The other problem was my staff, which still did not believe that the unions would ever agree. They also thought my agenda was so big that it couldn’t be accomplished on my timetable. That’s not how government works, I kept being told; they just don’t move that fast upstairs. Fabian and I raced against the clock to complete a deal in time to cancel the special election. After around-the-clock negotiations, we came to an agreement—only to be told by the secretary of state that it was too late to cancel; that there wasn’t enough time to draft and vote on the bills in the legislature before the overseas absentee ballots had to be mailed. The special election was on; there was no turning back.
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The special election became a cause célèbre for public-employee labor unions nationwide. Before I knew it the New York Times, Washington Post, and Wall Street Journal were all writing about it, and the story was even being picked up in the international press. It was the biggest political news to come out of California since the recall of Gray Davis, only now it was my governorship that was being tested. I hadn’t bargained on this tough a fight, but in a way I was glad. We were making Americans aware how far labor will go protecting its interests even when the deal is unfair.
I saw Teddy Kennedy when I joined Maria and the kids in Hyannis in August. “If you want me to talk to the national union chiefs or get involved,” he volunteered, “let me know.”
“Tell them I know they are sending money to California to beat me and my initiatives,” I said. “Try to calm them down and explain that an adjustment is inevitable. It’s not just California, it’s every state. We can’t afford to keep paying these rich contracts when we have less money.”
I ran the best campaign I could for the initiatives. But we were overwhelmed by the ad campaign. The California Teachers Association mortgaged its headquarters in the Bay Area suburb of Burlingame to raise extra tens of millions for its attack. It blanketed the airwaves with commercials complaining that California was worse off and turning the election into a referendum on me: Arnold is not keeping his promises. Arnold is failing the children. Arnold is failing the elderly. Arnold is failing the poor. The association put up billboards around the state that read, “Arnold Schwarzenegger: Not Who We Thought.” They even enlisted Hollywood stars like Warren Beatty and his wife, Annette Bening, and director Rob Reiner to campaign against me.
We raised money aggressively too. We spent from the war chest for my possible reelection campaign in 2006, and I even donated $8 million of my own. But while we raised $80 million, we couldn’t compete with the labor money. The two sides ended up spending more than $250 million, making the election the most expensive in California history.
I’ve had good defeats, and I’ve had bad defeats. A good defeat is a loss that nevertheless brings you a step closer to your ultimate goal. Losing my first Mr. Olympia competition to Sergio Oliva in 1969 was like that, because in preparing for that contest, I could honestly say I’d left no stone unturned. I’d eaten the right foods, I’d taken the right supplements, I’d trained five hours a day, I’d practiced my posing, I’d gotten properly psyched, and I was in the best condition I’d ever been. I even had my best-ever tan. When Sergio won, I knew I’d done my utmost and that I would come back even stronger the following year.
This defeat, however, did not feel that way. It really hurt. It was like losing to Frank Zane in Miami when I first came to America, when I’d gone into a major competition overconfident and underprepared. That time when I lost, I had only myself to blame. This time I had told voters I would fix their problems, and instead I had exhausted their patience by forcing them, just twenty-four months after a trying recall election, to go back to the polls and digest all kinds of big ideas. I had put the burden of solving problems on them, when they wanted me to take care of it. Even Maria complained that she couldn’t possibly do all the reading necessary to make informed decisions on the initiatives. The voters thought they were getting a diet pill when they elected me. Instead, I had turned around and asked them to meet me at the gym at five in the morning for five hundred push-ups.
I didn’t wait until the actual election to analyze what I’d done wrong. One night in late October, I sat in the Jacuzzi on our patio, smoking a stogie, staring into the fire, and thinking. I remembered back to the transition, and meeting the father of a firefighter who had died in the line of duty. I told him, “This is a terrible tragedy. If there is anything I can do, let me know.” And his answer was, “If you want to do something for me, do it in honor of my son. Please, when you go to Sacramento, stop the fighting. Get along.” Those words came back to me now.
I forced myself to face the fact that the failure of the initiatives was not simply a matter of the unions digging in their heels. I’d taken too confrontational an approach, I’d been in too much of a hurry, and I hadn’t really listened to the people. We overreached. And it had backfired.
What’s more, I’d allowed my reform crusade to threaten the other major commitment I’d made in becoming governor: to revitalize California’s economy and rebuild our state. I’d led my staff into a losing battle, and you could see the effects on them. They were a good team, especially considering that we’d pulled them together in the mad scramble of the recall. They’d helped me rack up the important successes of our first year. But with the impending defeat of the reform agenda, there was growing dysfunction and dissent. Morale was low. People were insecure about their jobs. There were leaks to the press. They were working at cross-purposes with one another and sometimes at cross-purposes with me.
We’d been making mistakes not only behind the scenes but also in public. At a press conference called to promote redistricting reform, the staff had me stand in the wrong location. The event was supposed to be at the border of two gerrymandered districts, which we tried to dramatize by laying down bright orange tape right through the middle of a neighborhood—except that the real border turned out to be blocks away.
All this put a strain on Pat. She was tired of the fighting. “When the time comes, I’ll move on,” she said. “I want to go back to the private sector, and you should get someone else to come in.”
Now I said to her, “Whatever happens in this vote happens. We’ll wait a little while for people to catch their breath, but then it’s time. I have to bring in new people.” She agreed.
The opinion polls weren’t wrong: November 8, 2005, was a total disaster. All four of my ballot measures lost, with the voters rejecting the most important one, the budget reform, by a huge margin of 24 percentage points. At a gathering that night, Maria stood by my side as I struck a conciliatory note. I thanked the voters for coming to the polls, including those who had voted against my reforms. I promised to meet with the Democratic leaders and find common ground. Soon afterward, I told a televised news conference at the capitol that I did not want the staff to be blamed for my mistakes: “The buck stops with me. I take full responsibility for this election. I take full responsibility for its failure.”
I promised that the fighting was over. Next year would begin with a different tone.
CHAPTER 26
Comeback
AT THE END OF 2005, I was happy to leave Sacramento thousands of miles behind by climbing on an airplane and embarking on a long-planned trade mission to China. I led a delegation of seventy-five California employers—including high-tech entrepreneurs, strawberry growers, construction engineers, and merchants—and for six days, we traversed the world’s fastest-growing economy promoting the strengths of our state. For me, it was an important trip, not just because it provided a welcome change of scenery after having lost the special election but also because seeing China transforming itself helped put things back into perspective. The Chinese were building on such a vast scale. I felt I was witnessing a modern power taking shape before my eyes and felt the challenge and opportunity this posed for Americans. And, of course, for a pitchman like me, it was also a thrill to be out in the world again, selling California products in Asia. That trade mis
sion brought California a nice little symbolic success. For the first time, we were able to export California strawberries legally to Beijing, just in time for the 2008 Summer Olympics there.
When I got back to California, my staffing issues took center stage. It was a hard time to make big changes, with the 2006 gubernatorial election less than a year away. But it was right to make them. I now knew far more about California politics, and I knew more of the players. I needed not just smart, experienced people but also a cohesive team. After the special election, only 27 percent of voters in public-opinion surveys thought that California was headed in the right direction, and my own approval rating was only 38 percent. I also needed ballsy people who weren’t going to be paralyzed by that, and who could even see the black humor in the fact that my approval rating was almost as low as the legislature’s.
I already knew who I wanted as my new chief of staff: Susan P. Kennedy. She was, as the press quickly began to describe her, a small, tough, blonde, cigar-smoking lesbian—and the least conventional choice I could have made. Not only was she a lifelong Democrat and a former abortion-rights activist, but also she had served as cabinet secretary and deputy chief of staff for Gray Davis. She’d quit that job out of disgust with the paralysis in the capitol building.
I had come to respect Susan when she was a Public Utilities Commissioner, because even though she was a Democrat, she was always pushing to eliminate regulations that got in the way of business growth. She would occasionally send memos with dead-on, crystal-clear commentaries about the challenges my administration faced. She was frustrated because she thought we were in danger of squandering a historic opportunity for change.
We had some preliminary discussions, and I offered Susan the job. Before accepting, she came down to talk to Maria and me at our house as soon as I got back from China. The discussion covered a lot of issues, including what Susan would be up against in dealing with the Republicans on the staff. “I’ll do everything possible to avoid a bloodbath, which would just slow us down and damage your image even further,” she said. “But you have to give me the ability to recommend whatever changes need to be made. And if there’s a fight, you have to back me one hundred percent.”
“I’ll back you up; we’ll work on this together,” I promised.
Finally I asked her the question you always ask at the end of a job interview: “Do you have any questions for me?”
“Yeah,” she said. “What do you want your legacy to be as governor?”
I looked at her for a few seconds before I said anything. When you’re a governor, you get that question all the time. And I knew she was already aware of what my administration had achieved and what we were trying to do. But I thought this short, feisty woman might really want to know what I cared most about. “I want to build,” I said. “I want to see cranes everywhere.” We were soon going to have fifty million people in our population, and we didn’t have the roads, bridges, schools, water systems, communication systems, rail, or energy projects to be ready for that.
I got pretty animated talking about building, and then she got animated, and next the thing you knew, we were both hyperventilating about cranes, trains, highways, and steel. “I saw you on TV talking about that while you were in China!” she said. “You said we should be talking about a fifty-billion-dollar or one-hundred-billion-dollar bond measure—not Mickey Mouse stuff—and then your staff tried to walk that back down to something smaller. Well, that’s bullshit, and you were absolutely right!”
That’s when I knew we were going to click. Susan didn’t roll her eyes like so many people did when I started talking about infrastructure. She shared my view that the state had not scaled up its roads, bridges, dams, levees, and rails to match the growing population: it was living off the visionary investments of governors in the 1950s and 1960s who’d built highways and water projects and had helped nurture the state’s economy. As a result, we had a system built for a population of eighteen million rather than the fifty million who would be living in California by 2025. Susan didn’t balk at investing in projects that wouldn’t be completed until many years after we were out of office.
Instead of wrapping up the interview, I relit my cigar.
“No way California can go on like this,” Susan agreed.
“We need to rebuild in a big way,” I said.
“But in Sacramento, nobody thinks like that.”
That was true. I’d learned that for the politicians, it was all incremental. The rule of thumb in Sacramento was that you can’t have a bond issue over $10 billion because the voters will never approve double digits. That’s why the Democrats were talking about asking for $9.9 billion this year. And then they’d divvy it up among all the interest groups and say, “Two billion dollars for schools, two billion for highways, two billion for prisons,” and so on. Never mind that you couldn’t build anything with that!
Susan said that it bugged her to see my staff undermining me when I talked about big plans. In China, one of my aides had told reporters, “No, no, no. The governor didn’t really mean fifty billion or a hundred billion. He was just thinking out loud.”
She’d put her finger on something that had been eating at me: when I talked about my vision, I often felt like I was being humored. Not being taken seriously had been a big problem. I would say, “I want a million solar roofs,” and the staff would react like I was exaggerating for effect—as if maybe I meant only one hundred thousand solar roofs. But I did mean a million! California is a giant state; there was every reason to shoot for a million solar roofs.
I was often coming up with ideas only to be advised that they were too much, as well as the wrong thing politically. And up until now, I’d had nobody to bounce those big ideas off professionally, to shape and refine them and not simply dial them down. Susan likes to say that she thinks of me as the biggest engine in the world, and her job is to build a chassis that can hold together with the engine running at top speed. Now I had a partner.
Before I hired Susan, I made enough phone calls to know what the reaction was going to be. Not pretty. My choice blew a lot of minds, especially among my fellow Republicans. All they knew was that she was a Democrat and a former activist. They didn’t know she was a seriously pissed-off Democrat who wanted to see change.
Their standard reaction to my choosing Susan was “You can’t do that!” and I would reply, “I can. Of course I can. I can and I will.” A couple of times, I had to explain that even though her last name was Kennedy, she wasn’t a member of the Kennedy clan, and Teddy really wasn’t taking over the state. A few people even talked about drafting actor Mel Gibson, whose controversial movie The Passion of the Christ had been a big hit among religious conservatives, to run against me in the 2006 Republican primary.
The directors of the California Republican Party asked for a private meeting with me at the Hyatt Regency hotel across the street from the capitol. They demanded that I reconsider my choice. One of the party leaders insisted that Republicans wouldn’t work with me if I didn’t pick someone else. “We don’t trust her, and we won’t let her in our strategy meetings,” was the message. “So you’ll end up completely isolated.”
I told him he had to make decisions as a leader of the party, but I had to make decisions as a governor. It was my responsibility, not theirs, to select a staff. And I said I was confident that Republican legislators would cooperate with Susan because she was terrific.
She started unofficially just before Thanksgiving 2005. The first move that Susan made was really shrewd. Instead of starting by making personnel changes, she focused on the big goal of rebuilding the state. She called together the senior staff and told them to collect all the information they could find on expanding highways, water, housing, prisons, and classrooms. She asked them, What kind of California did we envision twenty years from now? And how much would it cost? Some objected to the idea as too ambitious, but Susan said, “I hear what you’re saying. But let’s suspend disbelief and just plan.”
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The answers came back and added up to $500 billion. That was how much federal, state, local, public-private partnership, and private money we would need to build the California of 2025. Half a trillion dollars. The figure was so mind boggling, even for us, that we couldn’t work with it. So we cut the time frame to ten years and asked the staff to repeat the exercise. Now the number became $222 billion, of which the state contribution would be $68 billion in general obligation bonds. Those figures were still enormous. If California tried to borrow that much for construction, it would be by far the biggest bet on itself that the state had ever made. But we came up with a plan to spread the borrowing over the whole ten years. Then it became a manageable amount of debt. California leaders had abdicated responsibility for planning major investments, leaving big infrastructure projects to the whims of a handful of special-interest groups that would collect signatures and “sell” pots of bond money to those willing to help fund the campaign for the initiative. The result was that voters approved tens of billions of dollars in general obligation bonds over the years, most of which got spent on special-interest projects, and nothing valuable got built.
I’m a tightwad when it comes to spending taxpayers’ money, but I’m an equally strong believer in investing for the future. I had to educate the legislators about that, especially Republicans, who thought that building was the same as spending. When you spend money, it’s gone. It’s like building a house versus buying a new couch. Build a house, and your investment returns value. Buy a couch, and the minute you take it out of the furniture store, it loses value. That’s why I always say a house, you invest in; furniture, you spend money on.
In fact, building infrastructure is one of only three ways to lock in a benefit from a dollar one hundred years in the future. Number one is to build public works that will last for that long. Number two is to use your dollar to invent something that will still be used in a century. And number three is to educate your children and grandchildren so that they see the benefits of knowledge and educate their own children and grandchildren in turn. Do any of these successfully, and you’ve invested wisely. You may even be remembered for it.
Total Recall: My Unbelievably True Life Story Page 58