Governor Schwarzenegger leaves behind a legacy of devastating budget cuts and huge tax giveaways for corporations. In the last two years alone, Schwarzenegger has slashed $32.5 billion from the state budget— and now our schools and roads are crumbling, public safety is at risk, and vital state services have been decimated. And while state workers have endured deep wage cuts, corporations have enjoyed massive new tax breaks.
Now, Meg Whitman is on a mission to ratchet up the pain on working people in California—above and beyond the misery that Governor Schwarzenegger has already imposed.
State Workers’ Jobs
In February, Schwarzenegger announced two-day-a-month furloughs for state workers, which effectively reduced worker pay but did little to help our long-term economic crisis. In fact, economists report that the furloughs will result in a loss of $503 million over the subsequent years. When asked at the time what she would do to balance the budget, Whitman said that she would double the furloughs to four days a week, even though the furloughs actually caused the state to lose money.
When Schwarzenegger increased the furloughs to three days a month (resulting in a 12.8 percent pay cut and loss of an estimated $2.1 billion in wages and benefits for hundreds of thousands of state workers), Whitman went one step further. She announced that she plans to fire 40,000 state workers because she believes the state is “over-staffed.” (In fact, California ranks second to last in the number of state workers per capita, and the ratio of all government employees to population in California is 28 percent below the national average.) This mass layoff would cause unemployment in the state to spike a full percentage point.
Public Employee Pensions
Schwarzenegger has made pension takeaways a major issue and has threatened to not sign a budget without reforms. But despite his rhetoric the Governor has been forced to negotiate directly with unions representing state workers to get agreement on any changes to current pension benefits and contributions.
Whitman supports Schwarzenegger’s proposals, which include raising the retirement age, increasing what workers pay into the pension and ending defined-benefit pensions for new hires and sticking them in risky 401(k)-style retirement plans. But she doesn’t stop there. She’s willing to circumvent collective bargaining, and the elected legislature, by putting a pension cuts initiative on the ballot, and using her personal fortune to fund the ballot measure.
Regulations and Worker Protections
Schwarzenegger has continually attempted to roll back vital workplace protections including daily overtime and meal breaks, and he recently vetoed a bill that would give farm workers overtime rights. But Schwarzenegger did institute some regulations to protect outdoor workers’ health and safety. In 2005, after four workers died from heat-related illness while working outdoors, Schwarzenegger ordered emergency regulations for workplace standards for heat-stress prevention and treatment, making California the first state in the nation to adopt such regulations.
On the other hand, Whitman stated in an editorial board meeting, “On my first day in office, I want to put a moratorium on all new regulations.” That means that regulations to protect workers, consumers, the environment and governing almost all aspects of the state would be put on hold so that Whitman could make a political point. And she’s also expressed that she will continue to push for worker takeaways on meal breaks and overtime pay.
Schwarzenegger didn’t do much in terms of job creation during his time as Governor, and subsequently unemployment has shot up to Great Depression-era highs. But Schwarzenegger has done one positive thing on jobs — he whole-heartedly supports construction of California’s high-speed rail, which would create more than half a million new jobs, speed the movement of goods and people throughout the state, reduce pollution and lessen our dependence on foreign oil.
But unlike Schwarzenegger, Whitman has voiced her unequivocal opposition to the high-speed rail system in California, which was approved by California voters in 2008. She claims that California “can’t afford” the high-speed rail project, even though the costs for the project wouldn't come out of the state's budget, and any delays could jeopardize over $2.2 billion in federal stimulus money.
While high-speed rail would seem like a no-brainer for a candidate for Governor, a closer look at Whitman’s opposition reveals a potential ulterior motive. Whitman lives in a multi-million dollar home in the wealthy enclave of Atherton, which has led the charge against the planned high-speed rail project. Along with other wealthy cities, Atherton has even filed suit to halt the project, despite the clear economic benefits and broad support, simply because they don’t want train tracks in their ritzy town.
Capital Gains Tax
Schwarzenegger pushed some very unpopular changes to California’s tax code in the last year. His tax commission recommended a plan that would flatten the personal income tax and give the wealthiest Californians a massive tax cut while shifting a larger share of taxes onto the middle class. The commission’s recommendations were largely opposed by labor, business and most legislators, though he has tried to resurrect the idea of extending the sales tax to services and reducing personal income taxes.
None of Schwarzenegger’s proposals, however, have been as blatantly self-serving as those that Whitman is proposing. She wants to completely eliminate the tax on capital gains, which is money that wealthy investors rake in on things like stock dividends, bonuses or property sales (as opposed to the payroll income tax that the rest of us pay).
The Los Angeles Times called Whitman’s capital gains tax proposal “a pure handout, and a costly one, to the wealthy, a group that includes the billionaire Whitman herself” concluding the Whitman plan would do little, if anything, to create jobs (and) is “just offering a menu of handouts to favored industries and the rich.”
According to the Franchise Tax Board, 82% of the $56 billion in capital gains earned by California residents were reported by the top 1% of income earners (those making about $500,000 or more) in 2008. George W. Bush pushed through a similar tax cut, which went into effect in 2003, that didn’t create jobs or save the economy from collapsing in 2008. Whitman’s proposal would mean that she and her wealthy friends would get a massive tax break that would cost the state $10.8 billion.
Whitman repeats the false Republican claim that cutting taxes for the wealthy will increase investment in new jobs, but according to a broad coalition of economists and academics, that just isn’t true. In an open letter to Californians, economist Michael Reich wrote:
Eliminating the state capital gains tax would do very little to spur investment in the state. Most California investors’ portfolios are diversified nationally and internationally. Consequently, the vast majority of private income retained by investors would be spent on stock purchases of companies outside the state.
We’ve seen what Schwarzenegger’s polices have done to our state. Once the envy of the nation for our schools, infrastructure, world-class universities and booming economy, California now is at the bottom of many measures of quality of life, as public funding for the most basic services are slashed and more tax breaks are given to multi-national corporations. Whitman would take the pain to a whole new level by eliminating taxes on the very rich, halting regulations to protect workers, slashing jobs and pensions.
The future of California is in our hands this November 2. Don’t forget to vote, and be sure to remind everyone you know what’s at stake in this election.