Gov.-elect Arnold Schwarzenegger has a historic opportunity to create a Wirtschaftswunder - an economic miracle - for California just the way West German Chancellor Ludwig Erhard did in West Germany after World War II when, as finance minister, he decontrolled prices, eliminated rationing, lowered tax rates and deregulated commercial activity. But it really wouldn't be any more of a miracle in California than it was in Germany. It would simply be the predicable result of a free people unburdened by the state acting in their self-interest to pursue the American dream.
My friendly advice to you, Mr. Governor-elect, is to call Art Laffer, Steve Forbes and Tom McClintock and ask for their ideas about how to rejuvenate California's economy. If you haven't already done it, read fellow Austrian economists Ludwig von Mises and Frederick Hayek, on whose ideas the Wirtschaftswunder was based, and study Erhard's recipe for growth in the how-to book he authored, "Prosperity for All."
When the economic experts descend on you to warn how wrongheaded your proposals are, remember what happened when Erhard implemented his reforms. The military commander of the American-occupied zone, Gen. Lucius Clay, told Erhard that his American economic advisers thought Erhard's free-market reforms were a "terrible mistake." Erhard replied, "Herr General, pay no attention to them; my own advisers tell me the same thing."
Throughout the recall campaign, the media and pundits on the right and the left were lambasting not only the Schwarzenegger campaign but also the recall itself as a "circus." With all due respect to my fellow columnist George Will, who mockingly referred to the recall as a "riot of millionaires," it was no such thing. The recall was truly a revolt of the people similar to Proposition 13, the property-tax referendum that touched off a national tax revolt in 1978.
The anti-business policies of Gov. Gray Davis were simply unacceptable to Californians of all stripes. Arnold was right when he said, "The problem is not California; it is Sacramento." As governor, Davis increased state spending by nearly 40 percent; he did an end run around the two-thirds voting requirement for tax hikes and tripled the car tax by executive fiat. He signed a bill imposing a crushing mandate on employers to grant paid family and medical leave; he kept in place one of the nation's highest sales tax rates; and he added 44,000 employees to the government payroll despite a hiring freeze. There was also the electricity debacle with continued controls on retail energy prices and a workers' compensation system near bankruptcy.
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