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Interview With George Shultz

Aired August 27, 2003 - 20:01   ET


PAULA ZAHN, CNN ANCHOR: Joining us exclusively from Palo Alto is one of Schwarzenegger's top advisers, former secretary of state, labor, and treasury, George Shultz.
Always good to see you. Welcome, glad to have you with us tonight.


ZAHN: Mr. Shultz, as those know who follow this race carefully, Mr. Schwarzenegger's up against dozens of other Republicans and female candidates as well. What was it about his positions that made you go on his wagon?

SHULTZ: I first worked with him just a little bit on the initiative for after-school children. I thought it was impressive, his thinking and the way he went about that. But I had heard about him much earlier than that. I am a great friend and great admirer of Milton Friedman. Milton, as you may know, made, with his wife, Rose, a very strong documentary called "Free to Choose" that explains how the economic system works.

Arnold Schwarzenegger, in 1990, made the preview for it. He stated his views about how the marketplace works, the importance of freedom and all sorts of things.

Can I read to you a little excerpt from what he said?

ZAHN: You'll have to do it quickly. We just have a specific length of time for the segment.

SHULTZ: Anyway, his way of recognizing, he's been with these views a long time.

ZAHN: On your team is also a man, Warren Buffet, who doesn't necessarily always agree with you when it comes to economic policy. How does that work with Arnold in the middle?

You've made it clear you've been an ardent tax cutter over the years. Warren Buffet had suggested that maybe there should be some tax increases in California in the future.

SHULTZ: No, he didn't -- he didn't suggest that.

ZAHN: You think that's been misinterpreted, the quote that is attributed to him about property taxes going up? SHULTZ: No. He thought Proposition 13 should get reviewed and Warren Buffet clearly, definitively disagreed with him about that. That's more a question of tax reform than it is taxes going up or down.

ZAHN: So Mr. Schwarzenegger has made it very clear he would like to impose some tax cuts down the road if he becomes governor. Do you think that is a distinct possibility? Or when you look at the situation that your state bonds are in, is that a good idea?

SHULTZ: I was privileged to work with Governor Wilson, when he was in office, on economic and budgetary issues. During that time, he inherited a situation that was in some ways worse or broadly parallel to the mess we're in right now. He worked at it. He got the spending under control. So it's possible to do that.

If you can get the spending under control, and you get California's costs under control by reforming the workmen's compensation system and other such things, then the California economy starts to move forward, and it starts to generate a lot of revenue with the current tax system.

And when that happens, if you do get yourself to a surplus, certainly tax cuts would be right on top of the agenda. But we're a long ways from there. The first thing we have to do is get the operating budget under control and start getting the debts paid off.

ZAHN: I'd like to switch gears and talk about a part of the world you're familiar with: Iraq.

When you look back on the war, how does what you're seeing now in postwar Iraq square with what you thought might happen? Is it more difficult today than you thought it would be?

Well, I think it's -- it's obviously difficult, and you could see that it would be, because Saddam Hussein ran a regime that, so far as you could tell, bore no resemblance to what you might call civilized society.

So you basically start from scratch and have to build legal institutions and economic institutions and social institutions -- the constitutional arrangements for governance. All that has to be done, and done as we see in the face of die-hards and terrorists of one kind or another who are trying to make sure it doesn't happen.

ZAHN: Sir, what do you think it says that a new poll out by Gallup-CNN-USA Today says only 44 percent of Americans believe the president has a clear plan in Iraq?

SHULTZ: He has a clear plan, in the sense that we saw the dangers. The basic dangers have been put to rest, but there is a huge job to be done in building things back. And there's a lot of progress being made in that, even though there are also many problems.

So it's hard job but a necessary job. And no one should deceive themselves. We must succeed in Iraq and we will succeed but it's very important, central to the war on terrorism.

ZAHN: Do you think the American public perhaps had an exaggerated expectation of what Iraq was supposed to look like after the military victory?

I don't know that the public had any particular sense of it. But no doubt the fact that the war was won so easily, and we saw such a brilliant strategy in doing that, gave people a feeling that everything was -- maybe everything was going to be easy, but, of course, it isn't.

ZAHN: Final question for you tonight, sir. Back to California politics. You seen "Terminator 3" yet?

SHULTZ: No, I haven't seen that movie.

ZAHN: That wasn't a condition of signing on to Mr. Schwarzenegger's campaign?

SHULTZ: I guess I have to go.

ZAHN: Have you seen any of his movies?

SHULTZ: I've seen little snippets of some. I'm not a big movie fan.

ZAHN: You don't want to share one of your favorites with us this evening.

Always good to see you, sir.

SHULTZ: My favorite is the clear position he's taken that we've got to get spending under control and certainly you don't want to have tax increases -- that's not the way to solve the problem. He's very, very clear on that.

ZAHN: Somehow I think a Hollywood producer would be hard-pressed to turn that into a movie. We hear what you're saying loud and clear.

George Shultz, thanks for your time tonight.


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