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CNN Larry King Live

Encore Presentation: Interview With Arnold Schwarzenegger

Aired September 21, 2003 - 21:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LARRY KING, HOST: Tonight Arnold Schwarzenegger, the man everybody's talking about, talks. Arnold Schwarzenegger for the hour, next on LARRY KING LIVE.
It's always a great pleasure to welcome Arnold Schwarzenegger. He's been on this program frequently in the past, but never as a candidate for the Republican -- to be the Republican governor of the state of California.

By the way, let's get the thing current. The three-judge panel ruled that the recall should go to March. And now there's an appeal, and the California secretary of state has joined the recall performance in urging a federal appeals court to reverse.

What do you think they're going to do?

ARNOLD SCHWARZENEGGER (R), CALIFORNIA GUBERNATORIAL CANDIDATE: Well, I think that the will of the people will come through. I mean, I think it's very important the people have signed -- you know 1.6 million people have signed the petition to recall Gray Davis. I don't think that the judges can go against that. You know I think it would be a big mistake.

KING: Does it bother you, though, that some elements in the state will be forced to vote differently than others, that people will have to deal with chads and the kind of confusion Florida had? Doesn't that bother you?

SCHWARZENEGGER: Well, no. I mean, the thing is that it's the very same system that has elected Davis and Bustamante the last time, so how bad can it be, right? I mean, it's the same system, so why change it now?

So I think they should move forward. I think that we have to listen to what the people want. And the people very clearly, have said we want to have a recall. I think if you look at the polls, that 55 to 60 percent of the people who say they want to have a recall. So I think it will be a mistake, like I said, you know, to now change that.

For me, in my mind, you know, there's...

(CROSSTALK)

SCHWARZENEGGER: Exactly. I focus on October 7. To me, that's the election. I will campaign for that particular day. And I think in the end that will be the election date. KING: If it does switch to March, you're not going to change it? You're still going to keep campaigning, right?

SCHWARZENEGGER: Yes. Well, first of all, I don't even think about that. You know my mind, the way I work in competitions and all those things.

(CROSSTALK)

KING: I know.

SCHWARZENEGGER: There are certain things I don't think about, hypothetical things, because I think there is just so much work right now to be done. And you know we have to zero in on that date and make sure to get the message out there, do enough interviews, travel around the state, and really campaign. And so we are set for that date.

KING: So that's the focus.

SCHWARZENEGGER: That's what I'm focusing on...

KING: You say you'll be disappointed if that were to change.

SCHWARZENEGGER: Well, I think the Californians will be disappointed, and I think that everyone, because we have now spent money, we have now campaigned, you know, for the October 7 date.

KING: What do you make of those who say the recall, if you don't recall for something like criminal acts, you could have a mass recall. You could start recalling people all over the country just because you don't like the way they govern.

SCHWARZENEGGER: Well, I think that a recall, that it qualified. It was actually a shot that rang out throughout the country. You know, to all the Democrats and Republicans alike. It's a message that became very clear to -- you do your job and represent the people and if you don't, you're going to get voted out. There will be a recall.

KING: So you like that concept?

SCHWARZENEGGER: Yes, I think it is good. I mean, you have to understand that -- for instance, in California, Hiram Johnson came up with that whole idea because of special interests and powerful interests, industries 90-plus years ago, and have controlled politicians here in California. They set up the candidates, they controlled them and manipulated them because they had all the money.

So that's why this recall came about in the first place. And now today we have the same situation, that nothing gets done, people are very dissatisfied about what's going on in Sacramento right now. That's why -- you know there were many attempts made in the past about having a recall, but none of them have gone to the extent to where it is now.

There are 1.6 million people who signed up. And the polls show very clearly that they want to have change. KING: But what you're saying is that if the people of Nebraska feel that way or Montana, they are welcome to do the same thing.

SCHWARZENEGGER: Well, not every state has...

(CROSSTALK)

KING: But if you have it...

SCHWARZENEGGER: But if they do have it, yes, absolutely. I think that what happened is in California, I mean, the Davis- Bustamante administration has pulled wool over people's eyes twice. And, as you know, in California, we have a three-strike system. The third time, out they go.

KING: Have you had any thoughts since entering the race -- what surprised you so far about running? You never ran for office.

SCHWARZENEGGER: Well, I think -- no, I have not, no. So you never know what to expect. I think that the egg throwing was one of the surprises. You know, when it was done in Long Beach at the university.

KING: Yes.

SCHWARZENEGGER: That was a surprise. It was like this thing and I just moved on. But I was amazed about that.

And the other thing I think the big surprise was over the three judges saying, you know, that the recall would be postponed. But...

KING: But has anything surprised you about running, about the whole concept of campaigning, appearing, appearances?

SCHWARZENEGGER: No.

KING: Your personal life examined.

SCHWARZENEGGER: Well, no. I think that you know all of those things when you go into a race. I mean, you know that they're going to examine your life. You know that they do opposition research and that the other candidates continuously try to hammer away and distract people from the real issues and get them away and come in with all this other stuff from your background, what did you say when you were four years old to your mother while she was feeding you. And what happened in 1977, what happened in...

KING: So that didn't surprise you?

SCHWARZENEGGER: No. I think that I knew that, because when you make the decision to run, you have to think about all those things. And I had, you know, many, many discussions with my wife, with Maria, who has been such a jewel in this campaign and such a great support system. We even talked to the kids about that. What would that mean? You may hear bad things in school from other kids and all this. So we talked about this. So it's not really a surprise. I also knew that it would be a lot of work, a lot of studying, trying to really get up to speed with the issues and all those kinds of things. So I work sometimes to midnight and read and study.

Now I sit on the Lifecycle, for instance, in the morning at 6:00 and ride an hour of the Lifecycle and have my papers in front of me and not watch TV. So, you know, I knew those things would happen.

KING: How close did you come to not running?

SCHWARZENEGGER: Actually, it was going back and forth, Larry.

KING: Even today?

SCHWARZENEGGER: Well, not today, no. But I think it was going back and forth because for 14 days -- you see, throughout the whole promotion of "Terminator," I always kind of like blocked it out. I always said to people, "I don't want to deal with this right now. We don't even know if a recall will happen. We don't even know if we'll get enough signatures and all that."

So then I came back I remember after my trip to Mexico City, and that was my first -- that was my last stop for the promotion of "T3." I came back and then after that I heard that now there is a recall. So that's when I sat down with my family, with Maria, with my friends, and we talked about -- I called a lot of friends and talked about that. About what the pros and the cons are. But then in the end, you know, it just was in my heart and it was in my gut. And Maria said to me, "Whatever is in your gut, you should go with that."

KING: And no regrets?

SCHWARZENEGGER: I have no regrets, no.

(CROSSTALK)

SCHWARZENEGGER: Larry, this has been a really exciting thing so far. I mean, it's a great learning experience. Then it's a refreshing thing to do. And then to be in touch with the people out there, to travel up and down the state and to talk to people and to listen first hand, I never heard those kinds of complaints.

I never heard people talk to me about the pain they go through, the suffering with their businesses, how their profit margins are shrinking, the things that farmers go through, about the water rights, about the pollution, about the energy, about all of those kinds of things. And about them being squeezed. So this has been really fascinating...

KING: Let me get a break.

SCHWARZENEGGER: ... and one of the great experiences.

KING: We'll be right back with Arnold Schwarzenegger. He's a candidate for the Republican -- to be the Republican candidate for governor of California. Well, he's a candidate to be the governor, because if he wins and the recall -- if they accept the recall and he wins, he wins no matter what the -- whoever gets the most votes wins. There's no runoff.

We'll be right back.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: We are the luckiest people on Earth because we live in a country that we, the people, have the right to decide if the politicians are...

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: Are we going to win in unity with our common fiscal conservative principles?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GOV. GRAY DAVIS (D) CALIFORNIA: He clearly doesn't have very much experience in public life. And I can tell you that recycling old lines from movies only gets you so far.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

LT. GOV. CRUZ BUSTAMANTE (D), CALIFORNIA GUBERNATORIAL CANDIDATE: Arnold doesn't share our values. He doesn't live lives like we do. He doesn't have the same worries that we have. He won't fight for our families, our neighborhoods, our schools. He doesn't understand our lives.

(END VIDEO CLIP)

KING: That was Mr. Bustamante, preceded by the governor. Want to respond? You don't understand what the average guy goes through?

SCHWARZENEGGER: First of all, let me just say to you that I like when politicians up there, like Davis and Bustamante, talk about experience and about details. What has gotten us to the situation that we are in right now with this disastrous economic situation? And we have the worst credit rating, we have the hugest budget deficit, businesses are leaving, jobs are leaving. What has gotten us in this situation? All their experience. Think about that.

So it's experience and it's all the details that they have that's gotten us into this situation. That is the big problem. They think that they have a lock on their job. They think that you have to work your way through the halls of Sacramento to get to that job. But they're wrong, because the people are sick and tired of the politicians up there. They're disappointed about what they have accomplished in these last few years, and this is why they want a recall.

KING: When they say you don't understand the common man, you're not the common man.

SCHWARZENEGGER: Well, first of all, as you know, that I've been involved out there with issues for so many years.

KING: Education mostly.

SCHWARZENEGGER: And remember that I've traveled around the world, America and the world, for the last 20 years to work with Special Olympics, to work with people with mental disabilities. I was the national coach and have become the international coach. I've become the torchbearer for them.

I've become the ambassador, traveling all around the world, including -- I was just two years ago in South Africa with Nelson Mandela, driving around to increase the amount of special Olympians, so they could have equality, respect, and they can have regular jobs and get good education and all that stuff, which is an organization, as you know, my mother-in-law started. And also with after school programs.

I was with the president's Council on Physical Fitness and Sports, and I was the chairman. I traveled through all 50 states. I don't think any of those two guys have ever traveled all 50 states and have really gotten into the schools. And I'm talking about really working in the schools, creating after school programs, creating fitness programs and all those things, not just for the photo op, like those guys do.

Those guys go in there, read a little book, and sit around with the little children. And then they do the photo op and as soon as the photo is over, they split and you never see them again.

So I can relate to the inner cities. I've been in the inner cities with the after school programs. That's why, because I want to create equal education, equal opportunities for those kids. So I know about the ordinary lives out there. Plus, you know the way I grew up in Austria.

KING: I know. I know. Why won't you debate them then?

SCHWARZENEGGER: I will.

(CROSSTALK)

SCHWARZENEGGER: Yes, but you know the other thing is just little warm-ups. We go for the Super Bowl of the debates. That's what this will be.

KING: One... SCHWARZENEGGER: This is the same, you know, in bodybuilding. When I was competing in bodybuilding...

KING: You didn't...

SCHWARZENEGGER: I didn't go into Mr. Venice Beach contest. I didn't go into the Mr. Seattle contest. I didn't go into those little -- I went for the Mr. Olympia.

KING: But the questions are submitted in advance. That's not a debate, is it?

SCHWARZENEGGER: No, no. There will be discussions. People will know what kind of an idea -- and this is a rule that they came up with.

We decided to do this debate with the California broadcasters, which will be then viewed and aired on all the networks. We'll have a high rating. Everyone will be able to watch it. All the candidates can participate in that. And that's what we're going to do.

In the meantime, remember that every day I debate. Every day when I'm out there and I'm talking and doing interviews there's a debate. I'm doing sessions like, "Ask Arnold."

Yesterday, for instance, I had a wonderful session down there at the Hollenbeck Center. We (UNINTELLIGIBLE) 200 immigrants because it's a special time for me because I just celebrated yesterday my 20- year anniversary of becoming an American citizen.

So this is a big celebration. Maria got me a whole bunch of balloons and all those kinds of things. But I wanted to do this "Ask Arnold" session with immigrants, because I can relate to the immigrants. You know I will be a governor that is an immigrant that can relate to the problems immigrants face.

KING: Last week, you made a speech calling for unity in the party, the party should not be -- not united. Are you calling for the other major Republican candidate to quit the race?

SCHWARZENEGGER: No.

KING: Why don't you publicly ask him to quit?

SCHWARZENEGGER: Because it will be presumptuous for me to do that, Larry. I mean, I think that, you know, McClintock is a smart guy. He has been involved in politics for a long time. And I think that he has to make the decision himself.

Even though he thinks that I'm trying to force him out and I'm having people talk to him, it's not true. I never tried to get him out. It's a decision that he has to make. I just say that, mathematically speaking, it is easier to win. And the chances are higher to win if it's only one candidate, and I'm asking for the party to unify, to come together.

KING: So you're talking to the voters, then?

SCHWARZENEGGER: I'm talking to -- exactly.

KING: OK. Because, by the numbers, as the current polls say, that if he doesn't quit, Bustamante is five points ahead. How do you feel?

SCHWARZENEGGER: Well, this is -- you know you can't pay that much attention to those polls. In our polls, we are ahead.

KING: You're running polls now?

SCHWARZENEGGER: Absolutely. I mean, in every poll that I've seen, we are ahead in the polls. But, again, you're absolutely right. Mathematically speaking, he would take 13 percent away from me.

So, therefore, the chances, if he's not in there, are better for me to win. It's very simple. But I'm not going to tell him to get out. That's a decision that he has to make.

I look at it in the positive way. I think that things will change in the next three weeks in my favor. And I think it could very well be that even if he stays in that I can win this race.

KING: Do you expect him to stay in? He says he's staying in.

SCHWARZENEGGER: You know, I have no idea. I cannot speak for him. That's a decision that he has to make, like I said. You know he has his own way of thinking, and I have mine.

KING: You keep saying you're a conservative Republican, but in some major Republican issues you are not in accord with the concept of the party, certainly with regard to abortion, the right of women to choose, gay rights, et cetera. Would you agree that you could be safely called a "moderate"?

SCHWARZENEGGER: Well, I have always said that I'm fiscally conservative. That is the key thing. I'm a Republican who is fiscally conservative, that I believe that we should never spend more money than we have.

That's the big problem in Sacramento. That's what has gotten us into the situation that we are in.

KING: So you're moderate in social...

SCHWARZENEGGER: I'm a moderate in some of the issues, yes.

KING: And you're not afraid not to say that?

SCHWARZENEGGER: I'm not afraid. No, no.

KING: You haven't changed any positions since running?

SCHWARZENEGGER: No, absolutely not. I believe very strongly in certain things. You know, if it is choice, I'm against partial abortion, you know, all those things. But I'm for the second amendment, you have the right to bear arms. Even though I'm with moderations like the Brady Bill and...

(CROSSTALK)

KING: ... him having a machine gun?

SCHWARZENEGGER: Absolutely. And also I'm against heavy assault weapons, and also to close the loophole, and all those things. But you know there are certain things also about, you know, domestic partnership rights and all of those things I am for. But when it comes to fiscal policies, I am very conservative, because we cannot continue the way -- what we are doing right now.

KING: Arnold Schwarzenegger has done very well. He's made a lot of money. I'm going to ask him in a minute what's it going to be like to run a state where the purpose is not to make money. We'll be right back.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: The man that is failing the people more than anyone is Gray Davis. He's failing them terribly. And this is why he needs to be recalled. And this is why I'm going to run for governor of the state of California.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: No one knows profit and loss better than you. Here's what the movie costs, here's what it took, here's what we took in. Here's my businesses. You invest in many businesses; you've been very successful.

Running a state ain't the bottom line. The bottom line is not how much we made this week. It's a non-profit organization. Can you run it?

SCHWARZENEGGER: First of all, you should have profits. You should...

KING: The state should have profits?

SCHWARZENEGGER: You should have at the end money left over. You should not spend it all. And then if you have some money left over, you should put it in a rainy day fund.

The biggest problem that we have in this state is that those politicians only know how to sign a check on the back of the check rather than on the front of the check. And, like you said, I have run businesses before. I have met the payroll.

I have dealt with workers' compensation and with health care and with all those kinds of issues. I know what it is like. We can do the same thing in this state like running a business. We just have to really think ahead and have a vision and have leadership.

We cannot go in and see, like the situation in the last few years, when you see the state increased by 21 percent, revenues increased by 28 percent, and our spending increases by 36 percent. What's the point of that?

KING: The problem, though, is that everyone has a logical reason for what they spend. The schools need money and this needs money.

SCHWARZENEGGER: No, no. The schools are tied in -- Prop 98 has taken care of education, it's 40 percent...

KING: How do you know what -- what would you, for example, immediately cut?

SCHWARZENEGGER: Well, I think, first of all, like I said, the most important thing is to put a spending cap on it because you want...

KING: For all the spending?

SCHWARZENEGGER: Just a spending cap on it, because the first thing you want to do is stop the hemorrhaging, stop the bleeding. Because when you have a patient, when you have a guy that has an accident and he is bleeding, you don't worry about first how to fix the guy, but you worry about the bleeding. Stop the bleeding.

That's what we have to do with the current operating deficit: stop that. Stop it. Put a spending cap on it.

Then we have to open the books. Like I always said, auditing is the most important thing. I tell you, with workers' compensation, we cut down half of what the expenses are, what the costs are there. That will have a tremendous impact on the state workers that we have here. We can get a billion, $1.5 billion out of Medicare, huge frauds, huge amount of expenses...

KING: (UNINTELLIGIBLE).

SCHWARZENEGGER: We can take money out of that. The tax -- for instance, the tax amnesty, there is billions of dollars coming in through that. We have to go to the federal government. We have to go to the federal government and say, wait a minute, we are paying for each dollar we pay you in federal taxes, we only get back 77 cents.

I will be going there and I will be collecting money for the state. I would demand that. By the time I'm through with this whole thing, I will not be known as the Terminator, I will be known as the collectinator (ph). (UNINTELLIGIBLE).

KING: You talk about workman's comp and the cost of workman's comp. But workman's comp helps people. There's a need for workman's comp, to take care of workers who are in need. Are you telling the workers of California that you're going to cut their compensation?

SCHWARZENEGGER: Larry, the sad story is that we have the highest costs in workers' compensation but not the best benefits. I have just met the other day a man that was in a wheelchair. His name is Frank. He fell off -- through an elevator shaft, and he hurt himself badly, on the job. He's now in a wheelchair. He can never work again. You know what he gets a month? He gets $800 a month. Now, that is not fair when we have the highest costs here. We are talking about three times as much as the average of other states in this country.

Do you know that it costs five times as much to hurt -- to injure -- to break your arm, let's say, on the job than at home? It is ridiculous. We have to have utilization schedule (ph). We have to have certain things -- how many times should you be allowed to go to the doctor? People go three times as many times to the doctor. There's this whole scam going on between the lawyers and the doctors. And as soon as someone gets injured, the lawyer comes in, says, I can represent you...

KING: This is statewide?

SCHWARZENEGGER: This is statewide. He sends you to a doctor. The doctor examines you five, six times. Then he sends you to an X- ray. Then he does his thing. Then he sends you to the chiropractor, then he does his five sessions. Then he sends you to the physical therapist. And this is what goes on because they want to ring up the cost. That's because the lawyer collects one third of what...

KING: Are you saying...

(CROSSTALK)

KING: ... compensation, yes.

SCHWARZENEGGER: Work compensation...

KING: Are you saying a lot of people are doing this?

SCHWARZENEGGER: A lot. This is why we have this big problem here. And you know, we have to start, we have to go in there and say, renegotiate this whole thing, have reform. Worker's compensation reform, and look at the other states, what they are doing and model it after those states.

For instance, we have no clear definition in this state what is permanent disability. The other thing that is very important is that when people get injured on the job -- like, I have a friend of mine who has a body shop. If one of his guys got injured on the job, he cannot do that same job anymore. But he has been retrained, educated, reeducated so he can do -- and to write up estimates, and stuff like that. So what we have to do is we have to help people. No one wants to be out of a job, Larry. People want to work. People want to be productive. That's what we want to do. So it needs an entire worker's compensation reform.

Look what they just have done. It is -- it is total bogus what they've done. It was pre-election, you know, trickery. It's like the budget. If you look at the budget, moving numbers around, make all this kind of special effects. The budget that we have, the current budget, has more special effects than "Terminator III." It is outrageous.

KING: Can the governor change it?

SCHWARZENEGGER: Absolutely. He -- but I mean, he has to create leadership. That is the thing. And he doesn't.

KING: (UNINTELLIGIBLE).

SCHWARZENEGGER: And he doesn't. He has failed with the leadership. Every one of those guys up there, Cruz Bustamante, they failed with the leadership, and that's why the people of California are fed up. That's why they want to have change.

KING: Back with more of Arnold Schwarzenegger right after this.

(BEGIN VIDEO CLIP)

MARIA SHRIVER, WIFE OF ARNOLD SCHWARZENEGGER: I wanted to say how proud I am of my husband, for his courage to enter this race, for his commitment to the people of California. I think he is a serious, compassionate, smart, calm, compassionate man. And I think that he will represent Democrats, independents and Republicans, men and women all across this state.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: We're back with Arnold Schwarzenegger. Are the Kennedys going to campaign for you?

SCHWARZENEGGER: No.

KING: No?

SCHWARZENEGGER: No.

KING: Eunice announced for you, though.

SCHWARZENEGGER: No, both of them have -- all of the in-laws have been great supporters throughout the years, and they are a great supporter for this -- for this campaign. But you know, I don't need them to campaign. I mean, I...

KING: You wouldn't want them to come in?

SCHWARZENEGGER: No. I mean, I -- I just want their support. That is the important thing for me. But this is between me and the people, you know, that I want the people power. I mean, the other candidates, you know, Davis and all those guys, can bring in all the Democrats, from -- you know, all the leaders...

KING: They're all coming in.

SCHWARZENEGGER: ... everyone -- Clinton -- everyone is coming in, and they're campaigning. And I... KING: Against recall.

(CROSSTALK)

SCHWARZENEGGER: I understand, you know? But where were they in the last five years? Where were they when it was thinking, when they were burying this state, when businesses are leaving, when jobs are leaving and people are fed up in this state, and we have the hugest financial crisis -- $38.5 billion that we have on the budget deficit -- where were all those guys coming in and trying to help Gray Davis at that time? They were looking on at this whole thing. And now they're all coming in.

You know why, Larry? Because this presidential race is going on. There is the election next year. They don't want to lose California. This is a lot of electoral votes, as you know. They don't want to lose it. That's why they want to keep Gray Davis in. It's not about the people, it's about -- just about politics.

KING: Do you want the president to come in for you?

SCHWARZENEGGER: I -- you know something? I've never asked President Bush to come in. I've never called the White House to ask him for any favors. This is a Californian issue. I don't want to have the White House get involved. I don't want to have the federal anyone else get involved. This is between the people and this political system that we have here, that has torn us apart here in California.

I want the people power. The people have to vote on October 7. That's what this is all about, not all those other candidates coming in.

KING: Did you meet with Mr. Ueberroth?

SCHWARZENEGGER: Yes, I did.

KING: How did that go?

SCHWARZENEGGER: Yes, as a matter of fact, we had a wonderful meeting yesterday, and we talked about the importance of job creation. We talked about -- we are totally in sync, you know? We talked about...

KING: You are?

SCHWARZENEGGER: Oh, absolutely. The importance of bringing businesses back, the importance of creating a better business environment in California.

KING: You think he will endorse you?

SCHWARZENEGGER: This is up to him. He will make up his mind, but I'm not...

KING: Did he give you any indication? SCHWARZENEGGER: I didn't even ask him. I didn't...

KING: You didn't?

SCHWARZENEGGER: No, I absolutely...

KING: You didn't say, support me?

SCHWARZENEGGER: No. And what I said to him was, I said, Pete, I respect you very much. You're a great businessman. You are a terrific, you know, human being. You've done so much for our country. I said, you know, I want to hear your ideas also. Let's see how we can work together in the future.

And so -- but I said, I know you're going through a process right now, where you talk to all the various different candidates. And when you're finished with that, then you should make up your own mind which way -- which way you want to go. But I respect you and I respect your opinion.

And so it's up to him. He will make up his mind in the next few days.

KING: How do you think you will work with the legislature?

SCHWARZENEGGER: I will...

KING: It's often cantankerous.

SCHWARZENEGGER: Yes, but remember, the art of working with legislators, I think, is leadership. You have to tell them, this is where we want to be. See, the thing that has happened in these last few years is there is a vacuum of leadership. No one has really shown to the Californian people what we ought to do. Where should we be? Think about the '60s, Larry, when Kennedy said, we ought to be on the moon. We should have a man on the moon. And we did it. Look in the '80s, with Reagan. He said, you know, that America is the shining city on a hill, and he brought back pride and strength and the economic recovery and all this. We came back because he showed them a vision, this is where we need to be, and we did it.

And the same is with California. I mean, you show to the people, this is what we want to do with the infrastructure -- you can go out right now to anyone on the street and ask, what is the vision for California? I tell you that no one could give you an answer, because there is none. Our leadership in California has never shown a vision. What do we do with the infrastructure of our transportation?

KING: Costs money, though.

SCHWARZENEGGER: What do we do about the -- but I mean, that's the big problem. They're spending it the wrong way. We have to think about the infrastructure. We have to think about infrastructure of the airports. We have to think about the pollution problems that we have, that we have to cut down. You have to think about the water rights. What are we doing about electricity, so we don't have another blackout? Where should we be? We should be huge trading partners with the rest of the world. This is the greatest place in the world. This is the Golden State.

When I become governor, I will be out traveling around, and I will drum up business. I will make sure that our products, our farm products, our agriculture, gets into the other countries, rather than being locked out and they send us the products. We have to really represent California and be out there selling California and let the world know, this is the place -- best place to go. I was with Mayor Hahn over in Japan last year to drum up business for tourism. He asked me, could you come with me? I said, this is a great idea...

KING: The Democratic mayor of Los Angeles.

SCHWARZENEGGER: Yes, Democratic mayor. I said, I'm going to go with you. I'm going to go over there and make sure that every tourist office is there at our meeting. And there were hundreds of them there. And we had the press there, and it was a huge event, and we were really selling Los Angeles and California, how this is a great place to come, to come in here and to enjoy yourself and all this. And so there's so many things, so much potential.

KING: How long are you committed for? Supposing you're elected, will you run again? Will you serve -- do you want to serve two terms? How long is -- this ain't going to happen overnight.

SCHWARZENEGGER: I right now think only about this, about this term...

(CROSSTALK)

SCHWARZENEGGER: ... the people. (UNINTELLIGIBLE) three years. If the election now happens, then there will be approximately three years, yes. So I'm only thinking about that. The key thing is, is to concentrate and to go in there without owing anyone anything. See, I'm not beholden to anyone.

(CROSSTALK)

KING: ... money.

SCHWARZENEGGER: I know, but I'm just saying to the big, powerful special interests, like the unions, the Indian gaming and all this stuff. You don't want to take money from those guys.

KING: Who did you take money from?

SCHWARZENEGGER: I was the only -- I was the only candidate that put a limit on and said, I'm not going to take money from those guys. You cannot operate. This is what Sacramento is all about. Moneys come in, favors go out, and the people then get hurt by that.

And you cannot -- if you take money from those powerful unions and from these powerful Indian gaming tribes, how can you represent the people? You then represent them, and you cannot represent the people of... KING: How about powerful corporations?

SCHWARZENEGGER: Well, you don't have to take money from the powerful corporations.

KING: Who did you take money from?

SCHWARZENEGGER: I don't know the list. You know, there's thousands...

KING: No, but I mean...

SCHWARZENEGGER: There's thousands of people that have contributed $5, $20, $100, $1,000, $20,000 and all this. I cannot give you the list, but I can tell you one thing, that anyone of those guys that I've gotten money from, I will not be sitting across the table and negotiating about contracts. That I know for sure. And we did one...

(CROSSTALK)

SCHWARZENEGGER: ... by mistake accepted money from a union, which we -- which we never even deposited. When we got the money, we sent it back.

KING: So therefore, if someone gave you money, you don't owe them listening to their call or...

SCHWARZENEGGER: No, no. No, no. Wait a minute, Larry. There's a difference between listening -- you know, I don't mind any, you know, special interests talking to me and explaining their burden and the problems they go through, or lobbyists...

KING: Unions, too.

SCHWARZENEGGER: Oh, absolutely.

KING: You're a union member.

SCHWARZENEGGER: I'm a union member. Larry, I, for instance, have worked together with the teachers union on Proposition 49. You know, they gave me money for the Proposition 49, for the Afterschool Education and Safety Act. They were with me. We were campaigning together. But in this particular instance, it's different, because I want to do something for education, and I want to do something for the teachers not because I owe it to them, because I think that education needs to be improved, and I think we have to hire more teachers, more quality teachers, especially when it comes to special education and all those things. I will work with them...

KING: So you're not beholden to anyone.

SCHWARZENEGGER: No. I want to help. I want to help them. I want to help education but without owing them anything.

KING: Arnold Schwarzenegger's the guest. We'll be right back. Don't go away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: Body-building, like I said, had no reputation yet. I mean, we were trying to get the attention, so this were attention grabbers, those kind of lines. And of course, I cannot remember every interview. I don't remember the "Oui" magazine interview nor any of the others because I have done thousands...

UNIDENTIFIED FEMALE: But do you remember the parties, Arnold?

(LAUGHTER)

SCHWARZENEGGER: I don't. I really don't. No, but I mean, you know, these were the times when I was saying things like, you know, a pump is better than (DELETED) and all those kind of things.

(LAUGHTER)

SCHWARZENEGGER: No, no. But I mean, we were (UNINTELLIGIBLE)

(CROSSTALK)

SHRIVER: My mother is watching this show! My mother is watching the show!

(LAUGHTER)

(CROSSTALK)

SCHWARZENEGGER: Wherever Eunice is, don't pay any attention.

(LAUGHTER)

(END VIDEO CLIP)

KING: Are you saying then that the past is the past and that maybe -- no one's got a perfect past?

SCHWARZENEGGER: Well, Larry, I wish that Maria would have been there in the 1970s to put her mouth over -- her hand over my mouth when I said all those things. No, the past is the past.

I mean, the reality is, like I said there, that, you know, we were promoting body building. Body building was a sport that was not recognized yet. The press didn't cover it. No one really cared about it. So in order to get headlines and in order, really, to get attention, what I -- I'm...

(CROSSTALK)

SCHWARZENEGGER: I am a big promoter, so I went out there and I said things that made headlines. And it worked. You know, all those kind of lines worked, and people ran to the gyms. The gym businesses were booming. The magazines were selling. Health food industry was booming. All of those things worked.

Now, of course -- at that time, I didn't think about running for governor. I had no idea. If I would have known that, you know, I wouldn't...

(CROSSTALK)

SCHWARZENEGGER: ... talk differently. But you know, the bottom line, this is -- it's the past. If I have offended anyone, I'm sorry about it. It was not the intention to offend anyone with this kind of dialogue. And you know, the thing is that now they're trying to bring those things out in order to distract...

KING: You said you expected that.

SCHWARZENEGGER: Yes. Exactly. But now they do it because they want to distract from the real problems. The real problem's the economy, how people are suffering, what they have...

(CROSSTALK)

KING: But isn't the history of an individual important?

SCHWARZENEGGER: Well, no -- what you say doesn't ruin the state. I mean, Larry, what they have done has ruined the state. My statement to "Oui" magazine or any other statement that I made in the '70s didn't ruin the state. I didn't cause -- that didn't cause the economy to go down. That didn't cause the misery. That didn't cause that we have the worst money management and the worst credit rating and all this kind of things.

It was not what I said, what they did, what the politicians, what Gray Davis did and what Bustamante did. What those guys did up there, the big spenders of Sacramento, they have ruined the economy. They have created this environment that we're in that businesses are fed up.

I mean, the other day, I visited a factory owner in Los Angeles. He has been in business for many, many years, making plastic bags for medical use and for potatoes and fruit and all this kind of things. And he's closing shop. He's closing down his business. The moving vans were there. They're going to Nevada because he said to me, he says, Look, I used to pay $200,000 for worker's comp. Now I'm paying $780,000. The electricity bills, the energy bills, they are too high. I'm going to Nevada. There I pay $180,000, and I can live and I can make a profit. So this is what happens to so many business. That's what they have created. Davis has created that.

KING: Do you feel anything, since, as you said, experience doesn't mean everything -- but when you have -- you have had no experience. Do you feel any qualms at all about proposing a bill, legislation, dealing with that, dealing with things you've never been involved with? SCHWARZENEGGER: No, not at all, because I will surround myself obviously with the smartest people, you know, the economic recovery council. I've got the smartest people, from George Schulz, to Warren Buffett, all of those guys.

KING: Are they going to work in your administration?

SCHWARZENEGGER: Absolutely, they will be helping. They will be right there. This (UNINTELLIGIBLE) in education.

By the way, my mother-in-law, when I had an education summit out here, she was the first one to come out, which was very sweet of her, because she wanted to represent, you know, special ed, which is very important. Of course, it's very important to me also, but she's a great supporter, and she...

KING: So you are expecting the people...

SCHWARZENEGGER: Oh, absolutely. The smartest...

KING: ...will be involved.

SCHWARZENEGGER: ...in all the different areas, if it is energy, if it is the environment and all these things. That's what -- you can never do a job like this, by yourself.

KING: How about minorities?

SCHWARZENEGGER: Minorities, absolutely.

KING: Definitely going to be involved in your administration?

SCHWARZENEGGER: Whatever California is, California is a melting pot of different, you know, backgrounds and religions and all of that. We have in Los Angeles alone here, we have over 100 different languages. Everyone ought to be part of it. I will be a governor for the people, for a change.

KING: How about Sacramento? Are you looking forward to Sacramento? Not your kind of town, is it?

SCHWARZENEGGER: No, absolutely. You know, it's a funny thing, people sometimes come up to me and says, can you imagine you, Arnold, going form Hollywood to Sacramento? I say, you know something, I love Sacramento. I think that the whole, the huge, beautiful parks that they have there, the trees, that the buildings, the historic buildings and all this stuff, it's a beautiful quaint little town.

KING: What does Maria think?

SCHWARZENEGGER: Well, Maria is, you know, all the way on board with me.

KING: (UNINTELLIGIBLE).

SCHWARZENEGGER: You have to understand one thing, Larry, about Maria. Maria is so supportive that she believes in this, she knows how much I believe in it. She knows my whole, you know, way of thinking about how I feel that without this state, without California, I wouldn't have anything. It was California that has given me the opportunities, that has given me everything that I have, the movie career, the money, even raising the family. So she knows how I feel. She's 100 percent behind me.

KING: She's given up a career for this.

SCHWARZENEGGER: Absolutely.

(CROSSTALK)

SCHWARZENEGGER: She has been the best partner, and always knew that the greatest wife in the world and as a mother, untouchable. I mean, she's selfless, she only thinks about the children, and only thinks about me. That's all she thinks about.

KING: What role do you plan for her in the state?

SCHWARZENEGGER: I think that she will be whatever she chooses. I mean, if she -- she maybe wants to go back to her job, she maybe wants to have a more active role. I really don't know. We haven't talked about that. First, we have to win. Then we can start thinking about...

(CROSSTALK)

KING: If she wanted to be more active, you would welcome that?

SCHWARZENEGGER: Absolutely.

KING: (UNINTELLIGIBLE).

SCHWARZENEGGER: She is terrific. She is very smart, and she's very good with the issues and all those kinds of things, so you know, she is a partner in everything that I've done.

Remember, Maria is the kind of a person that will read every script, every script that I got in for a movie before I made any decisions, Maria will be there. And we will be debating over it, but she will be there reading it, about, you know, the special Olympics, the after-school programs, everything that I've done, she always with me was a partner.

KING: We'll be back with our remaining moments with Arnold Schwarzenegger. Don't go away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: I'll be back.

(END VIDEO CLIP)

KING: One of the historic scenes in motion picture history. Do you have any apologies about violent film making?

SCHWARZENEGGER: No, because, again, I think that the films are just make-believe.

KING: You don't think violence on the screen hurts?

SCHWARZENEGGER: No. Like I say, it's make-believe, it's all fake. But what Gray Davis has done to California, that is real, that is really the difference here. Mine is all -- mine is all make- believe.

KING: But critics, most Republican critics, criticize Hollywood, and they lump all the Hollywood together. They'll often criticize violent film making in Hollywood. You're not one of those critics, obviously?

SCHWARZENEGGER: Well, I think they're wrong. You know, and this is OK, because we can have different opinion. The thing that you have to understand is, what creates violence and what causes the crime is when you don't take care of our children, this is why I was very adamant to start with after-school programs.

I remember very clearly when I was sitting there with President Bush in the Oval Office, and we were talking about promoting fitness and traveling around the country, he said to me, he said to me, Arnold, make sure, always go to inner city schools. This is the biggest problem that we have, is the inner city schools, we have to pay attention to that.

And I started going into the inner city schools, and I realized that they didn't get a fair shake. They get locked out of the schools after 3:00, many times they're hanging out on the streets, and I realized that between 3:00 and 6:00, are the peak hours for juvenile crime, gang-related violence, drugs, teenage pregnancy and all of those things.

That's why I committed myself to starting with after-school programs, so that we can offer our children a positive alternative, and to have them off the street and give them a safe, supervised educational environment in the afternoon.

So those are the things that create crime, not taking care of our kids, not parenting.

KING: Not a violent film.

SCHWARZENEGGER: Not a movie.

KING: In the energy area, where this governor took a lot of raps, haven't we since learned that it was the Enrons of the world that screwed California, in a sense?

SCHWARZENEGGER: No, what we've learned was that there was no leadership there. That he was waiting too long, until the problem became really big. Then all of a sudden, we have blackouts, and then the biggest problem that we have is that we don't really attract any private investors now to build any of the energy plants.

You see, he has proposed in all his energy plans, he stood in front of the energy plant and took the picture, that was a photo op and all those kinds of things, and what happened, of all the energy plants that were proposed to be built, only a quarter of them were built.

This is because it's a lack of leadership. You have to go and follow through with this thing. Because, Larry, in 2006, in 2007, the experts are already saying we will have more blackouts. We have to build more energy plants. It's absolutely crucial. But in order to do that, is we have to get the state out of the business of running those things. They are competing with the private sector right now. That's why the private sector doesn't want to come in and do that.

KING: You trust the private sector?

SCHWARZENEGGER: Oh, absolutely.

KING: Even when you see the Enrons?

SCHWARZENEGGER: Look, there are mistakes being made, there is crime being done. I mean, all of those things, and those people should be punished, but this is not the major problem. The major problem that we have is that, A, he signed a long-term deal, when it was the height of the pricing, he locked those in for 10 years. We are now paying $2 billion extra every year because of that big mistake. And then you have to get investors in here, and we have to start looking at research.

We cannot be at 7 percent research, because we will have blackouts again. We need 20 percent research. It is absolutely crucial that we show leadership in energy, and with water rights and with so many other things.

KING: You, of course, were born in Austria, and are an American citizen. Would you favor changing the Constitution to make people like yourself and others run for president?

SCHWARZENEGGER: I don't have those intentions, to be honest with you.

(CROSSTALK)

KING: You think a person who becomes an American citizen, you should have the right to be president?

SCHWARZENEGGER: It's something to think about, you know, but I haven't really thought about that. I -- that is not what I am concentrating on. You know, that's something that they can debate in Washington. To me the debate is right here in California, how can we change and bring California back to be the greatest state of the greatest country in the world. That is for me, what I am concentrating on.

KING: Last book you read? SCHWARZENEGGER: "How to Make Schools Work" by O.Z. (ph). Let me tell you, the best non-fiction that I've read, or the best fiction, I should say, is the state budget. State budget is the best fiction.

But my mother, for instance, my mother-in-law, sends me religious books about our times, and I don't read them from front cover to back cover, I read sometimes the beginning of it, but then she keeps -- sends so much material, you have no idea.

KING: Are you proud of the Kennedy's?

SCHWARZENEGGER: Yes, I think that they did a great job. I think that I've learned a lot by just being around them, being around people, like for instance, my in-laws, my father-in-law, who...

KING: Sergeant Shriver.

SCHWARZENEGGER: Sergeant Shriver, who started the Peace Corps, the Job Corps, legal aid to the poor and all those kinds of things. Extraordinary work. I mean, he's one of my heroes. He's absolutely extraordinary.

And then, of course, I think that the whole family thinks always about what can we do for the people, to do public service and all this. I think when you hang around people like that, you start thinking about it yourself.

I think the whole idea -- not that we agree politically, no, not at all. I mean, on some issues, like education, and stuff like that, you know -- as a matter of fact, Teddy was very helpful to get me -- to help me with my after-school programs and all that. So we all help each other, but the key thing is is that I have the support there, and that I've learned from my in-laws a lot about public service, and giving something back to the country.

KING: Thanks so much, Arnold.

SCHWARZENEGGER: Thank you very much, thank you.

KING: Arnold Schwarzenegger. The elected is, well, on hold I guess. It's scheduled for October 7. There are appeals going on. We'll keep you posted. And I'll be back in a minute to tell you about tomorrow night. Don't go away.

(COMMERCIAL BREAK)

KING: Before we leave tonight, we want to bring you up-to-date on the legal wrangling over the California recall. Earlier this week, an appeals court issued a ruling that delayed the October 7 election. And during the show you just say, we talked with Arnold about the efforts to overturn their decision, that was Wednesday. Friday, the 9th Circuit Court of Appeals, the same court that issued the ruling to postpone, has agreed to review their initial decision. And why do I get the feeling this won't be the end of it.

Tomorrow night, Lady Heather Mills McCartney. She's Paul McCartney's wife and a pretty neat lady in her own right. But now, more news on the most trusted name in news, CNN.

END

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

Aired September 21, 2003 - 21:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LARRY KING, HOST: Tonight Arnold Schwarzenegger, the man everybody's talking about, talks. Arnold Schwarzenegger for the hour, next on LARRY KING LIVE.
It's always a great pleasure to welcome Arnold Schwarzenegger. He's been on this program frequently in the past, but never as a candidate for the Republican -- to be the Republican governor of the state of California.

By the way, let's get the thing current. The three-judge panel ruled that the recall should go to March. And now there's an appeal, and the California secretary of state has joined the recall performance in urging a federal appeals court to reverse.

What do you think they're going to do?

ARNOLD SCHWARZENEGGER (R), CALIFORNIA GUBERNATORIAL CANDIDATE: Well, I think that the will of the people will come through. I mean, I think it's very important the people have signed -- you know 1.6 million people have signed the petition to recall Gray Davis. I don't think that the judges can go against that. You know I think it would be a big mistake.

KING: Does it bother you, though, that some elements in the state will be forced to vote differently than others, that people will have to deal with chads and the kind of confusion Florida had? Doesn't that bother you?

SCHWARZENEGGER: Well, no. I mean, the thing is that it's the very same system that has elected Davis and Bustamante the last time, so how bad can it be, right? I mean, it's the same system, so why change it now?

So I think they should move forward. I think that we have to listen to what the people want. And the people very clearly, have said we want to have a recall. I think if you look at the polls, that 55 to 60 percent of the people who say they want to have a recall. So I think it will be a mistake, like I said, you know, to now change that.

For me, in my mind, you know, there's...

(CROSSTALK)

SCHWARZENEGGER: Exactly. I focus on October 7. To me, that's the election. I will campaign for that particular day. And I think in the end that will be the election date. KING: If it does switch to March, you're not going to change it? You're still going to keep campaigning, right?

SCHWARZENEGGER: Yes. Well, first of all, I don't even think about that. You know my mind, the way I work in competitions and all those things.

(CROSSTALK)

KING: I know.

SCHWARZENEGGER: There are certain things I don't think about, hypothetical things, because I think there is just so much work right now to be done. And you know we have to zero in on that date and make sure to get the message out there, do enough interviews, travel around the state, and really campaign. And so we are set for that date.

KING: So that's the focus.

SCHWARZENEGGER: That's what I'm focusing on...

KING: You say you'll be disappointed if that were to change.

SCHWARZENEGGER: Well, I think the Californians will be disappointed, and I think that everyone, because we have now spent money, we have now campaigned, you know, for the October 7 date.

KING: What do you make of those who say the recall, if you don't recall for something like criminal acts, you could have a mass recall. You could start recalling people all over the country just because you don't like the way they govern.

SCHWARZENEGGER: Well, I think that a recall, that it qualified. It was actually a shot that rang out throughout the country. You know, to all the Democrats and Republicans alike. It's a message that became very clear to -- you do your job and represent the people and if you don't, you're going to get voted out. There will be a recall.

KING: So you like that concept?

SCHWARZENEGGER: Yes, I think it is good. I mean, you have to understand that -- for instance, in California, Hiram Johnson came up with that whole idea because of special interests and powerful interests, industries 90-plus years ago, and have controlled politicians here in California. They set up the candidates, they controlled them and manipulated them because they had all the money.

So that's why this recall came about in the first place. And now today we have the same situation, that nothing gets done, people are very dissatisfied about what's going on in Sacramento right now. That's why -- you know there were many attempts made in the past about having a recall, but none of them have gone to the extent to where it is now.

There are 1.6 million people who signed up. And the polls show very clearly that they want to have change. KING: But what you're saying is that if the people of Nebraska feel that way or Montana, they are welcome to do the same thing.

SCHWARZENEGGER: Well, not every state has...

(CROSSTALK)

KING: But if you have it...

SCHWARZENEGGER: But if they do have it, yes, absolutely. I think that what happened is in California, I mean, the Davis- Bustamante administration has pulled wool over people's eyes twice. And, as you know, in California, we have a three-strike system. The third time, out they go.

KING: Have you had any thoughts since entering the race -- what surprised you so far about running? You never ran for office.

SCHWARZENEGGER: Well, I think -- no, I have not, no. So you never know what to expect. I think that the egg throwing was one of the surprises. You know, when it was done in Long Beach at the university.

KING: Yes.

SCHWARZENEGGER: That was a surprise. It was like this thing and I just moved on. But I was amazed about that.

And the other thing I think the big surprise was over the three judges saying, you know, that the recall would be postponed. But...

KING: But has anything surprised you about running, about the whole concept of campaigning, appearing, appearances?

SCHWARZENEGGER: No.

KING: Your personal life examined.

SCHWARZENEGGER: Well, no. I think that you know all of those things when you go into a race. I mean, you know that they're going to examine your life. You know that they do opposition research and that the other candidates continuously try to hammer away and distract people from the real issues and get them away and come in with all this other stuff from your background, what did you say when you were four years old to your mother while she was feeding you. And what happened in 1977, what happened in...

KING: So that didn't surprise you?

SCHWARZENEGGER: No. I think that I knew that, because when you make the decision to run, you have to think about all those things. And I had, you know, many, many discussions with my wife, with Maria, who has been such a jewel in this campaign and such a great support system. We even talked to the kids about that. What would that mean? You may hear bad things in school from other kids and all this. So we talked about this. So it's not really a surprise. I also knew that it would be a lot of work, a lot of studying, trying to really get up to speed with the issues and all those kinds of things. So I work sometimes to midnight and read and study.

Now I sit on the Lifecycle, for instance, in the morning at 6:00 and ride an hour of the Lifecycle and have my papers in front of me and not watch TV. So, you know, I knew those things would happen.

KING: How close did you come to not running?

SCHWARZENEGGER: Actually, it was going back and forth, Larry.

KING: Even today?

SCHWARZENEGGER: Well, not today, no. But I think it was going back and forth because for 14 days -- you see, throughout the whole promotion of "Terminator," I always kind of like blocked it out. I always said to people, "I don't want to deal with this right now. We don't even know if a recall will happen. We don't even know if we'll get enough signatures and all that."

So then I came back I remember after my trip to Mexico City, and that was my first -- that was my last stop for the promotion of "T3." I came back and then after that I heard that now there is a recall. So that's when I sat down with my family, with Maria, with my friends, and we talked about -- I called a lot of friends and talked about that. About what the pros and the cons are. But then in the end, you know, it just was in my heart and it was in my gut. And Maria said to me, "Whatever is in your gut, you should go with that."

KING: And no regrets?

SCHWARZENEGGER: I have no regrets, no.

(CROSSTALK)

SCHWARZENEGGER: Larry, this has been a really exciting thing so far. I mean, it's a great learning experience. Then it's a refreshing thing to do. And then to be in touch with the people out there, to travel up and down the state and to talk to people and to listen first hand, I never heard those kinds of complaints.

I never heard people talk to me about the pain they go through, the suffering with their businesses, how their profit margins are shrinking, the things that farmers go through, about the water rights, about the pollution, about the energy, about all of those kinds of things. And about them being squeezed. So this has been really fascinating...

KING: Let me get a break.

SCHWARZENEGGER: ... and one of the great experiences.

KING: We'll be right back with Arnold Schwarzenegger. He's a candidate for the Republican -- to be the Republican candidate for governor of California. Well, he's a candidate to be the governor, because if he wins and the recall -- if they accept the recall and he wins, he wins no matter what the -- whoever gets the most votes wins. There's no runoff.

We'll be right back.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: We are the luckiest people on Earth because we live in a country that we, the people, have the right to decide if the politicians are...

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: Are we going to win in unity with our common fiscal conservative principles?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GOV. GRAY DAVIS (D) CALIFORNIA: He clearly doesn't have very much experience in public life. And I can tell you that recycling old lines from movies only gets you so far.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

LT. GOV. CRUZ BUSTAMANTE (D), CALIFORNIA GUBERNATORIAL CANDIDATE: Arnold doesn't share our values. He doesn't live lives like we do. He doesn't have the same worries that we have. He won't fight for our families, our neighborhoods, our schools. He doesn't understand our lives.

(END VIDEO CLIP)

KING: That was Mr. Bustamante, preceded by the governor. Want to respond? You don't understand what the average guy goes through?

SCHWARZENEGGER: First of all, let me just say to you that I like when politicians up there, like Davis and Bustamante, talk about experience and about details. What has gotten us to the situation that we are in right now with this disastrous economic situation? And we have the worst credit rating, we have the hugest budget deficit, businesses are leaving, jobs are leaving. What has gotten us in this situation? All their experience. Think about that.

So it's experience and it's all the details that they have that's gotten us into this situation. That is the big problem. They think that they have a lock on their job. They think that you have to work your way through the halls of Sacramento to get to that job. But they're wrong, because the people are sick and tired of the politicians up there. They're disappointed about what they have accomplished in these last few years, and this is why they want a recall.

KING: When they say you don't understand the common man, you're not the common man.

SCHWARZENEGGER: Well, first of all, as you know, that I've been involved out there with issues for so many years.

KING: Education mostly.

SCHWARZENEGGER: And remember that I've traveled around the world, America and the world, for the last 20 years to work with Special Olympics, to work with people with mental disabilities. I was the national coach and have become the international coach. I've become the torchbearer for them.

I've become the ambassador, traveling all around the world, including -- I was just two years ago in South Africa with Nelson Mandela, driving around to increase the amount of special Olympians, so they could have equality, respect, and they can have regular jobs and get good education and all that stuff, which is an organization, as you know, my mother-in-law started. And also with after school programs.

I was with the president's Council on Physical Fitness and Sports, and I was the chairman. I traveled through all 50 states. I don't think any of those two guys have ever traveled all 50 states and have really gotten into the schools. And I'm talking about really working in the schools, creating after school programs, creating fitness programs and all those things, not just for the photo op, like those guys do.

Those guys go in there, read a little book, and sit around with the little children. And then they do the photo op and as soon as the photo is over, they split and you never see them again.

So I can relate to the inner cities. I've been in the inner cities with the after school programs. That's why, because I want to create equal education, equal opportunities for those kids. So I know about the ordinary lives out there. Plus, you know the way I grew up in Austria.

KING: I know. I know. Why won't you debate them then?

SCHWARZENEGGER: I will.

(CROSSTALK)

SCHWARZENEGGER: Yes, but you know the other thing is just little warm-ups. We go for the Super Bowl of the debates. That's what this will be.

KING: One... SCHWARZENEGGER: This is the same, you know, in bodybuilding. When I was competing in bodybuilding...

KING: You didn't...

SCHWARZENEGGER: I didn't go into Mr. Venice Beach contest. I didn't go into the Mr. Seattle contest. I didn't go into those little -- I went for the Mr. Olympia.

KING: But the questions are submitted in advance. That's not a debate, is it?

SCHWARZENEGGER: No, no. There will be discussions. People will know what kind of an idea -- and this is a rule that they came up with.

We decided to do this debate with the California broadcasters, which will be then viewed and aired on all the networks. We'll have a high rating. Everyone will be able to watch it. All the candidates can participate in that. And that's what we're going to do.

In the meantime, remember that every day I debate. Every day when I'm out there and I'm talking and doing interviews there's a debate. I'm doing sessions like, "Ask Arnold."

Yesterday, for instance, I had a wonderful session down there at the Hollenbeck Center. We (UNINTELLIGIBLE) 200 immigrants because it's a special time for me because I just celebrated yesterday my 20- year anniversary of becoming an American citizen.

So this is a big celebration. Maria got me a whole bunch of balloons and all those kinds of things. But I wanted to do this "Ask Arnold" session with immigrants, because I can relate to the immigrants. You know I will be a governor that is an immigrant that can relate to the problems immigrants face.

KING: Last week, you made a speech calling for unity in the party, the party should not be -- not united. Are you calling for the other major Republican candidate to quit the race?

SCHWARZENEGGER: No.

KING: Why don't you publicly ask him to quit?

SCHWARZENEGGER: Because it will be presumptuous for me to do that, Larry. I mean, I think that, you know, McClintock is a smart guy. He has been involved in politics for a long time. And I think that he has to make the decision himself.

Even though he thinks that I'm trying to force him out and I'm having people talk to him, it's not true. I never tried to get him out. It's a decision that he has to make. I just say that, mathematically speaking, it is easier to win. And the chances are higher to win if it's only one candidate, and I'm asking for the party to unify, to come together.

KING: So you're talking to the voters, then?

SCHWARZENEGGER: I'm talking to -- exactly.

KING: OK. Because, by the numbers, as the current polls say, that if he doesn't quit, Bustamante is five points ahead. How do you feel?

SCHWARZENEGGER: Well, this is -- you know you can't pay that much attention to those polls. In our polls, we are ahead.

KING: You're running polls now?

SCHWARZENEGGER: Absolutely. I mean, in every poll that I've seen, we are ahead in the polls. But, again, you're absolutely right. Mathematically speaking, he would take 13 percent away from me.

So, therefore, the chances, if he's not in there, are better for me to win. It's very simple. But I'm not going to tell him to get out. That's a decision that he has to make.

I look at it in the positive way. I think that things will change in the next three weeks in my favor. And I think it could very well be that even if he stays in that I can win this race.

KING: Do you expect him to stay in? He says he's staying in.

SCHWARZENEGGER: You know, I have no idea. I cannot speak for him. That's a decision that he has to make, like I said. You know he has his own way of thinking, and I have mine.

KING: You keep saying you're a conservative Republican, but in some major Republican issues you are not in accord with the concept of the party, certainly with regard to abortion, the right of women to choose, gay rights, et cetera. Would you agree that you could be safely called a "moderate"?

SCHWARZENEGGER: Well, I have always said that I'm fiscally conservative. That is the key thing. I'm a Republican who is fiscally conservative, that I believe that we should never spend more money than we have.

That's the big problem in Sacramento. That's what has gotten us into the situation that we are in.

KING: So you're moderate in social...

SCHWARZENEGGER: I'm a moderate in some of the issues, yes.

KING: And you're not afraid not to say that?

SCHWARZENEGGER: I'm not afraid. No, no.

KING: You haven't changed any positions since running?

SCHWARZENEGGER: No, absolutely not. I believe very strongly in certain things. You know, if it is choice, I'm against partial abortion, you know, all those things. But I'm for the second amendment, you have the right to bear arms. Even though I'm with moderations like the Brady Bill and...

(CROSSTALK)

KING: ... him having a machine gun?

SCHWARZENEGGER: Absolutely. And also I'm against heavy assault weapons, and also to close the loophole, and all those things. But you know there are certain things also about, you know, domestic partnership rights and all of those things I am for. But when it comes to fiscal policies, I am very conservative, because we cannot continue the way -- what we are doing right now.

KING: Arnold Schwarzenegger has done very well. He's made a lot of money. I'm going to ask him in a minute what's it going to be like to run a state where the purpose is not to make money. We'll be right back.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: The man that is failing the people more than anyone is Gray Davis. He's failing them terribly. And this is why he needs to be recalled. And this is why I'm going to run for governor of the state of California.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: No one knows profit and loss better than you. Here's what the movie costs, here's what it took, here's what we took in. Here's my businesses. You invest in many businesses; you've been very successful.

Running a state ain't the bottom line. The bottom line is not how much we made this week. It's a non-profit organization. Can you run it?

SCHWARZENEGGER: First of all, you should have profits. You should...

KING: The state should have profits?

SCHWARZENEGGER: You should have at the end money left over. You should not spend it all. And then if you have some money left over, you should put it in a rainy day fund.

The biggest problem that we have in this state is that those politicians only know how to sign a check on the back of the check rather than on the front of the check. And, like you said, I have run businesses before. I have met the payroll.

I have dealt with workers' compensation and with health care and with all those kinds of issues. I know what it is like. We can do the same thing in this state like running a business. We just have to really think ahead and have a vision and have leadership.

We cannot go in and see, like the situation in the last few years, when you see the state increased by 21 percent, revenues increased by 28 percent, and our spending increases by 36 percent. What's the point of that?

KING: The problem, though, is that everyone has a logical reason for what they spend. The schools need money and this needs money.

SCHWARZENEGGER: No, no. The schools are tied in -- Prop 98 has taken care of education, it's 40 percent...

KING: How do you know what -- what would you, for example, immediately cut?

SCHWARZENEGGER: Well, I think, first of all, like I said, the most important thing is to put a spending cap on it because you want...

KING: For all the spending?

SCHWARZENEGGER: Just a spending cap on it, because the first thing you want to do is stop the hemorrhaging, stop the bleeding. Because when you have a patient, when you have a guy that has an accident and he is bleeding, you don't worry about first how to fix the guy, but you worry about the bleeding. Stop the bleeding.

That's what we have to do with the current operating deficit: stop that. Stop it. Put a spending cap on it.

Then we have to open the books. Like I always said, auditing is the most important thing. I tell you, with workers' compensation, we cut down half of what the expenses are, what the costs are there. That will have a tremendous impact on the state workers that we have here. We can get a billion, $1.5 billion out of Medicare, huge frauds, huge amount of expenses...

KING: (UNINTELLIGIBLE).

SCHWARZENEGGER: We can take money out of that. The tax -- for instance, the tax amnesty, there is billions of dollars coming in through that. We have to go to the federal government. We have to go to the federal government and say, wait a minute, we are paying for each dollar we pay you in federal taxes, we only get back 77 cents.

I will be going there and I will be collecting money for the state. I would demand that. By the time I'm through with this whole thing, I will not be known as the Terminator, I will be known as the collectinator (ph). (UNINTELLIGIBLE).

KING: You talk about workman's comp and the cost of workman's comp. But workman's comp helps people. There's a need for workman's comp, to take care of workers who are in need. Are you telling the workers of California that you're going to cut their compensation?

SCHWARZENEGGER: Larry, the sad story is that we have the highest costs in workers' compensation but not the best benefits. I have just met the other day a man that was in a wheelchair. His name is Frank. He fell off -- through an elevator shaft, and he hurt himself badly, on the job. He's now in a wheelchair. He can never work again. You know what he gets a month? He gets $800 a month. Now, that is not fair when we have the highest costs here. We are talking about three times as much as the average of other states in this country.

Do you know that it costs five times as much to hurt -- to injure -- to break your arm, let's say, on the job than at home? It is ridiculous. We have to have utilization schedule (ph). We have to have certain things -- how many times should you be allowed to go to the doctor? People go three times as many times to the doctor. There's this whole scam going on between the lawyers and the doctors. And as soon as someone gets injured, the lawyer comes in, says, I can represent you...

KING: This is statewide?

SCHWARZENEGGER: This is statewide. He sends you to a doctor. The doctor examines you five, six times. Then he sends you to an X- ray. Then he does his thing. Then he sends you to the chiropractor, then he does his five sessions. Then he sends you to the physical therapist. And this is what goes on because they want to ring up the cost. That's because the lawyer collects one third of what...

KING: Are you saying...

(CROSSTALK)

KING: ... compensation, yes.

SCHWARZENEGGER: Work compensation...

KING: Are you saying a lot of people are doing this?

SCHWARZENEGGER: A lot. This is why we have this big problem here. And you know, we have to start, we have to go in there and say, renegotiate this whole thing, have reform. Worker's compensation reform, and look at the other states, what they are doing and model it after those states.

For instance, we have no clear definition in this state what is permanent disability. The other thing that is very important is that when people get injured on the job -- like, I have a friend of mine who has a body shop. If one of his guys got injured on the job, he cannot do that same job anymore. But he has been retrained, educated, reeducated so he can do -- and to write up estimates, and stuff like that. So what we have to do is we have to help people. No one wants to be out of a job, Larry. People want to work. People want to be productive. That's what we want to do. So it needs an entire worker's compensation reform.

Look what they just have done. It is -- it is total bogus what they've done. It was pre-election, you know, trickery. It's like the budget. If you look at the budget, moving numbers around, make all this kind of special effects. The budget that we have, the current budget, has more special effects than "Terminator III." It is outrageous.

KING: Can the governor change it?

SCHWARZENEGGER: Absolutely. He -- but I mean, he has to create leadership. That is the thing. And he doesn't.

KING: (UNINTELLIGIBLE).

SCHWARZENEGGER: And he doesn't. He has failed with the leadership. Every one of those guys up there, Cruz Bustamante, they failed with the leadership, and that's why the people of California are fed up. That's why they want to have change.

KING: Back with more of Arnold Schwarzenegger right after this.

(BEGIN VIDEO CLIP)

MARIA SHRIVER, WIFE OF ARNOLD SCHWARZENEGGER: I wanted to say how proud I am of my husband, for his courage to enter this race, for his commitment to the people of California. I think he is a serious, compassionate, smart, calm, compassionate man. And I think that he will represent Democrats, independents and Republicans, men and women all across this state.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: We're back with Arnold Schwarzenegger. Are the Kennedys going to campaign for you?

SCHWARZENEGGER: No.

KING: No?

SCHWARZENEGGER: No.

KING: Eunice announced for you, though.

SCHWARZENEGGER: No, both of them have -- all of the in-laws have been great supporters throughout the years, and they are a great supporter for this -- for this campaign. But you know, I don't need them to campaign. I mean, I...

KING: You wouldn't want them to come in?

SCHWARZENEGGER: No. I mean, I -- I just want their support. That is the important thing for me. But this is between me and the people, you know, that I want the people power. I mean, the other candidates, you know, Davis and all those guys, can bring in all the Democrats, from -- you know, all the leaders...

KING: They're all coming in.

SCHWARZENEGGER: ... everyone -- Clinton -- everyone is coming in, and they're campaigning. And I... KING: Against recall.

(CROSSTALK)

SCHWARZENEGGER: I understand, you know? But where were they in the last five years? Where were they when it was thinking, when they were burying this state, when businesses are leaving, when jobs are leaving and people are fed up in this state, and we have the hugest financial crisis -- $38.5 billion that we have on the budget deficit -- where were all those guys coming in and trying to help Gray Davis at that time? They were looking on at this whole thing. And now they're all coming in.

You know why, Larry? Because this presidential race is going on. There is the election next year. They don't want to lose California. This is a lot of electoral votes, as you know. They don't want to lose it. That's why they want to keep Gray Davis in. It's not about the people, it's about -- just about politics.

KING: Do you want the president to come in for you?

SCHWARZENEGGER: I -- you know something? I've never asked President Bush to come in. I've never called the White House to ask him for any favors. This is a Californian issue. I don't want to have the White House get involved. I don't want to have the federal anyone else get involved. This is between the people and this political system that we have here, that has torn us apart here in California.

I want the people power. The people have to vote on October 7. That's what this is all about, not all those other candidates coming in.

KING: Did you meet with Mr. Ueberroth?

SCHWARZENEGGER: Yes, I did.

KING: How did that go?

SCHWARZENEGGER: Yes, as a matter of fact, we had a wonderful meeting yesterday, and we talked about the importance of job creation. We talked about -- we are totally in sync, you know? We talked about...

KING: You are?

SCHWARZENEGGER: Oh, absolutely. The importance of bringing businesses back, the importance of creating a better business environment in California.

KING: You think he will endorse you?

SCHWARZENEGGER: This is up to him. He will make up his mind, but I'm not...

KING: Did he give you any indication? SCHWARZENEGGER: I didn't even ask him. I didn't...

KING: You didn't?

SCHWARZENEGGER: No, I absolutely...

KING: You didn't say, support me?

SCHWARZENEGGER: No. And what I said to him was, I said, Pete, I respect you very much. You're a great businessman. You are a terrific, you know, human being. You've done so much for our country. I said, you know, I want to hear your ideas also. Let's see how we can work together in the future.

And so -- but I said, I know you're going through a process right now, where you talk to all the various different candidates. And when you're finished with that, then you should make up your own mind which way -- which way you want to go. But I respect you and I respect your opinion.

And so it's up to him. He will make up his mind in the next few days.

KING: How do you think you will work with the legislature?

SCHWARZENEGGER: I will...

KING: It's often cantankerous.

SCHWARZENEGGER: Yes, but remember, the art of working with legislators, I think, is leadership. You have to tell them, this is where we want to be. See, the thing that has happened in these last few years is there is a vacuum of leadership. No one has really shown to the Californian people what we ought to do. Where should we be? Think about the '60s, Larry, when Kennedy said, we ought to be on the moon. We should have a man on the moon. And we did it. Look in the '80s, with Reagan. He said, you know, that America is the shining city on a hill, and he brought back pride and strength and the economic recovery and all this. We came back because he showed them a vision, this is where we need to be, and we did it.

And the same is with California. I mean, you show to the people, this is what we want to do with the infrastructure -- you can go out right now to anyone on the street and ask, what is the vision for California? I tell you that no one could give you an answer, because there is none. Our leadership in California has never shown a vision. What do we do with the infrastructure of our transportation?

KING: Costs money, though.

SCHWARZENEGGER: What do we do about the -- but I mean, that's the big problem. They're spending it the wrong way. We have to think about the infrastructure. We have to think about infrastructure of the airports. We have to think about the pollution problems that we have, that we have to cut down. You have to think about the water rights. What are we doing about electricity, so we don't have another blackout? Where should we be? We should be huge trading partners with the rest of the world. This is the greatest place in the world. This is the Golden State.

When I become governor, I will be out traveling around, and I will drum up business. I will make sure that our products, our farm products, our agriculture, gets into the other countries, rather than being locked out and they send us the products. We have to really represent California and be out there selling California and let the world know, this is the place -- best place to go. I was with Mayor Hahn over in Japan last year to drum up business for tourism. He asked me, could you come with me? I said, this is a great idea...

KING: The Democratic mayor of Los Angeles.

SCHWARZENEGGER: Yes, Democratic mayor. I said, I'm going to go with you. I'm going to go over there and make sure that every tourist office is there at our meeting. And there were hundreds of them there. And we had the press there, and it was a huge event, and we were really selling Los Angeles and California, how this is a great place to come, to come in here and to enjoy yourself and all this. And so there's so many things, so much potential.

KING: How long are you committed for? Supposing you're elected, will you run again? Will you serve -- do you want to serve two terms? How long is -- this ain't going to happen overnight.

SCHWARZENEGGER: I right now think only about this, about this term...

(CROSSTALK)

SCHWARZENEGGER: ... the people. (UNINTELLIGIBLE) three years. If the election now happens, then there will be approximately three years, yes. So I'm only thinking about that. The key thing is, is to concentrate and to go in there without owing anyone anything. See, I'm not beholden to anyone.

(CROSSTALK)

KING: ... money.

SCHWARZENEGGER: I know, but I'm just saying to the big, powerful special interests, like the unions, the Indian gaming and all this stuff. You don't want to take money from those guys.

KING: Who did you take money from?

SCHWARZENEGGER: I was the only -- I was the only candidate that put a limit on and said, I'm not going to take money from those guys. You cannot operate. This is what Sacramento is all about. Moneys come in, favors go out, and the people then get hurt by that.

And you cannot -- if you take money from those powerful unions and from these powerful Indian gaming tribes, how can you represent the people? You then represent them, and you cannot represent the people of... KING: How about powerful corporations?

SCHWARZENEGGER: Well, you don't have to take money from the powerful corporations.

KING: Who did you take money from?

SCHWARZENEGGER: I don't know the list. You know, there's thousands...

KING: No, but I mean...

SCHWARZENEGGER: There's thousands of people that have contributed $5, $20, $100, $1,000, $20,000 and all this. I cannot give you the list, but I can tell you one thing, that anyone of those guys that I've gotten money from, I will not be sitting across the table and negotiating about contracts. That I know for sure. And we did one...

(CROSSTALK)

SCHWARZENEGGER: ... by mistake accepted money from a union, which we -- which we never even deposited. When we got the money, we sent it back.

KING: So therefore, if someone gave you money, you don't owe them listening to their call or...

SCHWARZENEGGER: No, no. No, no. Wait a minute, Larry. There's a difference between listening -- you know, I don't mind any, you know, special interests talking to me and explaining their burden and the problems they go through, or lobbyists...

KING: Unions, too.

SCHWARZENEGGER: Oh, absolutely.

KING: You're a union member.

SCHWARZENEGGER: I'm a union member. Larry, I, for instance, have worked together with the teachers union on Proposition 49. You know, they gave me money for the Proposition 49, for the Afterschool Education and Safety Act. They were with me. We were campaigning together. But in this particular instance, it's different, because I want to do something for education, and I want to do something for the teachers not because I owe it to them, because I think that education needs to be improved, and I think we have to hire more teachers, more quality teachers, especially when it comes to special education and all those things. I will work with them...

KING: So you're not beholden to anyone.

SCHWARZENEGGER: No. I want to help. I want to help them. I want to help education but without owing them anything.

KING: Arnold Schwarzenegger's the guest. We'll be right back. Don't go away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: Body-building, like I said, had no reputation yet. I mean, we were trying to get the attention, so this were attention grabbers, those kind of lines. And of course, I cannot remember every interview. I don't remember the "Oui" magazine interview nor any of the others because I have done thousands...

UNIDENTIFIED FEMALE: But do you remember the parties, Arnold?

(LAUGHTER)

SCHWARZENEGGER: I don't. I really don't. No, but I mean, you know, these were the times when I was saying things like, you know, a pump is better than (DELETED) and all those kind of things.

(LAUGHTER)

SCHWARZENEGGER: No, no. But I mean, we were (UNINTELLIGIBLE)

(CROSSTALK)

SHRIVER: My mother is watching this show! My mother is watching the show!

(LAUGHTER)

(CROSSTALK)

SCHWARZENEGGER: Wherever Eunice is, don't pay any attention.

(LAUGHTER)

(END VIDEO CLIP)

KING: Are you saying then that the past is the past and that maybe -- no one's got a perfect past?

SCHWARZENEGGER: Well, Larry, I wish that Maria would have been there in the 1970s to put her mouth over -- her hand over my mouth when I said all those things. No, the past is the past.

I mean, the reality is, like I said there, that, you know, we were promoting body building. Body building was a sport that was not recognized yet. The press didn't cover it. No one really cared about it. So in order to get headlines and in order, really, to get attention, what I -- I'm...

(CROSSTALK)

SCHWARZENEGGER: I am a big promoter, so I went out there and I said things that made headlines. And it worked. You know, all those kind of lines worked, and people ran to the gyms. The gym businesses were booming. The magazines were selling. Health food industry was booming. All of those things worked.

Now, of course -- at that time, I didn't think about running for governor. I had no idea. If I would have known that, you know, I wouldn't...

(CROSSTALK)

SCHWARZENEGGER: ... talk differently. But you know, the bottom line, this is -- it's the past. If I have offended anyone, I'm sorry about it. It was not the intention to offend anyone with this kind of dialogue. And you know, the thing is that now they're trying to bring those things out in order to distract...

KING: You said you expected that.

SCHWARZENEGGER: Yes. Exactly. But now they do it because they want to distract from the real problems. The real problem's the economy, how people are suffering, what they have...

(CROSSTALK)

KING: But isn't the history of an individual important?

SCHWARZENEGGER: Well, no -- what you say doesn't ruin the state. I mean, Larry, what they have done has ruined the state. My statement to "Oui" magazine or any other statement that I made in the '70s didn't ruin the state. I didn't cause -- that didn't cause the economy to go down. That didn't cause the misery. That didn't cause that we have the worst money management and the worst credit rating and all this kind of things.

It was not what I said, what they did, what the politicians, what Gray Davis did and what Bustamante did. What those guys did up there, the big spenders of Sacramento, they have ruined the economy. They have created this environment that we're in that businesses are fed up.

I mean, the other day, I visited a factory owner in Los Angeles. He has been in business for many, many years, making plastic bags for medical use and for potatoes and fruit and all this kind of things. And he's closing shop. He's closing down his business. The moving vans were there. They're going to Nevada because he said to me, he says, Look, I used to pay $200,000 for worker's comp. Now I'm paying $780,000. The electricity bills, the energy bills, they are too high. I'm going to Nevada. There I pay $180,000, and I can live and I can make a profit. So this is what happens to so many business. That's what they have created. Davis has created that.

KING: Do you feel anything, since, as you said, experience doesn't mean everything -- but when you have -- you have had no experience. Do you feel any qualms at all about proposing a bill, legislation, dealing with that, dealing with things you've never been involved with? SCHWARZENEGGER: No, not at all, because I will surround myself obviously with the smartest people, you know, the economic recovery council. I've got the smartest people, from George Schulz, to Warren Buffett, all of those guys.

KING: Are they going to work in your administration?

SCHWARZENEGGER: Absolutely, they will be helping. They will be right there. This (UNINTELLIGIBLE) in education.

By the way, my mother-in-law, when I had an education summit out here, she was the first one to come out, which was very sweet of her, because she wanted to represent, you know, special ed, which is very important. Of course, it's very important to me also, but she's a great supporter, and she...

KING: So you are expecting the people...

SCHWARZENEGGER: Oh, absolutely. The smartest...

KING: ...will be involved.

SCHWARZENEGGER: ...in all the different areas, if it is energy, if it is the environment and all these things. That's what -- you can never do a job like this, by yourself.

KING: How about minorities?

SCHWARZENEGGER: Minorities, absolutely.

KING: Definitely going to be involved in your administration?

SCHWARZENEGGER: Whatever California is, California is a melting pot of different, you know, backgrounds and religions and all of that. We have in Los Angeles alone here, we have over 100 different languages. Everyone ought to be part of it. I will be a governor for the people, for a change.

KING: How about Sacramento? Are you looking forward to Sacramento? Not your kind of town, is it?

SCHWARZENEGGER: No, absolutely. You know, it's a funny thing, people sometimes come up to me and says, can you imagine you, Arnold, going form Hollywood to Sacramento? I say, you know something, I love Sacramento. I think that the whole, the huge, beautiful parks that they have there, the trees, that the buildings, the historic buildings and all this stuff, it's a beautiful quaint little town.

KING: What does Maria think?

SCHWARZENEGGER: Well, Maria is, you know, all the way on board with me.

KING: (UNINTELLIGIBLE).

SCHWARZENEGGER: You have to understand one thing, Larry, about Maria. Maria is so supportive that she believes in this, she knows how much I believe in it. She knows my whole, you know, way of thinking about how I feel that without this state, without California, I wouldn't have anything. It was California that has given me the opportunities, that has given me everything that I have, the movie career, the money, even raising the family. So she knows how I feel. She's 100 percent behind me.

KING: She's given up a career for this.

SCHWARZENEGGER: Absolutely.

(CROSSTALK)

SCHWARZENEGGER: She has been the best partner, and always knew that the greatest wife in the world and as a mother, untouchable. I mean, she's selfless, she only thinks about the children, and only thinks about me. That's all she thinks about.

KING: What role do you plan for her in the state?

SCHWARZENEGGER: I think that she will be whatever she chooses. I mean, if she -- she maybe wants to go back to her job, she maybe wants to have a more active role. I really don't know. We haven't talked about that. First, we have to win. Then we can start thinking about...

(CROSSTALK)

KING: If she wanted to be more active, you would welcome that?

SCHWARZENEGGER: Absolutely.

KING: (UNINTELLIGIBLE).

SCHWARZENEGGER: She is terrific. She is very smart, and she's very good with the issues and all those kinds of things, so you know, she is a partner in everything that I've done.

Remember, Maria is the kind of a person that will read every script, every script that I got in for a movie before I made any decisions, Maria will be there. And we will be debating over it, but she will be there reading it, about, you know, the special Olympics, the after-school programs, everything that I've done, she always with me was a partner.

KING: We'll be back with our remaining moments with Arnold Schwarzenegger. Don't go away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: I'll be back.

(END VIDEO CLIP)

KING: One of the historic scenes in motion picture history. Do you have any apologies about violent film making?

SCHWARZENEGGER: No, because, again, I think that the films are just make-believe.

KING: You don't think violence on the screen hurts?

SCHWARZENEGGER: No. Like I say, it's make-believe, it's all fake. But what Gray Davis has done to California, that is real, that is really the difference here. Mine is all -- mine is all make- believe.

KING: But critics, most Republican critics, criticize Hollywood, and they lump all the Hollywood together. They'll often criticize violent film making in Hollywood. You're not one of those critics, obviously?

SCHWARZENEGGER: Well, I think they're wrong. You know, and this is OK, because we can have different opinion. The thing that you have to understand is, what creates violence and what causes the crime is when you don't take care of our children, this is why I was very adamant to start with after-school programs.

I remember very clearly when I was sitting there with President Bush in the Oval Office, and we were talking about promoting fitness and traveling around the country, he said to me, he said to me, Arnold, make sure, always go to inner city schools. This is the biggest problem that we have, is the inner city schools, we have to pay attention to that.

And I started going into the inner city schools, and I realized that they didn't get a fair shake. They get locked out of the schools after 3:00, many times they're hanging out on the streets, and I realized that between 3:00 and 6:00, are the peak hours for juvenile crime, gang-related violence, drugs, teenage pregnancy and all of those things.

That's why I committed myself to starting with after-school programs, so that we can offer our children a positive alternative, and to have them off the street and give them a safe, supervised educational environment in the afternoon.

So those are the things that create crime, not taking care of our kids, not parenting.

KING: Not a violent film.

SCHWARZENEGGER: Not a movie.

KING: In the energy area, where this governor took a lot of raps, haven't we since learned that it was the Enrons of the world that screwed California, in a sense?

SCHWARZENEGGER: No, what we've learned was that there was no leadership there. That he was waiting too long, until the problem became really big. Then all of a sudden, we have blackouts, and then the biggest problem that we have is that we don't really attract any private investors now to build any of the energy plants.

You see, he has proposed in all his energy plans, he stood in front of the energy plant and took the picture, that was a photo op and all those kinds of things, and what happened, of all the energy plants that were proposed to be built, only a quarter of them were built.

This is because it's a lack of leadership. You have to go and follow through with this thing. Because, Larry, in 2006, in 2007, the experts are already saying we will have more blackouts. We have to build more energy plants. It's absolutely crucial. But in order to do that, is we have to get the state out of the business of running those things. They are competing with the private sector right now. That's why the private sector doesn't want to come in and do that.

KING: You trust the private sector?

SCHWARZENEGGER: Oh, absolutely.

KING: Even when you see the Enrons?

SCHWARZENEGGER: Look, there are mistakes being made, there is crime being done. I mean, all of those things, and those people should be punished, but this is not the major problem. The major problem that we have is that, A, he signed a long-term deal, when it was the height of the pricing, he locked those in for 10 years. We are now paying $2 billion extra every year because of that big mistake. And then you have to get investors in here, and we have to start looking at research.

We cannot be at 7 percent research, because we will have blackouts again. We need 20 percent research. It is absolutely crucial that we show leadership in energy, and with water rights and with so many other things.

KING: You, of course, were born in Austria, and are an American citizen. Would you favor changing the Constitution to make people like yourself and others run for president?

SCHWARZENEGGER: I don't have those intentions, to be honest with you.

(CROSSTALK)

KING: You think a person who becomes an American citizen, you should have the right to be president?

SCHWARZENEGGER: It's something to think about, you know, but I haven't really thought about that. I -- that is not what I am concentrating on. You know, that's something that they can debate in Washington. To me the debate is right here in California, how can we change and bring California back to be the greatest state of the greatest country in the world. That is for me, what I am concentrating on.

KING: Last book you read? SCHWARZENEGGER: "How to Make Schools Work" by O.Z. (ph). Let me tell you, the best non-fiction that I've read, or the best fiction, I should say, is the state budget. State budget is the best fiction.

But my mother, for instance, my mother-in-law, sends me religious books about our times, and I don't read them from front cover to back cover, I read sometimes the beginning of it, but then she keeps -- sends so much material, you have no idea.

KING: Are you proud of the Kennedy's?

SCHWARZENEGGER: Yes, I think that they did a great job. I think that I've learned a lot by just being around them, being around people, like for instance, my in-laws, my father-in-law, who...

KING: Sergeant Shriver.

SCHWARZENEGGER: Sergeant Shriver, who started the Peace Corps, the Job Corps, legal aid to the poor and all those kinds of things. Extraordinary work. I mean, he's one of my heroes. He's absolutely extraordinary.

And then, of course, I think that the whole family thinks always about what can we do for the people, to do public service and all this. I think when you hang around people like that, you start thinking about it yourself.

I think the whole idea -- not that we agree politically, no, not at all. I mean, on some issues, like education, and stuff like that, you know -- as a matter of fact, Teddy was very helpful to get me -- to help me with my after-school programs and all that. So we all help each other, but the key thing is is that I have the support there, and that I've learned from my in-laws a lot about public service, and giving something back to the country.

KING: Thanks so much, Arnold.

SCHWARZENEGGER: Thank you very much, thank you.

KING: Arnold Schwarzenegger. The elected is, well, on hold I guess. It's scheduled for October 7. There are appeals going on. We'll keep you posted. And I'll be back in a minute to tell you about tomorrow night. Don't go away.

(COMMERCIAL BREAK)

KING: Before we leave tonight, we want to bring you up-to-date on the legal wrangling over the California recall. Earlier this week, an appeals court issued a ruling that delayed the October 7 election. And during the show you just say, we talked with Arnold about the efforts to overturn their decision, that was Wednesday. Friday, the 9th Circuit Court of Appeals, the same court that issued the ruling to postpone, has agreed to review their initial decision. And why do I get the feeling this won't be the end of it.

Tomorrow night, Lady Heather Mills McCartney. She's Paul McCartney's wife and a pretty neat lady in her own right. But now, more news on the most trusted name in news, CNN.

END

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