the locals and the governor-elect deal with each other.

SCHIEFFER: Leon Panetta, how important is all of this to the rest of the country? We gave this an enormous amount of attention. Does what happened in California matter?

LEON PANETTA, Former White House Chief of Staff: Oh, I think it matters a great deal from two perspectives. One, the vote itself reflected that there are a lot of angry and frustrated people who are concerned about the economy, concerned about deficits, concerned about leadership, concerned about gridlock. A lot of those things, very frankly, are what we see in Washington as well. So the anger and frustration that's out here could very well be reflected across the country.

I think the second thing is that, look, California is facing a large structural deficit right now. Eighty percent of our budget here in California is committed either by federal mandates or by initiatives that have been passed. You can't deal with a $10 billion or a $12 billion deficit and not consider both cuts in spending, as well as revenues. That's always been the story in dealing with deficits. It's true for California, and it's true for the federal government.

SCHIEFFER: Well, can he do this without raising taxes?

PANETTA: I can't imagine how you can deal with the structural deficit that we face in California without looking to areas to raise revenues. I mean, even going to the Indians and asking them to pay more, I think, is the equivalent of an additional tax on the Indians. So he's got to admit that. And then if you are going to get rid of the vehicle tax, you're going to have to have local government decide whether they're going to raise fees at the local level in order to make up those funds. I think that's called taxes as well. So, you know, taking the position that somehow no taxes will ever be raised I just think ties one hand behind his back as he's confronting this very difficult issue of a large deficit in California.

DREIER: Bob?

SCHIEFFER: Well, Congressman Dreier, let's go to you next. How do you do this if you don't cut spending in education? Where will the cuts come? Because obviously there are going to have to be some.

DREIER: Well, let me say that one of the things that Tom McClintock pointed out in his campaign is that there's $9,000 per student that goes into the classroom. You take a classroom of 28 students, you're talking about roughly a quarter of a million dollars. Making sure that those dollars actually get to the classroom is a priority. And in fact maybe there could be some streamlining there that actually improves education.

The other thing I want to say is that early on we saw the governor-elect put together his Economic Recovery Council with George Shultz and Warren Buffett and one of the things he said he wanted to do because there have been so many very, very wide-ranging reports from experts to exactly what the ramifications of the state's fiscal crisis is, he called for an independent audit.

And we have now brought in a woman called Donna Arduin who did this in Michigan, New York, and is presently working for Governor Jeb Bush. And he very graciously allowed her to come in to do this audit. And I think that she is going to be making a wide range or recommendations. And she understands that the governor is committed to not increasing taxes but at the same time wants to streamline things. And I know she wants to work closely with Senator Burton and others in Sacramento as well.

SCHIEFFER: Well, let's ask Senator Burton. Where would you think just starting here at the starting place -- where do you think you could cooperate with Governor Schwarzenegger, and where will the big problems come, Senator?

BURTON: Well, I mean, we're going to deal with it issue by issue.

SCHIEFFER: Sure.

BURTON: I've, you know, been around long enough to have worked with and against Governor Reagan, George Deukmejian, Pete Wilson, Gray Davis. We take it issue by issue. But, you know, I think this term of auditing the budget -- I mean, the budget is an open book. The budget, you could go look at it in the library. It acts like it's a secret document, which it isn't. And I think calling it an audit, you know, is a political thing to act like there are secret things hidden in the budget. I mean, reviewing the budget and seeing what to do with the structural thing is one, and again -- and just in response to David, when asked how is he going to do this, don't cut education and avoid taxes, then he talked about reforming the amount of money that's currently spent in education, which I think you can always spend any money you spend better but that doesn't answer how you can do it.

If Arnold Schwarzenegger is able to not cut vital programs, to not raise any taxes, and to put us on a sound footing, as I said, you know, he'll end up getting reelected by acclamation but I wouldn't be holding my breath on that. It's just going to be a tough deal.

SCHIEFFER: OK.

DREIER: We also have to focus on the issue of eco -- John, we also have to focus on the issue of economic growth, and I will tell you, Carly Fiorina, who is the head of Hewlett-Packard, has indicated a willingness to help us do a competitiveness assessment. Because we know that California in a wide range of areas has fallen behind other states and the rest of the world and so looking at ways in which we can improve public policy, working -- Senator Burton and his colleagues, along with Governor Schwarzenegger...

SCHIEFFER: Yeah.

DREIER: ...will be very important in that quest.

SCHIEFFER: Let me just give Leon Panetta the last word here.

BURTON: Well, that'll take a while. Go ahead, Leon.

PANETTA: ...(Unintelligible) Bob. Bob, I...

SCHIEFFER: Let me just ask Leon Panetta here if he thinks it's -- yes, go ahead.

PANETTA: Well, I think what you're hearing is the same old problem. Look, if they're not willing to cut spending and if they're not willing to raise taxes, then they're going to one place and one place only which is to borrow more money and create a huger deficit. Borrowing and spending a larger and larger part of the California budget. And it certainly is a large part of the federal budget. We're now borrowing about $500 billion at the federal level.

So, you know, you've got to make the tough choices. That's what leadership is all about. You know, economic growth is great. But economic growth is not going to happen unless the state shows fiscal discipline. That's the only way they're going to get it.

DREIER: And we want to do that. We want to do that.

SCHIEFFER: All right, I think that's a good place where we have to leave it.

DREIER: Absolutely.

SCHIEFFER: Thanks to all of you. And we'll certainly be keeping up with this story.

DREIER: Good to be with you now.

SCHIEFFER: Thank you.

DREIER: Thanks, Bob.

PANETTA: Thanks, Bob.

SCHIEFFER: When we come back, we're going to talk to a couple of key reporters about California politics and what it could mean for the rest of the country, in a minute.

(COMMERCIAL BREAK)

SCHIEFFER: And with us now, Dan Balz, the crack political reporter for "The Washington Post" and David Brooks, the newest member of the op-ed page at "The New York Times."

Well, you were out in California, Dan, and you probably know more about this than any of us. Are there national implications here?

DAN BALZ, "The Washington Post": I don't think we know for sure yet, Bob, but I think Leon Panetta was right that the discontent that was evident in California could ripple farther, depending on what the state of the economy is as we go into the next year and the presidential campaign. Obviously, there's something stirring out there. I mean, we've seen some discontent in a variety of ways. California made it easier to manifest itself than other places, but it could ripple.

SCHIEFFER: I really think that the economy, the impact on the economy and what happens in California is probably more significant than what happens on the political scene. But we'll wait and see. What do you think, David?

DAVID BROOKS, "The New York Times": Yeah. I don't think it'll have much political impact.

I think Bush will win France before he wins California. It's just not a state he's going to carry very well.

I think the important thing about the election was that these scandals about the women and Arnold Schwarzenegger came out; had absolutely no effect. And to me, that leads me to think that for 30 years we've tried to destroy people through scandal. There was Bill Clinton, or Clarence Thomas before him. I think voters are beginning to say, `Enough is enough.' They're tired of the whole machinery of that. And I think they're going to give the benefit of the doubt to politicians who come out and say, `I made a mistake. Here are my plans. Let's move on.' So that's an important sea change, I think.

SCHIEFFER: It is, and it may go beyond just scandals, because I know when Howard Dean was questioned closely and we had him on this broadcast and talked to him about changing positions -- it did not seem to impact with the people who were for him. In cases I think it may have helped him.

BALZ: And certainly among the people who are passionate for Howard Dean, I think that's the case. I think what we're not clear yet, though -- you know, I'm not sure that we're through the politics of, you know, personal destruction.

Whatever happened in California, I think we will continue to see more of that, because I think the parties and a lot of the practitioners -- it's the only way they know how to play the game. And the more voters don't reward that, probably, the better, but I'm not sure...

BROOKS: Yeah.

BALZ: ...that we're through with it.

BROOKS: Though there are three impulses in the country; one is the liberal impulse, which Dean represents; the conservative impulse -- impulse Bush represents; but then there's an anti-political impulse that Schwarzenegger, Perot, McCain all tapped into.

It seems to me you've got to have one and the anti-political, and that's what we saw in California. And a lot of voters took a look at the reporters, a look at us, the consultants, all as part of this political problem. And if we unveil a scandal, it seems me a lot more of them every year are saying, `No, I'm not interested in that stuff.'

BALZ: I think the other point about, though, California, is that this really was about Gray Davis much more than it was about Arnold Schwarzenegger and his past. And Gray Davis was in so much worse shape, certainly, than most politicians, even governors who were in similarly tough positions, that in the end, when people went into that voting -- you know, those polling places, that was what was on their mind. They wanted to get rid of him for a lot of reasons.

SCHIEFFER: You see, that's what I think is the important part, and that's why I'm not sure it's going to have that much impact in other places, because other states don't have an Arnold Schwarzenegger. You don't have the kind -- and you don't seem to find a governor in the other states who has just been recently elected that had such low approval records.

BROOKS: You don't think Jackie Chan's running for governor of Pennsylvania? Is that what you're...

SCHIEFFER: So I'm not sure that this is going to have the political ripple effect that other people -- I think it'll have an effect, but I'm not sure that's the significant part. I want to ask you -- you just heard Dreier. You just heard Senator Burton there, talking about the job that Arnold Schwarzenegger now has to do. Do you really think, realistically, that he can do what he's going to say -- what he promised to do, Dan?

BALZ: I don't see how he's going to be able to do it without going after some revenue. And obviously, as you know, as was evident there, he is going after some revenue with the Indian tribes.

SCHIEFFER: What does that mean? I kept hearing him talk about that. What...

BALZ: This is...

SCHIEFFER: ...what's he trying to get from the Indian tribes.

BALZ: The Indian tribes who have casinos are essentially not taxed in California and...

SCHIEFFER: But it's on a federal reservation. So how do you tax them?

BALZ: Well, their belief is that in some states, states have been able to work something out with Indian tribes in order to get some revenue for the ability to run the casinos and he wants to do something similar to that. He may be able to get some money out of that.

SCHIEFFER: I mean, what do you do...

BALZ: That's probably not a...

SCHIEFFER: ...put up a toll gate at the reservation and...

BALZ: You work out an arrangement that -- I mean, one of the things he's talked about, I believe, is he would allow expansion if they were prepared to pay more in -- pay some in revenue, so...

SCHIEFFER: What do you think, David?

BROOKS: I think it's going to be tough. I think the Democrats really are interested in working with -- at least some of the Democrats -- but when it comes time to cut the budget, there are going to be librarians, there are going to be cops. All the normal interest groups are just going to be screaming. And for Democrats, the temptation to go into harsh opposition is going to be immense, and I think that's what he's going to have to face.

SCHIEFFER: One of the things that was going on that didn't get much attention while the California deal was going on was this race amongst the Democrats for the Democratic nomination. How's that shaping down right now?

BALZ: Well, the interesting thing is they had a debate in Phoenix on Thursday night -- a couple of days after the election, and what was the dynamic there was that General Clark, who has jumped to the top of the -- some of the national polls -- got jumped on by all his opponents. I mean, this is a race in which if somebody's head goes a little bit higher than anybody else, they get jumped.

First, it was Governor Dean, and now it's Wes Clark. He's got a number of things that he's trying to explain. One is: Is he a real Democrat? And when did he become a Democrat? And if he's a real Democrat, why was he saying nice things about Republicans in 2001?

And the second, and I think more important issue is: What was his real position on the war in Iraq? He's come in as an opponent to the war in Iraq, but he said some things before that that he would have supported or probably would have voted for that resolution a year ago. And the other candidates are going to pin him down on that, and until he can find a crisp and effective answer, he's going to have some trouble.

SCHIEFFER: Are you now or have you ever been a Republican (unintelligible)?

BROOKS: Yeah, he went to a Republican fund-raiser in 2001, and his claim now is, `I went, but I didn't inhale. You know, I was fine. I was always a Democrat, not terribly plausible. I'm not sure it'll hurt him, though. The whole reason for his candidacy is, `I can be elected.' And if
Democrats need a Republican to beat a Republican, I think they'll go for it.

SCHIEFFER: You know, a friend of mine in New York told me, and I have no way to back this up or verify it with another source, that Bill Clinton is telling close friends in New York that if things break just right, that if nobody breaks out of the--out of the pack amongst the Democrats, that, indeed, Hillary Clinton might run this time. Now I'm not sure I believe that. I certainly don't -- have no way of proving that. Do you think there's a chance that -- David, that she'll get into this race?

BROOKS: No, I really don't. I think I believe her absolutely. I do not see how things are will break out, though.

We -- I mean, Clark's strength is national in national polls, but we don't vote nationally. And I have trouble seeing the path he gets to the nomination through Iowa, New Hampshire, South Carolina.

BALZ: Yeah, I agree with that. I'd be very, very surprised that -- if Hillary Clinton got in. I just don't see it this time. She's been very clear about it, and I think she's been so clear so recently that it would -- you know, it would be hypocritical at this point for her to do it.

David's right about General Clark. I mean, it's a little bit like Senator Lieberman. Senator Lieberman has done well in the national polls, but his route to the nomination is also, you know, geographically challenged in a sense. And so I think that's the problem they're both facing.

SCHIEFFER: Who's ahead right now in the Iowa caucus 'cause that's the first one?

BALZ: It's either Dean or Gephardt or either -- I would say they're roughly in a dead heat, and, you know, it's -- I think a lot of people have always underestimated Gephardt. He's steady, he's solid and in Iowa, he's -- you know, he's a force. And Howard Dean would obviously like to try to get by him in Iowa, but that's going to be a real battle.

SCHIEFFER: If Dean should win Iowa, is that it for Gephardt?

BALZ: It's hard to say. It's over, but I think even his people know that if he loses there, it's going to be hard for him to recover in New Hampshire and elsewhere.

SCHIEFFER: And then you come down to Dean and Kerry, I guess...

BROOKS: In New Hampshire...

SCHIEFFER: ...in New Hampshire.

BROOKS: ...and say it's...

SCHIEFFER: What if Dean beats Kerry in New Hampshire, what happens to Kerry?

BROOKS: Well, I think he'd be probably mortally wounded, but then they go to South Carolina and there'd be Dean with the left wing of the Democratic Party and a whole bunch of people still left with the rights. Suddenly, Edwards, South Carolina, Joe Lieberman, South Carolina, and Wes Clark, South Carolina. You've got these three guys splitting what is essentially the centrist vote.

It seems to me Howard Dean can beat them there, and at that point, I think Dean is unstoppable if he wins those three.

SCHIEFFER: All right. Very interesting. Thanks, guys.

I'll be back with a final word about California in just a minute.

(COMMERCIAL BREAK)

SCHIEFFER: Finally today, Jim Baker ran campaigns for Ronald Reagan and the first George Bush, and he didn't like debates much because he said they froze the campaign for two weeks. The week before nothing happened while the candidate prepped for the debate. The week after nothing happened while everyone answered questions about the debate.

I was reminded of that watching Arnold's California action movie. No, he did not debate much, but he took so much of the spotlight that he froze everything else. Democrats running for president were frozen in the dark. They would have had a better chance at getting on television if they'd stood in the window of one of those morning TV shows.

Even the president got crowded off center stage. Presidents generally don't like that, but with top administration figures in open revolt and trashing each other with nasty leaks, with Iraq getting worse, the deficit soaring and the tax revenues shrinking, you got the feeling the president didn't mind being out of the spotlight this time.

That won't last, of course. Those problems are just too serious. But as goofy as the California story got, it still deserved the attention it got. Not because having a movie star governor is cool, as some of Arnold's supporters said, but because California is just too big a chunk of the American economy to ignore.

How big is it? Every time five American manufacturing workers lose their jobs, one of them lives in California. We hate to admit it, but when California sneezes, the rest of us have to worry about warding off a cold. And that was the reason for the coverage.

That's it for us. We'll see you next week right here on Face The Nation.

  • Bootie Cosgrove-Mather

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