by Seth Sandronsky
October 2, 2003
As the top GOP candidate in the California recall vote, Arnold Schwarzenneger is down on government spending and taxing under Gov. Gray Davis’ administration. An excess of both are causing job losses, the actor said in the recent gubernatorial debate, likely his last.
Arnold is a millionaire who blames “special interests” connected with the state Legislature and Davis for harming the state’s business climate and budget. There is some truth in this.
Davis and his advisers did fail to see the predictable shrinking of the stock market bubble, and resulting slide in capital gains tax revenue. But so did most other politicians and pundits in the state and around the country.
They were under the sway of financial market frenzy. Remember their blather about a “new economy” of ever-rising stock prices that had arrived?
There is a similar blindspot on the recall campaign trail about California’s housing bubble. It is worthy of a thought experiment.
Think about what Arnold has said or not said about this bubble in California real estate. Now consider one part of it, home refinancing, that has been a crucial source of economic stimulus as the “jobless recovery” continues.
People using their homes as automated teller machines has spurred some job creation in California’s construction and service sectors. Without that stimulus, unemployment in the state would be higher.
Speaking of joblessness, the weak recovery from recession in the state has breathed life into Arnold’s campaign. He has pinned the blame for economic growth that is not fast enough to cause employers to hire many new workers on state Democratic politicians and their smooth “special interests.”
However, four of America’s 50 states have had negative employment growth this year, as reported in the Sept. 26 edition of the Sacramento Business Journal. Arnold appears unwilling to discuss the state being a part of this nationwide trend.
Meanwhile, state worker job cuts will deepen economic contraction already underway in California. Under Davis, the layoff process has begun, with at-risk workers being notified.
The last hired will be the first fired. They are the sacrificial lambs for the state’s political class.
On that note, Arnold’s strategists are striving to blame Davis for capital flight. That is, California businesses that have relocated out of the state.
But capital flight is a regular feature of the U.S. economy within and between states. Corporate media rarely analyze this.
The absence of political debate about capital flight reminds one of John Dewey’s observation: “politics is the shadow cast on society by big business.” Firms in California and nationwide always look to set up shop where wages, government regulations and taxes are low to boost the bottom line.
One effect is a gradual lowering of wages and the living standards of working people. Politicians make this “race to the bottom” possible in ways big and small.
Apparently, California’s working people are supposed to believe that Arnold will protect them from the harm of capital flight. Exactly how he will do so is unclear, as the leading actor candidate tries to “fake it until he makes it” into the governor’s office.
Polling questions and media discussions on the issue of capital flight and California’s working people would help state voters. In this way, they can make a more informed choice about whether to accept or reject Arnold on Oct. 7.
Governor Schwarzenneger, or not?