Dialogue: Gov. Arnold Schwarzenegger

Squaring the budget and rebuilding California are all in a term's work for this busy politician.

Gov. Arnold Schwarzenegger is a man of many offices. In addition to his gubernatorial digs in Sacramento, he has a state office in downtown Los Angeles and maintains a civilian sanctuary in Santa Monica. A holdover from his days in filmmaking, it's his most personal work space, filled with art and artifacts and family pictures along with the trappings of state -- all of which he discusses with great relish. A replica of the Harrier jet from 1994's "True Lies" hangs above a pool table, beneath which lurks the crocodile from 1996's "Eraser." Across the room, there's a heroic bust of Vladimir Lenin. "It was a gift from a Russian weightlifter friend. When the Soviet Union fell, these were the hugest things to get a hold of. I told him how great it was, and he sent another one the next year. So, now I have all the Russian leaders," he laughs. "It reminds me of what worked and what didn't work. Communism obviously didn't work. These are the winners over here," he says, gesturing to a gallery that includes former presidents Ronald Reagan and John F. Kennedy. There also is a wall full of trophies for acting and bodybuilding, as well as photos documenting his public and private life. An etching of an old castle triggers memories of growing up and playing in a real castle in his Austrian homeland. With Christmas tunes jingling in the background, the governor welcomed The Hollywood Reporter's Paula Parisi and Carl DiOrio on Dec. 18 to reflect on his first years in office and look ahead at the term to come.

The Hollywood Reporter: You're known as a centrist, a very moderate Republican. Are you doing anything to groom the next generation of Republican leadership along those lines?
Arnold Schwarzenegger: I'm always telling my Republican friends that the center is where the action is. But at the same time, I'm telling that to the Democrats, too. Because you have to remember, the fastest-growing party right now is not the Democrats or the Republicans, it's the Independents. They say that 20 years from now, it will have outgrown each of the parties. So, what does that say? It says they don't see a school being built as a Democratic or a Republican school. It's just, "Build the school! Build the road! Give me health care!" Not, "Give me Republican health care!" Increasing the minimum wage may have been a Democratic idea, but when you see how the people, the hard-working people of this state made the economy come back over the past three years, you've got to share the pot with them, too. It was the working people who did the job. I think redistricting will solve a lot of this because the way the district lines are drawn now -- it's all about keeping the Republicans shooed into their district and the Democrats shooed into their disrict, and there's no competition.

THR: You certainly succeeded in bringing people together in Hollywood because you had all these traditionally Democratic, liberal Hollywood people coming out in support of your recent campaign. How did that work? Did you outreach to them, or did they offer their support to you?
Schwarzenegger: Both, but I think it was also that they looked at my work, and the question always was, "What is it that this administration does that makes you maybe want to vote for someone else?" Is it that we're taking care of the environment too well? Are we paying down the debt too fast? Are we taking care and sending too many kids to after-school programs? Is it that we have an ocean action plan to clean up the oceans? Or that we're creating parks underwater, like we did 100 years ago with the national parks, to protect the fish and ocean life? Do we not want to have the cars drive on alternative fuel? Is that a bad idea? What is it? Tell us, so we'll know. And eventually, they couldn't come up with anything. I get a lot of phone calls from people in the Hollywood community, and they say, "I have to tell you, you're doing a great job." More and more people are saying, "You're doing a great job."
I think the environment is a very important issue. It's an important issue to our town, and because of that -- since I was part of the town -- I became much more conscious of protecting the environment. So that means a lot, like my stance on things like taking care of the animals. Little things that sometimes are little things to you and the person across the street but not really for the people who own animals and are into that. I have some very interesting animal-protection women working in my office here. My whole office is filled with Democrats! (Laughs) Animal protection and the environment -- it's really intense, this office. These are all people who have been working with me for 5,000 years.

THR: So, you didn't fire them just because they were Democrats.
Schwarzenegger: No, because I like people who bring something else to the table that would add to my thinking. Let's assume for a second that I never thought about it. If they're making me aware of it, well, that's great. That's one of the things I love about my wife (Democrat Maria Shriver). She sometimes thinks about things and brings up issues that I may not think about, and I bring up issues that she doesn't think about. So, it complements it: if you don't feel defensive about it and if you don't feel like my way is the only way. I always felt that I have my way of thinking, and I hope that someone else can bring their ideas to the table also, and I can learn something new.

THR: Were there one or two individuals, like, say, (former Paramount chief) Sherry Lansing, who were key to you getting the support of Hollywood?
Schwarzenegger: I didn't lobby Sherry. I think Sherry came around on her own because she's a (University of California) Regent and works with our administration on things like keeping production here in town and helping us in many other areas where we need someone with a really broad understanding who knows about politics, knows about Hollywood issues, knows about family issues and knows how to make things work. But she always was a known Democrat and supported Democratic issues, so I always wanted her to work for us because she's a smart woman, and I respect her from the movie days. But I never asked her. However, I think she came to the realization that the things we do are exactly her priority. At one of the events we did in Beverly Hills, where we brought all the Democrats together, she introduced me. Sherry said, "Let's go through an inventory: What are the things that I like that the governor does, and what are the things that I don't like. After going through this list, I like everything he does. Why just because he has an 'R' in front of his name should that really make me be a closed-minded person? Or do I want to be a 'liberal' that has an open mind. That means open-minded if you can accept a Republican and vote for him if he does the job right." So that was her thing, and she told that to the people in that room when she did her presentation and introduced me.

Then I talked about the things that we're doing, and they all walked away and said, "That's great!" Including stem-cell research. These are people like Jerry Zucker, who has a daughter that has diabetes and suffers tremendously; if we have stem-cell research, his daughter can be cured. She's young, so she can maybe wait 10 or 15 years. There are some people, like my father-in-law, who has Alzheimer's -- there's no cure for him because he's 90 years old. But for the young, there is still hope. That kind of thing has nothing to do with party lines. It's crazy to think of stem-cell research as a Democratic or Republican issue. Now some people, no matter what party they belong to, base that decision on their religion, and that's a whole other thing.

Mrs. Reagan, a longtime Republican and former first lady, is big believer in stem-cell research, as are an endless amount of Republicans and Democrats. That's why it passed -- Proposition 71 passed because it had such an overwhelming majority of people interested in it.

The interesting thing is even among the legislators in Sacramento, the Democratic legislators felt they could work with me. We passed one bill after the next bill after the next bill, and we worked together even though it was an election year, which was very unusual. And they felt there was going to be a backlash -- they thought the union and the Democratic establishment were going to go after them after the election was over. And they all told me they never heard from anyone. Everyone was pleased.

And it's not my style to retaliate. I would never go after someone who didn't support me. I would just think I wasn't good enough in convincing the person to support me, so that's OK, too. I serve all 37 million and would never look at the party, the color, the religion or anything.

THR: In that bipartisan spirit, would you ever want to be proactive on a real Hollywood issue? For instance, AB 777, the runaway production bill -- you were favorably disposed to it, but it didn't make the grade in the last session, and whether or not Speaker Fabian Nunez (D-Los Angeles) or someone introduces a similar bill this session remains to be seen. But would you be tempted to be a little proactive on the runaway production issue?
Schwarzenegger: I think we've been very proactive. There's never a budget conversation that comes up where we're not putting that on the table. But we have Republican leaders and lawmakers that know that our farmers are struggling and would like subsidies. They know that our manufacturers are struggling and would like subsidies. Factories are going to Mexico and other places, though in this past year, there's been some movement again, and they're coming back. There's been major problems for the past 20 years or so where production went outside the state, but we never really subsidized them. So, now this is the Republicans that do all the different businesses who say this business is struggling. How can we go to those businesses who for years and years and years told us they want subsidies, they want tax incentives, they want some relief, and we said no. All of a sudden, Schwarzenegger comes from Hollywood, and he says, "Give Hollywood a break," and we make it happen. How does that make us look? So that's their argument: Find a package where we can give them all relief, then, of course, we love to bring Hollywood in and make it part of it.
The Democrats, on the other hand, have a different argument. Sen. (Don) Perata (D-East Bay) and says how can I walk by my homeless people -- see them lying on the streets, sleeping in the cold, not having any food, year after year after year -- and say to them, "I can't get you any more money. We're doing as much as we can with the state and local government, but we don't have the money. But by the way, I managed to find money to help the Hollywood moguls."

Because even when you provide tax incentives, that means a loss of tax revenue, and we had set aside $75 million for that. So, that's their argument, and they feel uncomfortable and say unless we do something more for them, so I can go to them and say guess what, we've got a few more million dollars here for you, and by the way, we're also giving a couple of million to Hollywood. Then the $75 million package suddenly becomes a $500 million package. That's the problem. So, it's not like I can just go out and put a lot of noise on runaway production. One of the things I learned working in Sacramento is that it's important to understand the other side. What are the challenges? The way I can work with Speaker Nunez and Sen. Perata and the Republican leaders is if I can understand their challenges, their obstacles. What is the reason you can't sign this minimum-wage increase? You're giving $1.25 increase, why can't you sign that? He has to be able to tell me that so I can work my way around that challenge to help him be able to say yes. That's the way it works.
I've always said that our economy will solve a lot of the issues. As soon as we've paid off our debt and we have the money available, we can do what New Mexico is doing, we can do what New York is doing, we can do all of those things. And it may very well be that this coming year we feel comfortable doing that. If we bring the budget deficit and the structural deficit down to zero, then we have a possibility to open up this discussion again. They all want it. There is nobody who is anti-Hollywood. Perata is positive about it, Speaker Nunez, the Republican leaders -- they all say we would love to help Hollywood. Let's just add the other things so we have a nice package for everybody.

THR: Do you think a package like that will be introduced this session?
Schwarzenegger: It will definitely be negotiated because we have it as part of our agenda.

THR: You also cite a balanced budget as a priority. Do you really think you can wipe out the state's deficit during your next term?
Schwarzenegger: The structural deficit, absolutely, and also paying down our debt. As a matter of fact, our recovery bonds from Propositions 57 and 58 that passed a few years ago -- those will be paid off (by) 2009 or 2010. But there's always new debt. We just approved the $42 billion infrastructure bonds.

THR: Having moved on to the political arena, do you think the studios are smart about how they do business? It's been said that the studios are turning into banks, becoming financing and distribution mechanisms.
Schwarzenegger: The business changes. The studios, since they've been absorbed by bigger entities, are looking at moviemaking as much more of a business (instead of), 'Let's do something fun or create something artistic.' There are stocks involved and shareholders. So, it's a different structure, but the movies still are getting made. The corporate structure is not so comfortable with being at risk themselves, so they'll diversify; they'll bring in some French money or German money or make a partnership deal with Japan. They don't want to have all their eggs in one basket, which, you know, you can't blame them for that. But the whole idea, the way it was when (Jack L.) Warner started his studio or what (Walt) Disney did -- where it was their idea, they raised the money and they went all the way until it was on the screen -- that is pretty much gone.

THR: Do you have any aspirations to return to Hollywood at some point further down the road?
Schwarzenegger: First of all, I never think about what I'll do four years from now because why would I be interested in that? You have to plan so many things that that's actually a fun thing not to plan. In fact, the day before I announced (my 2003 gubernatorial candidacy) on (NBC's) "The Tonight Show With Jay Leno," I didn't know what I was going to say. Therefore, why would I make a plan four years ahead?

In the business world, you like to be disciplined, you like to plan, you like to make the appointments, you like to have a vision: Where's California going to be 20 years from now? I'm a fanatic about that because California really didn't have a vision for so long. You could go to any street in any city or any town and ask someone, and no one could give you an answer. But now people know: We're going to rebuild California. We're going to build our roads, we're going to build our schools. So I like that because for that you need to plan, you need the people's approval, you need to bring legislators together -- you need to have a vision. But in (one's) personal life, I think it's much more fun to just not know.

Because how do you know how you'll feel two years from now? Or four years from now? You may feel totally different. So, why schvitz over now with, 'What is my plan?' With the recall, no one could have planned any of that. When I was finished with (2003's "Terminator 3: Rise of the Machines") promotion -- the last city was Mexico City, I remember, July 31 -- all of a sudden, they say they've got the signatures, and there will be a recall. How could you have planned that four years before?

No such thing. Some people like to know, but I left Austria because I was sick and tired of people coming up to me in school and saying, "I'm going to work for this bank," or "I'm going to work for the police or go into the military or work for the government because then I'll have my health insurance and have my pension." The thought of worrying when you were 18 about who is going to pay your pension -- can you imagine how depressing? Worrying 50 years ahead. That's not my style.

That's why I never did a TV series, either, because I didn't like the idea that you go to work in the morning, and you know that three years from now, you're still going to go to the same set and work with the same people, and five years from now if everything goes well, you'll still be with the same people. I like a little more uncertainty in my personal life. But with government, I like certainty: plans, vision, bringing people together and getting things done. Those may seem like two opposites, but for me, they go hand in hand.

THR: What are your biggest successes and your biggest disappointments from your first term in office?
Schwarzenegger: All of the stuff I accomplished I'm proud of, and all the stuff I didn't accomplish I'm upset about! (Laughs) It's very simple.

THR: We need a dramatic moment here.
Schwarzenegger: I did a pump for the whole year on the special election and it just didn't work. It was obviously the wrong approach, to rush it that much, and not to be inclusive enough. Mistakes were made. So I'm disappointed in those things that didn't work. But we will go back and readdress those things, and we will get it done one way or another.

Gov. Schwarzenegger inauguration