Special Report

Beware of Hillarycare

California's rebound is threatened by Prop. 72 -- and a Governator too frightened to squawk.

By 11.1.04

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ANAHEIM -- For those appalled by the emergence of the California Legislature, circa the year 2000, as the most reliably left-wing legislative body east of Pyongyang, the Schwarzenegger era continues to be a genuine feel-good story.

A year after taking office, Gov. Arnold Schwarzenegger has made only so-so progress on the biggest problem facing the state government: the massive gap between what it spends and the revenue it takes in. Under Gov. Gray Davis, the gap was about $1 billion a month; now it's about half that. That may sound pretty good. But despite his tough talk, Schwarzenegger doesn't have any credible plan to wipe out the difference, given that he won't target the giveaways to public employee unions or the costly new programs agreed to by Davis.

Still, it's difficult to imagine a more pro-business administration than Schwarzenegger's. His vetoes and threatened vetoes have halted the Legislature's attempt to turn California into an outpost of Western European socialism, and state Chamber of Commerce leaders describe Schwarzenegger in the same terms that hostages use for their rescuers. Meanwhile, every day brings new stories of Arnold personally wooing businesses to move to California or expand operations here. The possibility that the economy (and tax revenue) could grow so rapidly that the state's deficit disappears -- Schwarzenegger's prediction -- seems less absurdly optimistic.

So glory days are here again for California, thanks to a governor who's both competent and charismatic?

We'll find out on today. California voters who had the common sense to recall Davis last year will decide whether to enact the single most destructive law he supported -- and according to the latest Field Poll, it's ahead by 16 percent.

It's Proposition 72, which would require all businesses with 50 or more employees either to provide health insurance or to pay a yet-to-be-created state bureaucracy to provide health care. It would limit how much workers could be charged for their premiums. The law will automatically expand to cover businesses with 20 to 49 employees should such firms be given tax credits by the Legislature.

If 72 passes, by 2007 state businesses would face an estimated $7 billion in new annual costs, wiping out profits, limiting reinvestment, and creating huge competitive disadvantages for many firms in California's huge export industries. (Hawaii is now the only state to mandate employer-provided health insurance.)

And not only would the new law greatly expand the government's role as health-care provider, it would further increase the distance between who pays for care and who benefits from it. So much for any chance of market-driven reforms to contain soaring health-care costs.

CALIFORNIA'S VERSION OF HILLARYCARE is the handiwork of state Senate President John Burton, the quirky San Francisco paleoliberal who's as relentlessly foul-mouthed as the South Park kids. (The first thing he said to me when I met him in January 2001 was, "Are you f--king kidding me?" I had asked him if he thought he could trust Gray Davis. Burton and Davis didn't get along, but in one of Davis' final big decisions as governor, he signed Burton's health insurance bill. It was stayed pending Tuesday's vote.)

Schwarzenegger has joined his idolators at the state Chamber of Commerce in opposing 72 -- but in oddly muted fashion, given the stakes involved. Instead, he's concentrated his political clout on defeating Proposition 66, which would scale back the state's "three strikes" law.

Why isn't the leader who promises "action, action, action" more active against 72? The only theory I can come up with is that any full, honest discussion of the issues raised by the proposition would inevitably move to the tremendous strain on the state's health care system created by California's 2 million-plus illegal immigrants. Ever since liberals and their media allies got away with defining Proposition 187 as racist, most California Republicans have been scared to talk with any candor about illegals, despite their vast impact on schools and public budgets throughout the state. Schwarzenegger -- an immigrant himself, albeit a legal one, and someone who's hugely popular among state Hispanics -- appears just as cowed by the 187 backlash. His administration won't even challenge the canard that illegal immigrants pay more in taxes than they receive in free government services.

Whatever the reason Arnold isn't campaigning against Prop. 72 around the clock, his reluctance to do so could come back to haunt him -- and soon. The last thing a deficit-ridden state needs is an economy in decline -- and the last thing California's now-rebounding economy needs is a $7 billion hit on its annual bottom line.

At least 72's passage would help one industry: movers. The exodus of California businesses to low-tax states like Nevada and Arizona seen under Gray Davis would certainly resume.

Gov. Schwarzenegger's pro-business cheerleading wouldn't stop, of course. But even CEOs who appreciate his charms realize the truth: Sweet talk doesn't pay the bills.

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About the Author

Chris Reed is an editorial writer for the U-T San Diego newspaper, formerly the San Diego Union-Tribune.