The Governor of California: A. Schwarzenegger. Research Paper

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Introduction

Arnold Schwarzenegger, a republican is the current Governor and has been on the helm since November, 2003 and is the 38th governor; he came in after Grey Davis. The governor is the head of the executive branch of ‘s government, commander in chief of the California , enforces state laws, has the power to either approve or reject bills passed by the , convening legislative meetings , grants pardons, except in cases of impeachment, (Constitution of California).

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California economy is said to be dependent on trade (California Chamber of Commerce, 2009), the more the reason the state is experiencing such a deficit due to fluctuating stock markets as a result of global economic crisis, but in the past few years, 2007 in particular the international commerce is said to have contributed approximately one quarter of the states economy. Computers and electronics are the most traded products and the top most exported products accounting for 36% of the total export. When the governor came in as the governor, there were a lot of expectations considering he was a familiar figure in every household as a successesful actor and body builder, this together with the fact that he is married to a celebrity wife from the Kennedy family provoked high expectations from the people of California and even the country at large.

During his first years in office he received the highest ever approval rating for 45 years of 65%, a rate even Ronald Reagan never came close to, an implication of the good will people of California had entrusted in him. This approval rating has since been fluctuating but it is now said to be statistically flat above 50%, a good implication that, though his support has dwindled in the past few years, he still remains popular and commands some following which he could use to push for implementation of views favoring ways out of the current budget crisis.

Role of Governor Schwarzenegger since the credit crisis

Imagine a successesful body builder and a Grammy winning actor for a governor, I am sure a similar success story would be expected, but has this been the case?

Reports show that as of 2007, California had the largest gross state product (GSP) of approximately $1.812 trillion and the state is responsible for 13% of the country’s gross domestic product (GDP). However, the state is experiencing the one of the worst budget crisis ever in United States for the year 2009-2010 and economic crisis has hit the state to a near insolvency, the governor is quoted saying, “our wallet is empty, our bank is closed and our credit is dried up”, (Brown, Web of Debt, 2009)

California’s economy is deemed to have hit the lowest during this recession period, through the following:

  • Has the forth highest unemployment rate with an approximate percentage of 12.2%.
  • Has the third highest rate of mortgage foreclosure.
  • Has the biggest budget deficit for two consecutive years.
  • Has a budget gap of approximately $24 billion.

The partisan battle between democrats who are in total support of tax hikes as the appropriate way out of the budget crisis and republicans who have proposed slashing million of dollars on state’s safety nets and educational system in order to balance the budget, Schwarzenegger together with fellow republican are opposed to raising taxes, conservatives view it as an opportunity to cut the state’s spending back to the levels it had reached 10years ago, a stand liberals feel is an attack on major sectors like the public infrastructure which have contributed immensely on making California an economic giant in the last few years. Liberals also feel it will impact heavily and badly on the poor and the minorities once implemented. The governor should be in a position to critically evaluate the partisan views and strike a balance or consensus on the best possible means out of the crisis and use his power and a fair good will of the people to rally support on the settled means of ending the crisis. The governor has performed below expectation and there have been attempts to unseat him, most from the employees and labor unions. A meeting of the association of California State supervisors (ACSS) board of directors early in the year resolved unanimously to push for his impeachment, the president of the association Olin King stated that, “his inability to pass a budget is placing California in financial jeopardy, and his order to cut state worker’s pay by 10%, to place the burden of balancing the budget on our backs is an act of malfeasance” (Nnnolhi, 2009). Even further the non partisan analyst’s office feel the governor’s proposed budget deficit resolution is risky and declared the governor not only unable to balance the state’s spending and revenues, but also unable to convince his own party members to work with him.

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Contributions of Arnold Schwarzenegger

The governor still riding on his power as an actor or a body builder turned politician has put up a spirited fight to correct the budget crisis;

In June, 2009 the governor declared a fiscal emergency as a result of failure by the legislature to pass a budget aimed at resolving the budget gap and ordered unpaid closure of offices three days each month for the approximately 235, 00 employees in the state.

To help close the gap, the governor has proposed and acted on an extensive combination of cuts on some sectors like public schools, prisons, by reducing the number of inmates, prison staff or even laying off prison guards among others and an increase in tax to address the deficit. The deficit is largely attributed to the fact that, a major portion of the state’s income comes from a small percentage of the citizens for example, in 2004 statistics show the rich, who constitute 3% of the state tax payers paid approximately 60% of the states tax (San Francisco Chronicle, 2006). This implies that the economy of the state largely depends on capital gains, bonuses, and stock options of the wealthy investments which unfortunately have been severely impacted by decline of the stock market during this period of global recession.

He has established a bipartisan tax commission chaired by California businessman and former U.S. Treasury official Gerald Parsky which has so far recommended a number of ways aimed guiding the state out of economic quagmire:

Broadening the tax base and slashing tax rates on personal income, business and sales. The commission aims at achieving flat tax, a single rate with large standard deductions, the income tax rate, which currently tops at 10.55%, suggestions are to have it cut to a more reasonable percentage, approximately 7.5%.

Has recommended the elimination of corporate income tax and the 5% of the sales tax that used to contribute to the general fund and proposed introduction of a broad-based Business Net Receipts Tax of no higher than 4% in order to prevent the revenue-generating efficiency of the Business Net Receipts Tax form ultimately increasing the overall tax burden in state. This is aimed at taxing business entities on gross receipts from what they produce, minus the business’ purchases from other firms and would apply to all entities doing businesses in California except small businesses and is an equivalence of value added tax (VAT). Once fully implemented, it will level the playing field for all business entities and effectively reduce favoritism based on the power of lobbyists in the state capital, Sacramento though there are fears BNRT lacks critical a element of Europe’s VAT and involves border adjustment which can only be regulated by the federal government.

The commission recommends a rainy day fund as a means of allowing the state to operate in economic dire times and also to protect the state from future economic downturns by requiring annual revenues above a 10-year rolling average to be put into a reserve fund rather than being spent, each year until the fund reaches an increased target balance equal to approximately 12.5% of the state general fund. I strongly believe this would help the state to avoid increasing tax when in recession like what has been happening for the past year or so. Mr. Schwarzenegger acting on his gubernatorial power will be calling for a special session of the legislature to deliberate and approve this plan later in the year (Shelley & Kelvin, 2003).

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The governor has found allies in countries like; Canada, Mexico and the U.N. because of their related policy on encouraging clean technology, to help in pushing for greenhouse-gas reductions at home and has since signed agreements on how to partner in the quest for clean technology. He enacted the first statewide cap on carbon emissions, the first state green-building code and the first state fuel-efficiency standards aimed at mandating an economy-wide 25 percent reduction in carbon emissions by 2020. He is a global salesman for the war on carbon, He once aid that, “you don’t have to be a girly-man to save the planet” (Grunwald, 2008, p. 2). He’ has continued to advocate for a clean environment and green-tech economy in place of the past policies, “Guilt doesn’t work,” Schwarzenegger told TIME last year (Grunwald, 2008, p. 5).

The governor retracted on the intended cut on the parks department budget though the state has since established that, the Parks department need to improve on management and cut on some costs like maintenance, equipment and vehicle purchases to ensure the parks are self sufficient (Knutson, Wall Street Journal, 2009).

The governor also consented on legislation that restored $196 million to California’s Healthy Families insurance program to ensure children below age of 19 and don’t qualify for Medi-Cal or private services get subsidized services and the California legislative committee indicated the intended cut would have led to a waiting list of new children seeking coverage through the program (Buchanan, San Francisco Chronicle, 6/16). And in August, an already implemented cut of $7 million for an airplane reserved to fight wildfires was reinstated through emergency funds due to high probability of wild fires during some seasons; this would guarantee effective handling of fire related calamities in California.

With the assistance of the law makers who tried to close the deficit by establishing means and imposing major cuts in the budgetary allocations, he also had to deal with $1 billion deficit. He achieved so by using powers bestowed upon him by the California constitution to strike budgetary allocations on among many other things; in-home care by slashing $500 million, transportation assistance and other social services.

The governor has called for a special session of the legislature to deal with California’s water crisis and tax issues, a move which has appeased the citizens considering they had cast a 65% disapproval rating on his leadership, the highest of his six year term in office (Garafoli, 2009).

The governor consented on seven laws aimed at protecting home mortgage holders through the following:

  • Tapering restrictions on mortgage brokers to ensure that they do not convince borrowers into high risk, but more profitable loans when they qualify for less expensive ones or lower cost mortgages which are more economical according to their power of refurbishment.
  • Banning negative amortization loans, loans which allow a low monthly payment such that the ultimate amount is relatively high compared to the borrowed.
  • Limiting prepayment penalties to not more than 2% of the principal balance, which sometimes would be very high thus exploitative and even sometimes necessitating foreclosure.
  • Allowing state regulators to enforce federal lending laws in order to protect borrowers from exploitation.

The author of the bill, Lieu successfully argued out that the bill was needed to help the state’s homeowners from foreclosure and overcoming the powerful interests blocking reform in order to save future generations from a similar kind of crisis, (Lifsher, Los Angeles Times, 2009).

The governor recently vetoed a pair of renewable energy bills which had been passed by democratic controlled California legislature in September and opted for the alternative plan to boost the states percentage of renewable power sold at 33% this is because the 33% renewable energy is in line with the California’s ultimate goal of combating climate change and the core aim of his administration considering that it does not limit the much California utilities can purchase from the neighboring states. The bills requires getting 33% of states electricity from sun, the wind and other forms of renewable energy sources by 2020 (Sweet, Wall Street Journal, 2009).

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Failures of the Governor

Expending political energy on making sure same-sex couples cannot be legally recognized as married, this has continued to make the party unpopular for the 18-29 voters since they don’t comprehend the political animus towards gays and ethnic minorities. A good illustration of the youth abandoning the Republican Party is the voting pattern of last year’s general election where 63 percent of youth voted for Democratic Party compared to a 34 percent for the Republican.

The governor used the states bloated budget as a strong statement during the campaigns, in his words, vowing to “blow up the boxes, of Sacramento’s bureaucracy, more especially in California state capital” (Leary, Los Angeles Times, 2009) and promising to overturn Gray Davis’ record-setting $38 billion deficit. More than five years into his era, the budget is said to have grown from $100 billion to $145 billion, and the governor’s spokesman announced in November that,” California was facing a deficit of $28 billion and a possible $41.8 billion by the budget year ending in June 2010” (Lin, Associated press, 2008).

On social issues where people thought the governor’s libertarian approach which advocates for maximization of individual liberty and minimization or even abolition of state while embracing different viewpoints, would avoid the republican trap of freedom constricting politics, the governor instead opted to embrace a freedom constricting policy of the left who always have an egalitarian view concerning resources and support some form of income redistribution. A good illustration is the fact that in September 29th 2004 he consented to Assembly Bill 1825 requiring every employer in the state with more than 50 employees to force upon its managers state-approved sexual harassment training every two years (Welch& Matt, Reason, 2009).

Warren Buffet who was an advisor to the governor during the gubernatorial campaign in 2003, advocated for an address to the inequality and injustices associated with proposition 13 which is seen to protect large land fortunes but he was quickly overhauled from the campaign and he kept silence until after the elections. According to Nunes (Wall Street Journal, January 10, 2009), State’s spending increased from $56 billion in 1998 to $131 billion in 2008 and at the same time facing a budget deficit of $40 billion. Observers say had he listened, California economy would currently be in a better and more stable financial footing. The governor’s snapping of the idea was attributed to fear of loosing conservatives on the tax issue. The decision to eliminate car tax which would in the past generate $3.6 billion per year has so far contributed $18 billion of the current $24billion budget deficit making him partly if not to a large extent responsible to the current economic quagmire (Welch & Matt, The Reason, 2009).

When the governor came into the helm in 2003, his main focus was on Waste, fraud and abuse but ended up hiring an expert from Florida, Gov. Jeb. Bush who failed in establishing an easy way out of the budget problem and quickly left the capital.

The governor, just like grey Davis, was wrong on predicting the life span of economic good times thus ended up overextending the states’ spending programs when the global recession was just beginning to take effect, this has rendered him ineffective in dealing with mounting fiscal problems (San Francisco Chronicle).

Recommedations

If the number of tax brackets were to be reduced from six to two, then the new tax rate would be 2.75% for taxable income up to $56,000 for joint filers and 6.75% for taxable amount above that, this would create an additional revenue from middle and low income families thus reducing the state’s dependency on trade; volatile stock and capital gains which are subject to fluctuations as a result of market changes (California City and County Sales). Ultimately the state’s finances would be made more stable and some fairness would be achieved on taxation. There has been a suggestion also to eliminate the two-thirds majority requirement on budget and tax measures, a view seconded by Erwin Chamerinsky, a leading constitutional scholar and dean of University of California Irvine Law School (California Ballot Prepositions, 1990-1999).

The rainy day fund policy needs to be highly refurbished to ensure a continued increment and the ability of the government to use the reserve should be restricted. This would provide shock absorbers during economic dire times.

Some decades ago, California had the best education system in all levels, a great economic dynamism, a good climate that attracted people from all walks of life and great natural recourses but this suddenly began to change in 1970’s due to expansive growth, this led to hiking of all kinds of fees and taxes in order to pay for its nanny state tendencies. The worst hit was property taxes which necessitated heavy outflow of people into neighboring states while decrying heavy state burden on their home state, (Pittsburg post-Gazette, August, 2008). The incumbent governor together with the legislature have proposed and passed important legislations on taxes aimed at restoring the former glory of the state and good will from the citizens would go along way in achieving the set out intentions.

References

Buchanan, W. (2009), Mass veto off, governor signs hundreds of bills, Chronicle Sacramento Bureau Monday, San Francisco Chronicle, 6/16, USA.

Brown, E. (2009), California’s empty wallet: Turning crisis into opportunity, Web.

California Ballot Propositions, (1990-1999), Los Angeles County Law Library. Web.

California Chamber of Commerce: All about International trade and investment, Web.

California City and county sales and use tax rates-cities, countries and tax rates – board of equalization, Web.

Constitution of California, Gubernatorial powers of a Governor, 2009. Web.

Garafoli, j. (2009), Chronicle staff writer: Voters disgusted with governor, and the legislature, Tuesday, San Francisco, USA.

Grunwald, M. (2008), Arnold Schwarzenegger, Times Magazine, Vol. 172, Issue 14, New York, USA.

Knutson, R. (2009), the Wall street Journal, State Finds Funds to Save Some Programs, Avoiding the Most Grim Scenarios, New York city, United States of America,

Leary, K. O. (2009), California’s Budget Crisis: Is there a way out? Times, Los Angeles, USA.

Lin, J. (2008), California budget deficit to hit $21.8 billion by 2010, Associated press, New York City, USA.

Lifsher, M. (2009), the Los Angeles Times: Schwarzenegger signs seven Mortgage laws, Los Angeles, USA.

Nunes, D. (2009), Wall Street Journal, California Gold Rush has been reversed, New York city, United States of America, Dow Jones & Company.

Nnnoli, (2009), State workers call for impeachment of Schwarzenegger: Web.

Pittsburg post-Gazette (2008, August 17), enough said: guess how Pennsylvania stacks up against other states on size of local/state tax burden, Pennsylvania, USA

Sweet, C. (2009), Schwarzenegger vetoes energy bills, the wall street journal, Web.

San Francisco Chronicle, Googles April surprise for state, 2006, San Francisco, USA.

San Francisco Chronicle, State Budget gap deepens $2 billion overnight, San Francisco, USA.

Shelley, Kevin (2003). Summary of Qualifications and Requirements for the Office of Governor, California Secretary of State Department. Web.

Welch & Matt (2009), Schwarzenegger’s Failure. Reason, Vol. 40, Issue 9, Los Angeles, California, United States of America.

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IvyPanda. 2021. "The Governor of California: A. Schwarzenegger." November 23, 2021. https://ivypanda.com/essays/the-governor-of-california-a-schwarzenegger/.

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