01.19.10

How Obama Lost Arnold

In an exclusive interview, Gov. Schwarzenegger tells Joe Mathews why he turned on the president’s health-care plan—and how Obama can win him back.

Is the love affair between California’s Republican governor and the Democratic president over?

For the past year, California Gov. Arnold Schwarzenegger appeared to be the most fervent member of a shrinking fan club: Republicans Friends of the Obama Administration. Schwarzenegger defended the stimulus legislation against GOP attacks. He praised the president’s efforts on climate change legislation. And the governor, having tried and failed to pass similar legislation in California two years ago, remained a stalwart backer of Obama’s efforts to remake the nation’s health care system. A grateful White House routinely touted Schwarzenegger’s support in the face of tea parties, town halls and a terrible slide in public support.

“I spoke personally with Valerie Jarrett,” Obama’s senior advisor, the governor told me. “She said this would be fixed.”

So it came as a shock when the former movie star, in his state of the state speech this month, said that “health care reform, which started as noble and needed legislation, has become a trough of bribes, deals and loopholes.” Unless changes were made to the legislation, he said, Californians in Congress should vote against it.

What changed? I asked the governor, who is scheduled to visit Washington this week in a bid to secure $6.9 billion in federal funds to shore up his state’s finances. In a short interview, he offered three explanations for his more aggressive stance towards the White House and Democrats in Washington.

1. The White House didn’t deliver on its promises.

Schwarzenegger had been lobbying throughout the year to make sure that the expansion of Medicaid that is part of federal health reform didn’t blow a hole in the budget of California. This is a major concern for the cash-strapped state because California has been generous in providing Medicaid benefits even though, under federal formulas, the state receives a relatively low 50 percent federal match for what it spends. (The formula penalizes California because it is based on per capita income—high in California because of all the wealthy folks—and not on its also high poverty rate).

Without changes in this formula and other provisions, a health care bill like the one that passed the Senate could cost California between $3 and $4 billion annually on top of its current $20 billion deficit, Schwarzenegger says.

The governor said the White House had reassured him for months that California would be protected in the legislation. “I spoke personally with Valerie Jarrett,” Obama’s senior advisor, the governor told me. “She said this would be fixed.” Instead, “the bill went south in the last month,” he said, as Nebraska’s Ben Nelson worked out a sweetheart deal for his state on Medicaid funding while California received no protection.

Of the White House reassurances, Schwarzenegger said: “It turns out that was untrue.”

An Obama administration official, speaking on condition of anonymity, said it was too early for the governor to reach that conclusion, and indicated that the issue of state funding was being worked out as the House and Senate bills were combined into one piece of legislation.

The White House, asked for an official response to Schwarzenegger’s comments, emphasized the governor’s longstanding support for health care reform.

"Governor Schwarzenegger agrees that health care reform is vitally important—and he knows as well as anyone that California families and businesses can't wait any longer for relief,” spokesman Adam Abrams said in an email. “Passing comprehensive health-insurance reform will make it easier for those with insurance to afford it, it will help 7 million Californians without insurance get coverage and it will save billions lost every year by the State of California in uncompensated care.”

2. California faces a true fiscal emergency that requires federal action, and Congress is failing to act.

Just as he has been politely lobbying the White House, Schwarzenegger has been asking Congress, nicely, for more money for the state since he reached into office. Not counting the one-time stimulus package, California has in recent years been a donor state, its taxpayers getting back 78 cents for every $1 they send to Washington DC. And its delegation has little history of cooperating in efforts to bring back more federal money (the worst example: the federally funded national research center on earthquakes is in… wait for it… upstate New York).

With the state having already raised taxes and cut $60 billion from the budget, Schwarzenegger and the state legislature have few options. So, the governor said, he had little choice but to get tough with Congress. For his trouble, he’s been blasted by Californians in Congress, including Senators Barbara Boxer and Dianne Feinstein, who both said the U.S. was doing well by California and the state should take care of its own budget problems.

Those responses left the governor even more frustrated. “Who do they represent? California? Or Washington?”

3. He still believes the country needs federal health legislation and doesn’t want to get in the way of historic reform.

Schwarzenegger said he understands it’s a fragile moment for reform, and he doesn’t want to get in the way. Asked if he was worried about sabotaging reform, Schwarzenegger said: “they have bigger troubles if I’m the one who does it.”

The White House is hardly in danger of losing this particular Republican completely. The governor and I spoke late last week after an event in Compton, the famously tough city in Southern California, where Schwarzenegger signed his state’s application for $1 billion under the president’s signature education program, “Race to the Top.”

The governor said the president had been crucial to convincing California Democrats to make the state eligible for the money by changing state law on teacher evaluation, despite the opposition of teachers’ unions.

“The Obama administration came in and gave us this extra push,” he said, gratefully.

Joe Mathews is a journalist, an Irvine senior fellow at the New America Foundation, and a contributing writer at the Los Angeles Times. He previously served as Justice Department reporter for the Wall Street Journal and as a city desk reporter at the Baltimore Sun. He is the author of The People's Machine: Arnold Schwarzenegger and the Rise of Blockbuster Democracy.