"The majority of Republicans prefer progress with messy compromise over defeat with pristine principles. Compromise is part of politics. And it is especially part of politics if you are the minority party... The road to our comeback is clear. The California Republican Party should be a right-of-center party that occupies the broad middle of California. That is a lush, green, abandoned political space. It can be ours."

Schwarzenegger has long been at odds with the conservative elements of the party that tend to dominate policy positions, though he has twice proven his popularity with the rank-and-file members and with independents. Tonight the governor homed in on his greenhouse-emission policies, which he said three-quarters of party members support: "They want this party to do something more about climate change than simply doubt it." And he made the same point about healthcare reform on his way to a plea to shift the party from the political right to closer to the center.

Gov. Arnold Schwarzenegger tonight threw down the gauntlet with his own party, lecturing some 1,200 people at the semiannual Republican state convention in Indian Wells that the party was "dying at the box office" because it has "lost the middle. And we will not regain true political power in California until we get it back," according to Schwarzenegger's prepared remarks.

PREPARED TEXT OF GOVERNOR SCHWARZENEGGER'S FALL 2007 CALIFORNIA REPUBLICAN PARTY STATE CONVENTION SPEECH

Below is the prepared text of Governor Arnold Schwarzenegger's speech to be delivered at the California Republican Party Fall Convention. These remarks are embargoed until the Governor delivers his address, which is expected to begin at approximately 7:30 p.m. on Friday, September 7, 2007.

Begin Prepared Remarks:

Good evening. I'm happy to be with my fellow Republicans. I have so many people I want to thank tonight.

I want to thank Ron, of course, for all the great work he does for our party.

I want to thank Mike Villines and Dick Ackerman for their leadership. Especially on the recent budget. For the fourth year in a row ever since the recall we have not raised taxes on Californians. The new budget contains less than a one percent rise in spending. The Federal Government should do so well.

And, of course, I want to thank the thousands of volunteers who make our party possible.

Ladies and gentlemen, this is not going to be the typical convention address. I didn't come with a bunch of applause lines. Instead, I came with some concerns about our party...and some hopes. And there is no better place to raise them than at this convention.

The people in this room love the Republican Party or you would not be here. Since I know you want our party to flourish, this allows me to speak frankly about how we can make it stronger...how we can ensure it is not relegated to the margins of California's political life.

I know there are some who think, "What does Arnold know about Republicans? He's not a real Republican."

I have been a Republican since Nixon. I have been a Republican in spite of years of debates with Maria, the entire Shriver clan and all the Kennedy's up at Hyannis Port. Believe me, it would have been far easier to abandon my Republican identity years ago.

But being a Republican is important to me. This party is important to me. I am proud to be a member of the party of Abraham Lincoln, who righted the greatest moral injustice in this nation's history...the party of Teddy Roosevelt, the enthusiastic reformer and conservationist...I am proud to be a member of the party of Ronald Reagan, the pragmatic conservative who reached out and captured the political center, winning 49 of 50 states in 1984.

Where is the party today?

In California, as you know...our party is losing numbers. An astonishing 30 of the 32 Republican Assembly districts lost registered Republicans this year. Since 2005, we've lost 370,000 registered Republicans statewide. In just the last eight months, our numbers have declined by 120,000.

In movie terms, we are dying at the box office. We are not filling the seats.

Now, while the number of California Republicans has been declining, the number of independents has been growing. They may well outnumber both political parties in just 20 years.

So, who are these people? According to the Public Policy Institute, 70 percent of independents own their own homes. Most are graduates with incomes of more than $60,000. They are younger and more likely to be employed than members of either major party. They describe themselves as moderates. They often hold conservative views on fiscal policy and law-and-order issues, while taking more liberal stands on social and environmental issues. And they can be reached. They voted for me, 59 to 33 percent, over my opponent last year.

The real opportunity for Republicans is that independents generally agree with our core principles. Like us, they believe in limited government that is not wasteful. They believe taxes should be as low as possible, because the more you give government the more it will spend. They believe in individual freedom and the responsibility that goes with that freedom. They believe in the importance of public safety. And they believe that economic prosperity comes from the energy of the marketplace, not from the heavy hand of the state.

I want to make the Republican Party welcoming to these independents.

And the reason I mention this is because there were some Republicans who had proposed that we should not allow independents to vote in Republican primaries.What kind of sense would that make?

The Democrats have said they welcome independents to vote in their primaries. Why wouldn't we welcome them, too? Research shows that the party you vote for in the primary is usually the party you vote for in the general election.

The goal of any political party is to win elections, to become a majority and to advance its ideals. How do we succeed at that? By including, not excluding. By being open to new ideas, not rejecting them out of hand. By expanding into the center, not falling back upon ourselves into a smaller and smaller corner.

Our party has lost the middle, and we will not regain true political power in California until we get it back. I am of the Reagan view that we should not go off the cliff with flags flying. I did that in 2005.

In 1967, when Ronald Reagan spoke to the California Republican Assembly, he said:

"We cannot become a narrow sectarian party in which all must swear allegiance to prescribed commandments. Such a party can be highly disciplined, but it does not win elections. This kind of party soon disappears in a blaze of glorious defeat."

In business if you lose market share, you do something to about it. But I wonder if we've been so beaten down by our minority status that we've developed a bunker mentality? I wonder if we've come to believe that our only remaining power is to say no?

This very savvy audience understands that saying no is not the basis for a healthy political party. We need to address the issues that even registered Republicans are urging us to address.

According to the polls, nearly three-quarters of our own party support the global warming bill that I signed last year. They want this party to do something more about climate change than simply doubt it. If it is the policy of the Republican Party to ignore the great majority of the world's scientists...to ignore the views of 80 percent of the young people who believe the same...then that party is at odds with the future. The Republican Party needs once again to be the party of Teddy Roosevelt conservationists.

The surveys show that a majority of our own party also wants us to work for comprehensive health care, not stand in its way. My proposal is not a European socialist plan. It's not a Canadian single payer plan that is driving Canadians across our border for health care. My plan is a good faith attempt at a market-based solution. Never in history has medicine ever been able to make such a difference in peoples' lives. And we will be on the losing end of history unless we realize that health care must be addressed.

A majority of our own party supported our transportation and flood control bonds that were on the ballot last year. Yes, it is expensive. But we cannot allow our levees to break as in New Orleans or our bridges to collapse as in Minneapolis.

We are the party of President Eisenhower, the moderate military man who understood the need for logistics and infrastructure and created the Interstate Highway System--the largest public works project in American history. The majority of Republicans understand the need for investment. I believe we should be listening to the majority of our party.

If our party doesn't address the needs of the people-the needs of Republicans themselves - the voters, registered Republicans included, will look elsewhere for their political affiliation.

The majority of Republicans prefer progress with messy compromise over defeat with pristine principles. Compromise is part of politics. And it is especially part of politics if you are the minority party.

California Republicans do not have to be the political equivalent of the Spartans at Thermopolae. We do not have to defend the pass alone. Defeat does not have to be our future.

A large body of reinforcements is right behind us. It is called the middle, the center. They are independents. They are Reagan Democrats. They are disenchanted Republicans.

We do not have to give up who we are for them to come to our aid. They already believe much of what we believe. But they must be allowed to believe other things, too - things that perhaps not all of us agree with. That is fine.

The road to our comeback is clear. The California Republican Party should be a right-of-center party that occupies the broad middle of California. That is a lush, green, abandoned political space. It can be ours.

And we have accomplished so much together these past 3 ½ years.

* We brought the economy back.

* We reformed workers comp.

* We created nearly a million new jobs.

* We eliminated the operating deficit.

* We passed the biggest prison construction program in our history.

* We protected 3 Strikes.

* We passed Jessica's Law.

And much more.

Ladies and gentlemen, let me close with this. When I was 21 years old, I lost my first American bodybuilding competition, in Miami, which I thought for sure I would win. I had already won two Mr. Universe titles in Europe.

When I didn't win, I couldn't believe it. I was devastated. I had let people down. It kept going through my head, "I'm away from home, in this strange city, in America, and I'm a loser." I cried all night long. I vowed to myself I would work as hard as I could to be strong and I would not be beaten again.

My fellow Republicans, I pledge to you that I will work hard to make the Republican Party strong. But I cannot do it alone. For the sake of California and its people, I ask you to join me.