Arnold Schwarzenegger - Total Recall - My Unbelievably True Life Story

It galled me that some of this pain could have been avoided. Even before I was elected in 2003 I’d insisted that the boom-and-bust nature of California’s dynamic economy created a huge downside risk in the event of a bust—and that California desperately needed a cushion. I’d tried to put in place a rainy-day fund that would have accumulated $10 billion by now, but I’d failed to convince the legislators or the voters to adopt one with rules stringent enough to keep the money locked up until there was a major emergency. Well, it was starting to rain, and I was forced to make unpopular decisions that nobody, least of all me, was happy about.

By spring 2008, state revenues were in a steep plunge. The budget deficit widened by $6 billion between January and April alone. And that was still months before the financial crisis went global.

I endorsed John McCain for president that January, even before the primaries ended. The senator from our neighboring state had helped me for years, particularly in the hard days of 2005, when John spent an entire day riding around Southern California with me on my bus campaigning for my doomed reform initiatives.

At the same time, as the presidential campaigns unfolded, I did not criticize Hillary Clinton or Barack Obama. The truth was that on the biggest issues, particularly the environment and building a new energy economy, I thought any of the candidates would be better than the current administration. I told an audience at Yale: “President McCain, President Obama, or President Clinton will all shift this country into a much higher gear on climate change. All three candidates will be great for the environment. So things will immediately pick up speed after inauguration day.”

I skipped the Republican National Convention that August for the first time in twenty years. I was stuck in California wrestling with the budget, but indirectly my absence reflected a much larger concern. The growing conservatism of the party didn’t appeal to me or to the vast majority of California voters. This tilt toward the far right became obvious when McCain chose Sarah Palin as his running mate. At the time of her nomination, I praised her as a smart, courageous leader and reformer. But ultimately I decided that I didn’t like the polarizing effect she had on the country.

If you visited the Schwarzenegger household that fall, you got a real blast of political diversity. I had a big John McCain poster on the front door. And in the living room stood a life-sized Obama cutout. The kids, for the first time, seemed politically engaged; the drama of the presidential election interested them much more than my job. I’d always teased Maria about coming from a family of political clones, but that was no problem in our household. One of our kids was a Democrat, one was a Republican, and two were independent/decline to state.

When it hit in late 2008, the Great Recession more than wiped out the progress we had made through years of discipline and cuts. Looking ahead to the next budget year, 2009–10, which began in July, we faced a combined gap for the current year and the coming year of $45 billion. In percentage terms and dollar amount, that was the biggest shortfall California had ever faced—in fact, it was the biggest shortfall any state had ever faced. The deficit was so huge that you could close all the schools and all the prisons and fire every state employee and still be in the hole.

Even when I took actions to save money, the budget got worse. With the collapse of the financial markets, we had to kick in billions of dollars to cover shortfalls in the public-employee pension system. I pushed hard for changes that removed the worst pension abuses, but it wasn’t enough. Meanwhile, prison spending soared, thanks to sweetheart contracts signed years before by previous governors as well as increases ordered by federal judges who actually took over parts of the system. I’d worked to save more than $1 billion by making controversial changes, including cutting out automatic pay raises for guards and reforming our parole policies. I had to fight the fiercest labor union in the state—the prison guards—at the same time I had to push hard against my strongest supporters in law enforcement, like the sheriffs and police chiefs. We proposed treating more nonviolent felonies as misdemeanors, shipping more prisoners out of state, and creating alternatives to prison for lower-risk offenders, like GPS monitoring and house arrest. We won major battles on those fronts, but prison costs still rose. In fact, we were now spending more on prisons than on universities.

The budget battles became like the movie Groundhog Day . No sooner would we finish doing all the negotiating and cutting for one budget than the revenue numbers would come in even lower than forecasted, and we’d have to start again.

Early 2009 was the worst. Budgets are normally negotiated in June (and often into the summer, on and on). But California’s financial picture deteriorated so quickly during the global meltdown that I called the legislature into special session and held budget talks over Christmas. It wasn’t just the deficit. We had a cash problem. The state was running low on money and in danger of having to issue IOUs to pay bills.

I always wanted to cut fast. Part of this was my philosophy: when you’re spending more money than you’re taking in, you cut spending. Simple. Part of this was math. In budgeting, the sooner you make cuts, the less deep they have to be. But for the legislature, the scary numbers had the opposite effect: they were paralyzed. The talks dragged into January and then February. I pressed them to act. Outside my office, I put up a display that said “Legislature’s Failure to Act” and counted the number of days and the additional debt being racked up for every day they didn’t move on the budget.

In mid-February, when we were in late-night negotiations, sometimes I would remind myself that this was nothing compared to being up to my neck in freezing jungle mud in Predator or driving a Cadillac down stairs in The 6th Day. And I’d think how budget negotiations are no different than grueling five-hour weight-lifting sessions in the gym. The joy in working out is that with each painful rep you get a step closer to achieving your goal.

Still, the weight of the crisis put even my optimism to the test. The hardest moment for me came after a conversation with Warren Buffett. I’d call him periodically to ask what he was seeing out there in the world beyond California, where he had a much better vantage than I did. The Obama administration was adding to the emergency stabilization measures launched under President Bush, and I wanted his advice on when all this would have an effect. He said, “The economy this time is like a deflated ball. It won’t bounce back. When you drop it, it just goes splat and lies there until you pick it up and pump some air back in.”

This was the big picture, and it didn’t look good. He explained what he meant. Not only had the United States taken a beating. So had Germany, England, France, India, and even China. This wasn’t just another American recession as usual. He said, “If assets have lost twenty percent of their value, the income from those assets will be less. Before you can really start to grow again, the whole world has to adjust to that fact. Propping up values artificially isn’t going to work. Everyone has to get used to living with less and building from a lower base.”

“How long will all that take?” I said.

“Years. It could easily be 2013 or 2015.”

What, 2013? I was counting in my head: 2009, 2010, 2011, 2012. My term ran out on December 31, 2010, and if Warren was right, I’d be back on my patio reading movie scripts long before any real growth returned.