Capitol Alert

SCHWARZENEGGER: Through global warming, we have now a fire season all year round. We used to have fire seasons only in the fall. But now the fire seasons start in February already. So this means that we have to really upgrade and have more resources, more fire engines, more manpower, and all of this, which, of course, does cost extra money.

But I think that that's what -- you know, why you have reserves in the budget.

STEPHANOPOULOS: But you have a budget crisis now.

SCHWARZENEGGER: When we have such things as the -- but we have a budget crisis as many other states have. It's simply because, you know, this is a different world now. We have been hit first by an economic slowdown. And then, because we are relying through our tax system, that is relying heavily on income tax and capital gains tax, that we have a flat economy, but our revenues took a dive by 10 percent. So that means that all of sudden, we have $11.2 billion less than anticipated. And so now we are in a special session to bring Democrats and Republicans to lead us together, and it's to cope with those kind of things through revenue increases and also making additional cuts.

STEPHANOPOULOS: Yet, your critics say that this one-and-a-half- cent sales tax is the most regressive form of tax. It's going to hit the people who are going through the toughest times right now the hardest.

SCHWARZENEGGER: Well, no one should be that worried about any of that, because remember, the way it works is that the governor puts up a proposal, and then the legislative leaders go and start debating over that and looking into it, if they maybe have a better idea or a different idea. So we have a very collaborative kind of approach to the whole thing. So they may come up with different type of taxes.

I totally agree with you. It is very hard when you have to increase taxes, no matter when you have to increase taxes...

STEPHANOPOULOS: You don't want to do it.

SCHWARZENEGGER: I don't want to do it. I hate taxes. I hate the word "taxes" and all of those things. But there's certain times when you have to forget about the ideology, and, you know, all of this, and fix problems...

STEPHANOPOULOS: That is...

SCHWARZENEGGER: Because people want their fixed problems.

STEPHANOPOULOS: That is exactly the same debate that's going on in Washington right now. And there's this question whether the federal government should step in and throw a lifeline to the automobile industry, the domestic automobile industry. Should they?

SCHWARZENEGGER: Well, first of all, I think the important thing for the federal government is to look and follow through with what they intended to do in the first place with the $700 billion. I think the key thing is to show consistency to the financial community and to the American people, so you don't have to, you know, going back and forth and changing too many times, and also to show to the world's financial community that America has its act together. We know there's a problem in the economy, and here's how we fix it. So that's number one.

Number two, I think it's important for the United States and Washington to look at the states, which states are struggling, and maybe helping them out.

Number three, if they go in the direction of helping companies like the car manufacturers, I think it's very important to not just put money in, but let's go and see if they have been fiscally responsible, and if they're really operating the right way. Because right now, all of those -- you know, if you pay the auto workers or the benefits and all of those things, are maybe too high. Right now, if you compare it to Germany and to Japan and to other countries, they can build cars cheaper, and they don't have that overhead with the amount of what they pay to the workers, the benefits they provide.

SCHWARZENEGGER: We have, like, in America, you sell a car, and you have $2,000 of each car just goes to benefits.

So I think that there's a way of reducing all of that, make them more fiscally responsible. And then, if they have to act together and have renegotiated those deals, then, yes, you can go in there and help them out, financially.

STEPHANOPOULOS: So Democrats have said that some of that $700 billion should be used for the auto industry. You're for that if the auto industry agrees to make some changes?

SCHWARZENEGGER: Make, really, changes that are fitting our time today. This is a different world. Anyone that wants to go and think that they don't have to shift down and make changes -- if it is states; if it is local government; if it is the auto industry, or any other industry, as far as that goes, they're living in a dream world or in a fantasy world.

You've got to recognize that this is the time, now, to renegotiate and to work in a different way -- like we have proposed a furlough to have, you know, our state workers, for instance, not work one day a week and not get paid for that day.

We've got to find ways to cut down, because there's not that much money around, right now. It's a different world.

STEPHANOPOULOS: So reform, but if they reform, then they can get some of the federal money?

SCHWARZENEGGER: Then I'm fine with that, yes.

STEPHANOPOULOS: You mentioned a stimulus, aid to state and local governments, as well. You've actually petitioned President Bush and leaders in Congress, saying that they should pass a stimulus package.

Now, yet President Bush is resisting that. So are your Republican colleagues in the Congress.

SCHWARZENEGGER: Well, I think that there's different ways of thinking. You know, that doesn't mean that when I, as a governor, who have my stated interest -- you know, I represent the state. You know, I don't care about what anyone's philosophy is. I will fight for the State of California. And so I proposed that we should get help from the federal government, if we can -- again, also, like the car manufacturers -- can prove that we have our fiscal house in order, and that we can solve our problems ourselves.

But give us, in this emergency kind of a situation, or in this crisis, some additional money. Help us with Medi-Cal and with some other kind of things that -- because, remember that Washington is collecting from California so much money that they are, you know, giving us 80 cents on the dollar.

So I think, when we are in a state of emergency like this, I think that Washington can give some of that money to the state. And we're not talking about a lot of money, but maybe $5 billion a year, for the next three years, until we get out of this economic crunch that we're in.

STEPHANOPOULOS: The economic advisers to President-Elect Obama see this emergency, as well. And some of them say, you know, next year we're going to have 8 percent or 9 percent unemployment in this country.

The Federal Reserve is out of any room to maneuver. And they say that it might even be necessary to consider a stimulus package of $500 billion, $600 billion. Do you support that?

SCHWARZENEGGER: Well, I cannot get into the numbers, you know? But I can tell you one thing.

The most important thing, right now, is to recognize the fact that this is not the end of the economic slowdown. There is no sign that shows that there's an upswing next year.

So when you come up with rescue packages, or with economic stimulus packages and all those things, don't think just about now. Think what will happen within the next few months or the next year. Things will get worse. Unemployment will get worse. The housing crisis will get worse. The mortgage situation is going to get worse.

So what we have to do is we have to plan for that worst situation, rather than always one month at a time. And then, each month, we have to make the adjustments and adjustments and adjustments.

And that's when the people of the United States and of the various different states start losing faith in government. They say they don't have their act together. They change all the time. They change the package all the time. They have a rescue package number one, and number two, number three, and number four. Why not just come up with a good program?

And of course, there is a good reason, because I think that no one really knows what's going to happen to the economy, 100 percent. I mean, you know, as you could see with the stock market, one day it's up 500 points, the next down -- it's down 500 points, and all of this. But I think that it is wise, and I have told our legislative leaders to plan for the worst.

STEPHANOPOULOS: President Bush, yesterday, gave a speech, where he warned against too much interference in the market.

PRESIDENT GEORGE W. BUSH: History has shown that the greater threat to economic prosperity is not too little government involvement in the market. It is too much government involvement in the market.

SCHWARZENEGGER: Well, the sad story, here, is that it was government that created the problem in the first place. And so I think that...

STEPHANOPOULOS: What do you mean by that?

SCHWARZENEGGER: I think that government is responsible to help. But then it depends to what extent.

Well, you know, I think that all the housing crisis, the mortgage crisis, and all of those things with Fannie Mae and Freddie Mac, and the way they were pushed to give everyone the chance to be part of the American dream.

It's a nice thing; it's wonderful to strive for everyone having -- being part of the American dream and have home ownership.

SCHWARZENEGGER: But you got to look at can people afford it? Who can afford it? You cannot go and give someone that has no, you know, proof of a regular income, and has no assets, and has no equity in the house, and just give them a loan, and just throw the loan after that person and hope for the best, just so that you can bundle up all those mortgage deals and sell them to someone else, and sell them to someone else, and sell them. So now we don't even know who owns what.

STEPHANOPOULOS: Yes, but those buyers and lenders bear responsibility for that too. Don't they?

SCHWARZENEGGER: No, everyone has a responsibility. Even the lender has a responsibility. Everyone was irresponsible. But I think that the whole push was -- on Fannie Mae and Freddie Mac was by government. And I think that we -- a big mistake was made in Washington by the very same people now that scream let's bail out and let's bail out. So I think, since government has already been responsible for creating this problem, I think that government is responsible to help along. And from then on, it is a matter of what is your definition of helping along? I think the key thing is no matter who you help, they themselves first, before you give them anything, have to show fiscal responsibility, and that they have to act together.

You cannot let them abuse the system. You cannot go and give corporate America and Wall Street and everyone these billions of dollars. And then they grab, millions of them, you know, pay themselves with the great benefits and all of this, and go off and have great vacations. That's not fair while someone else is getting kicked out of their home.

So we have to have a balance. And I think that, besides just making the decisions, you have to have great follow-through. And you have to have someone in charge that then goes and really does it the right way. Because it's always one thing to make the decisions, another thing to actually then execute that vision and that bailout all the way through.

STEPHANOPOULOS: How about your party? At the Republican Governors' Association meeting this week, a bunch of governors got up, and it was like a litany of postmortems on the election.

UNKNOWN: Obama was going to get elected president unless the American people came to the conclusion he was unacceptable.

UNKNOWN: We're going to have to be bold. We're going to have to be aggressive.

UNKNOWN: They fired us with cause. We gave them reason to fire us.

(END VIDEO CLIP)

STEPHANOPOULOS: Is he right?

SCHWARZENEGGER: Well, yes. I mean, if you look at it in a political way. I think that, you know, that everyone will have a different take on what happened this last election. I think you can also make it very simple, and that is, you know, that Republicans have not provided for what the people need. And I think that's why Jindal is partially right on that, or he's right on that, because, you know, it is all about what the people of America need right now, and have we provided that as a party?

And to me, I of course go way beyond all of that. Because to me, I think it's a bunch of nonsense, talking about parties and all of those things -- because in the end, the American people are not that interested in Democrats versus Republicans and them arguing in Washington about is this a Democratic principle or is this a Republican principle.

Let me tell you something. When it comes to building roads and people driving on the roads -- it's Democrats, Republicans, independents, decline to state -- everyone wants to use those roads. Everyone's kids -- Republicans' kids, Democrats' kids -- everyone is in the school. They want to have great education. When it comes to clean air and protecting our environment and fighting global warming, everyone in America wants to be part of that.

So I think that it's only the politicians that always divide things up and they draw and line and say this is a Republican idea and this is a Democratic idea. And in the meantime, it doesn't help the people to stay in their homes.

STEPHANOPOULOS: That sounds like Barack Obama.

SCHWARZENEGGER: Well, it may sound whoever it sounds like, but I just think that we are too, kind of, preoccupied with this Democrat versus Republican.

I, when I make decisions as governor here in California, I have my Republican principles, but I don't make decisions based on just Republican principles. I make decisions on what do the people need?

Right now, the people need to stay in their homes. So I want to go and renegotiate and have them work on the loan agreements and see how do we bring the payments, the monthly payments, the mortgage payments down, so they're affordable for the people. They can go and lower the interest rate. They can go and throw off the payments. Instead of 30 years, 40 years or whatever maybe the method is, but let's help the people.

And I don't analyze, wait a minute, is this a Republican idea or a Democratic idea?

STEPHANOPOULOS: But you are a Republican. So how does your party do that? You know, Governor Tim Pawlenty says Republicans need a Dr. Phil moment. We have to recognize we are not speaking to the fastest-growing voter groups -- Hispanics, young people, professionals.

SCHWARZENEGGER: Well, you know, again, if I start to calculate of what can I do specifically for the Latinos? What can I specifically do for the African-Americans? And what can I do specifically for this group and that group and for the Austrian-born body builders, and all of those kind of things, I will go crazy.

I got to think about California. What can I do for the California people? So this is why a lot of times when Latinos come to me and say, "What have you done for us?" I say, "You benefit when we get a better education system. You benefit when we rebuild California and when we build the infrastructure of California; when we fix our levees and we don't have the huge floods if there's an earthquake; when we build extra schools. Everyone benefits from it.

SCHWARZENEGGER: Latinos benefit. African-Americans benefit. Everyone benefits from that," as I said. So I don't go and make decisions based on what I do specifically to pass legislation that helps Latinos. That's all wrong dialogue. That's divisive. We are all Americans, all Americans. I'm for those Americans, being an Austrian, as I want the Latino to feel American, as I want the blacks to feel American. Everyone, we all want in one pot and we're all together. There's one big mosaic that is all coming together.

STEPHANOPOULOS: Do you think that your party sends that message?

SCHWARZENEGGER: Well, no. Many times they don't. But I mean, you know, so that's what they have to learn. Remember that so many times there's dialogue about, you know, we have to go back to our core values.

What is that? What is core? How far does core go back in history in America, the word core? Does it go back 30 years? Does it go back 50 years? Because we know that Teddy Roosevelt talked about universal health care. So they're off the core for a long time ago already. He has talked about protecting our environment. So they've been off for a long time on that.

I mean, let's be honest. Ronald Reagan -- let's go to Eisenhower, for instance. Eisenhower has built the highway system in America and he's poured billions of dollars into infrastructure. Where Republicans today say, well, that's spending. We shouldn't spend. That's not spending. That's investing in the future of America.

So there's a lot of things that they have been off on, if they want to go and talk about the core values. But maybe their definition of core values is maybe different.

But I mean, so I think it's all nonsense talk. I think if they just talk about one thing, what do we need now?

Now, America needs to be rebuilt, because we haven't really rebuilt America for decades. So we need to rebuild America, fix the bridges, fix the highways, fix the buildings, tunnels and all of those kind of things we need to do. And then we have to go and create great relationships with our partners overseas, with the world, and to build those relationships again. And we have to take care of health care. We have to take care of our environment. And we have to build an energy future. Those are the things that people want right now.

And I know in the poll numbers in America -- I mean in California, that's what the people want.

STEPHANOPOULOS: Proposition 8 here in California, it passed, defining marriage as exclusively for men and women. I know you've said you hope the court overturns it. Will you join Democrats who are filing a challenge in the court?

SCHWARZENEGGER: No. I mean, I have been asked to join this fight, and I had my own fight with Proposition 11, and that's what I've focused on.

But I made it very clear. I personally am -- for me, marriage is between a man and a woman. But I don't want to ever force my will on anyone.

I think that the Supreme Court was right by saying that it's unconstitutional. And that everyone should have the right, just like we had the battle in 1948 and the Supreme Court decision came down, that, you know, it was unconstitutional for blacks and whites not to be able to get married with each other, and they overturned that. And since then, that has been taken care of.

And now the Supreme Court says that it's also unconstitutional to not let gay people get married, the same-sex marriage. So to me, that is the important decision here, and everything else is not that important. So people can pass initiatives, like Proposition 187 passed under Wilson that said we should not give, you know, Latinos and those that are illegally here any educational services or any kind of medical services. The Supreme Court said, well, the people maybe had some intentions there, but it's unconstitutional.

STEPHANOPOULOS: So you think the courts should overturn Proposition 8?

SCHWARZENEGGER: The court has overturned it. And now they went back. And the people have voted for it again, against the gay marriage. So the Supreme Court, you know, I think ought to go and look at that again. And we'll go back to the same decision, basically.

STEPHANOPOULOS: And you believe they will.

SCHWARZENEGGER: I think that they will. And I think that the important thing now is to resolve this issue in that way.

(BEGIN VIDEO CLIP)

CROWD (chanting): Marriage is a civil right!

(END VIDEO CLIP)

SCHWARZENEGGER: In a peaceful way, rather than, you know, going out and protesting, and going out and boycotting and all those things. I think that's not the best way to go about it.

STEPHANOPOULOS: In the meantime, some legal experts have suggested that you should, if you believe that, issue an edict, a ruling, that says that the marriages that have already taken place in California are absolutely legal. Will you do that?

SCHWARZENEGGER: Well, I have to get together with Jerry Brown, our attorney general, and see what the legal opinion is, because he's my lawyer, basically. And so, we always do those things together.

STEPHANOPOULOS: But you're inclined to do it?

SCHWARZENEGGER: It's a conversation that I can have with him about the -- if that's the legal way to go.

STEPHANOPOULOS: How about Proposition 11? The opponents of Proposition 11, which will set up this independent commission to draw up the congressional districts, haven't given up the fight yet. Do you think they actually have a chance of still winning?

SCHWARZENEGGER: In Proposition 11? This is over. Proposition 11 has won. And there will be the next time redistricting by the people, by ordinary people of California, and it is taken out of the hands of the legislature.

And thank God. I think the people of California were very smart in this, because five times before it has not succeeded.

SCHWARZENEGGER: And, you know, people asked me, over and over, and said, "Why would you go back and try it again?"

And I said, you know, that, whenever you lose, you analyze why you have lost. What have you done wrong? Because the idea is not wrong. It's just the way you went about was wrong. And, for instance, in 2005, I tried that same battle. And I was not inclusive enough. I didn't bring in -- brought all the stakeholders in and marched with them together. I went out there by myself. And so we lost. And we went back again, regrouped, brought all of the people from Common Cause to the League of Women Voters, to the ACLU, the NAACP and all of those different organizations we brought in. And we won.

STEPHANOPOULOS: So have you talked to President-elect Obama?

SCHWARZENEGGER: I have not had a chance to talk to Obama. But I did say, and made it clear that, even though I was for McCain, that I am the first one to go and do everything that I can, as governor, and as a state, to support his administration and to -- because we have done a lot of studies and work on health care.

If he wants to do health care, then we want to be his partners and help with the health care reform. If it is environmental issues -- all the kind of things -- high technology, power technology, anything that he needs to do in a state, in the whole country or in the whole world, we want to participate.

And I want to be personally helpful for that, even though I'm not looking for a job...

STEPHANOPOULOS: You're not going to go to Washington?

SCHWARZENEGGER: Well, I made it very clear that I want to stay in California for the next two years and finish my term here, because there's still a lot of things that I want to accomplish. This is a great state.

And there's wonderful things -- we want to still get the health care reform done. We want to continue fighting on environmental issues that is important in creating the renewable portfolio of creating renewables 20 percent by the year 2010, and then, of course, 33 percent by the year 2020; and bringing our budget system back in place where it belongs, and then start working on career (ph) education and in other educational areas.

STEPHANOPOULOS: You poked some fun at the president-elect in those final days of the campaign.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: We're going to make him do some squats.

(LAUGHTER)

And then we're going to go and give him some biceps to beef up those scrawny little arms.

(APPLAUSE)

(END VIDEO CLIP)

STEPHANOPOULOS: Do you think he wants to challenge you on the basketball court?

SCHWARZENEGGER: Look, I've seen him playing basketball. He's a better basketball player than I am. But I think that no one should take that joke that seriously, because Columbus, Ohio is the place where they have the world championships in lifting and in body building every year.

And so, this is one of those jokes that, when they were very (inaudible) or when you talk about body and legs and skinny and all -- pumping up, and all of those kind of things.

So this was not meant to be an insult in any way. It was meant to be to lighten up the place and to make everyone laugh a little bit.

STEPHANOPOULOS: And maybe he'll laugh about it, too?

SCHWARZENEGGER: Exactly.

STEPHANOPOULOS: Governor, thanks very much for your time.