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>> Jonathan Movroydis: It's Thursday, April 6, 2023, and you are listening to Matters of Policy and Politics. A Hoover Institution podcast, devoted governance and balance of power here in America and around the free world. I am Jonathan Movroydis, senior writer at the Hoover Institution, and I'm sitting in the chair of Bill Whalen, the Virginia Hobbes Carpenter Distinguished Policy Fellow in Journalism.
So that he can answer questions and provide commentary about California policy and politics, in which he is well versed. Bill Whalen, in addition to being a Washington Post columnist, writes weekly for Hoover's California on Your Mind web channel. And Edison publishes Eureka, a quarterly forum featuring analysis and commentary from Hoover scholars and California's top thinkers. Whalen is joined today by Lee Ohanian, Hoover Institution senior fellow and professor of economics.
And director of the Ettinger Family Program in macroeconomic research at the University of California, Los Angeles. Ohanian also writes twice per week about the policy environment, the Golden State for California on Your Mind. Good day, gentlemen. Let's talk about the latest developments in policy and politics in the Golden State. Let's begin this episode on a somber note.
Early Tuesday morning, tech executive Bob Lee, the co-founder of Cash App and the chief product officer of MobileCoin, was stabbed to death in the Rincon Hill neighborhood that is basically San Francisco. That is basically around the city's main business center and the Bay Bridge. A suspect is not in custody. On Twitter, its CEO, Elon Musk, who also has headquarters ten or so blocks away from where the murder took place, wrote, quote, violent crime in SF is horrific.
And even if attackers are caught, they're often released immediately. Musk then tweets at San Francisco district attorney, Brooke Jenkins, asking, quote, is the city taking stronger action to incarcerate repeat violent offenders? Crime is just one symptom of the city's ailments. In the San Francisco Chronicle last week, Roland Li and Noah Arroyo write, interconnected forces trap the city in economic free fall. Workers remain primarily remote, office space sits empty, businesses shutter.
Mass transit is sharply reduce or even bankrupt, making it even harder for low and middle income workers who enable restaurants and small businesses to operate. Causing major budget shortfalls from declining tax revenue that imperil numerous city services. Trigger mass layoffs of city workers, and shred the social safety net, all of which causes more people to leave. Lee, I'd like to start off with you.
What do you think can be done to draw people back to work and live in this once-bustling city? >> Lee Ohanian: Jonathan, San Francisco was one of the great cities of the world, and it, in principle, is easy to figure out how to revive San Francisco. And the major issue is that it's gotta get a handle on the drug abuse problem that has taken over several neighborhoods within the city, such as the Tenderloin district, South Market, the Mission district.
And with that, essentially, it's not even implicit but explicit acceptance of drug use. What that creates is a lot of crime. It creates a sense of unease among people who live there and among people who would think about having a business convention there. Among people who would think about having a trip to San Francisco.
So when we look at this tragic murder that occurred, what is hard to understand is that in the past, in big cities, a lot of violent crime was understandable in the sense of a gang member shoots another gang member. This appears to be completely random. More information will come out over time as they investigate. But you can't make people feel better about coming back to the city. And for the last couple of years, that's what San Francisco leaders have tried to do.
They've tried to cajole people to get back, including tech workers. Mayor London Breed, I think she even may have given a press conference or speech in her pajamas. Saying, tech workers, please get out of your pajamas and come back to Downtown, we need you here. Well, they're not coming back because they don't want to be there. So all San Francisco leaders need to do is make San Francisco a place where people wanna be there again. And to go back to the old Bill's baseball aficionado.
You go back to that old Kevin Costner movie, Bill, about the 1919 White Sox, back in the day, and Costner said, filled the dreams, and Costner said, build that they will come. Well, if you make San Francisco a clean, relatively affordable, functional, safe city, people will fought back. And ironically, the issue about tech workers is that a lot of people think that they aren't there because they can work from home.
The ironic aspect is that of all the industries in the economy, the outcome of that industry is so magnified when those workers are together and creating things together. Whether it's Bill Gates and Paul Allen who together created the Microsoft operating system, or Steve Jobs and Steve Wozniak who created Apple computer, tech industry needs to be concentrated. They need to be together. That's why we had that magic about Silicon Valley.
It wasn't the dirt in Silicon Valley, it was the fact that all those tech workers were together creating new things, creating startups and spinoffs. So all San Francisco needs to do is become safe and clean and livable and cut taxes, cut regulations, and approve housing projects, which they are incredibly good at impeding, and the city will flourish again. But I don't see any real evidence of that taking off on a substantial scale. At least some people within the city are talking about it.
So we'll see if they actually implement. >> Bill Whelan: Yeah, this is an interesting story in several levels. The gentleman who was knifed to death, this happened at 2:30 in the morning on Main Street in San Francisco, which is not the main street in San Francisco, but it's Main Street. It's an area, Rincon Hill, as you mentioned, Jonathan, which is popular with tech bros, as they call them. That's a lot of seven and eight figure high rise condos are around there.
It's kinda the new construction in San Francisco, the tall building you see come across the Bay Bridge. There's a curious question of what someone's doing on the street in San Francisco at 2:30 in the morning. An interesting sidebar here is, apparently, there was video footage of not the crime itself, but the poor guy staggering up the street. And apparently saw a car that was parked on the street with its lights on and flashes on. So he tried to get help, that car drove away.
It makes you wonder, Lee and Jonathan, if there's a good Samaritan law in San Francisco, cuz that driver could be in trouble. But this happens, and then we get to this conversation about how dangerous is San Francisco. You look at statistics in San Francisco on the whole is not as dangerous as, let's say, New York when it comes to violent crime. And not as dangerous as other red states, as Governor Newsom will tell you.
What's interesting, though, Lee and Jonathan, is not so much violent crime, but property crime. If you look at property crime in California, it's about 23.47 crimes per 1000 residents statewide in San Francisco. This is according to a website called neighborhoodscout.com. In San Francisco, it's about 48.94 per 1000 residents. The national median is 19. So double the property crime average in San Francisco than in California. Lee and Jonathan, so there's a livability issue here.
And to me, that ties into other livability issues, which is just the cost of housing, which I want to get into, as Lee wrote a really excellent column about this recently. But also just a city thriving. And this gets back on the idea of the doom loop. The Hoover Institution, Lee's been looking at this, some other talented economists like Josh Rauh have been looking at this as well.
And I think, Lee, we're gonna do a conference at some point this year, this was your idea, to look at San Francisco and talk about solutions more so than problems. We can sit here on this podcast and beat up San Francisco to no end. I mean, it's just literally shooting fish in a barrel. But the question is solutions here. And, Lee, here's what I wanna toss it back to you.
I look at San Francisco and I think of Chicago right now, which had a rather interesting election, by the way, this week, it chose a new mayor. And Chicago has a rampant crime problem, Chicago has problems at its school, Chicago was hit very hard by COVID. Chicago was called what the city that works, and now it's kind of a question whether Chicago works itself. But part of what Chicago's had to do, Lee, is it's had to just kinda redesign its downtown.
And you see buildings like the Sears Tower and so forth, which had been repurposed for domestic living and so forth. I think this is San Francisco's future, Lee. It's gonna have to look at its downtown office space, where, I think, at last glance, something like 30% of offices are vacant right now. It's gonna have to decide what to do with all this empty space because this is the doom loop.
If you can't bring workers back in and you don't have office space, then just the whole vibrant part of the downtown dies, restaurants suffer, hotels suffer, workers suffer. Workers can't afford to come into San Francisco, they use public transportation. But if not as many of them are coming into work, then public transportation loses money. My apologies for hogging the podcast here, but then suddenly, the city is losing revenue, the city has to cut back its services.
Less cops are on the street, less of a safety net, and this is the doom loop. So, Lee, the question is really from an economic standpoint, from an economist standpoint, how does San Francisco turn this thing around? >> Lee Ohanian: Bill, yeah, yeah, a couple of months ago, I wrote a piece for our California on your mind Hoover column. And I suggested that San Francisco could become, they were on the verge of becoming like Detroit.
And Detroit was a city of 1.8 million people back in the 1950s, and today, it's about 600,000, it lost two-thirds of its population, and it lost that population for exactly the reasons that you just described. There's a vortex in which people leave. There are public obligations that still need to be staffed, including pensions, those become more expensive on a per-person basis. Public services get squeezed, police staff get squeezed.
No one's there to fix the water hydrant that's flooding the street. And just the beat goes on, and more and more people leave until you get to the point where land is essentially free. And then people start coming back and taking the chance that Detroit will ultimately reinvent itself. Well, it's been 70 years in the making.
So, Bill, when I think about San Francisco, it strikes me as sort of the restaurant equivalent of a three star Michelin restaurant that was handed over to a seventh grade cooking class. And what happens at seventh grade cooking class with essentially an unlimited budget, because San Francisco city budget, I believe it's around 14 billion on a per-person basis, it dwarfs any city, including New York. >> Bill Whelan: Right.
>> Lee Ohanian: I believes about $20,000 per household, which is just extraordinary on a per household basis. But then you look what you get. You have a couple of high-performing schools, but many of the schools are really nonfunctional. You mentioned the cost of housing. So I haven't looked at the median home price in San Francisco the last couple of weeks, but it was up around 1.2 or 1.3 million. And the reason it's so expensive is because the city government just gets in the way.
San Francisco Chronicles had a great series about what it takes to build a home in San Francisco. And they cited homeowners who I believe had to get 57 permits, and I believe the cost all in, with everything, was gonna be $500,000. So say goodbye, [LAUGH] say goodbye to those people. And I think they ultimately did move outside of San Francisco. But, Bill, the one liner answer to what does San Francisco need to do? They really need to be put into the equivalent of receivership.
It needs a board of supervisors, which understands just plain old economic common sense, how to manage a budget, how to demand accountability within its departments and bureaus. Bill, as you know, once a lot of dollars start flying around, bad things happen. San Francisco government has been beset by corruption, it's been beset by incompetence to the point where a Chronicle story, and again, the Chronicle is not a right wing newspaper.
As you noted, the Chronicle had a series of articles about how there are hundreds of rooms in San Francisco that are unoccupied, that could be occupied by people who don't have a home. So you look at that and you just, well, who's minding the store? [LAUGH] There's a disconnect here, and that disconnect is a governance structure that is not, I hate to say it, but they're not competent, they can't manage a budget, they can't oversee their city services.
And what happens when there's no accountability and there's no incentive to do a good job at some level, this is what happens. So reinvent government, have a clean city, have a safe city, improve schools, build housing, reduce the costs of living there, and people would love to be in San Francisco. It has shot itself in the foot time and time again. >> Bill Whelan: Yeah, so San Francisco has a big fiscal problem right now, Lee, the mayor came out with her budget report last week.
The city, it does two-year budget cycles, Lee, not one. It's looking about a $780 million deficit, you mentioned a $14 billion annual budget, so this is about 780 million over two years. And how's that gonna impact, I'll read you a little passage here. Quote, the Controller's office cited uncertainty about reimbursement from the Federal Emergency Management Authority, FEMA, as one factor in the worsting fiscal outlook.
Other factors, Lee, included, quote, reduced real estate transfer taxes given the impact of higher interest rates on property sales. The Office of Business Tax Projections remain largely unchanged versus a January, though analysts adjusted their expectations for office vacancies. A major factor in the city's fiscal picture, with potential ramifications for property, business, and sales tax revenue over time.
Lee, is that a very kinda fancy way of saying that taxes are gonna have to get raised in San Francisco? >> Lee Ohanian: Bill, yeah, they're certainly gonna push that. The old saw about live within your means really applies to San Francisco, and they haven't. They haven't to the sense that there were remarkable businesses in San Francisco, some are still there, that created enormous economic value. There was a lot of revenue created within San Francisco that was subject to taxes.
This is how they got that $14 billion budget, that $20,000 budget per household. The money flowed in, there was never a question of saying, let's use this really wisely and really efficiently and on investments that our constituents really care about. Instead, everything was done the exact opposite, that the money wasn't used wisely, it wasn't used efficiently, it wasn't used competently. And now they're in a position where we have these windfalls from the tech industry for years.
What do we do now? What do we do now? They're going to try to raise taxes. I suspect they will. And when you raise taxes, you're going to push more economic activity outside the city. It's a little bit like a leaky bucket where you're trying to put more water in, and the hole just keeps growing a little bit bigger every year. >> Bill Whelan: Final note, Lee, then we'll switch topics here. The worst is not yet to come for San Francisco in terms of office space.
The city is telling folks that vacancy rates could hit about 33% by 2025. That's incredible. That's one in three offices in San Francisco. >> Lee Ohanian: It's amazing. There's a lot of office space that's now sublet. The underlying leases, a lot of those are coming due in the next two years. So, yeah. Bill, it's not going to be pretty there. They have their work cut out for them.
>> Jonathan Movroydis: Gentlemen, let's continue on this theme of housing affordability, but from a statewide perspective. At the beginning of Governor Gavin Newsom's term, he declared a vision of expanding housing in the state to 3.5 million additional units. But, Lee, as you write in a recent column for California on your mind, despite over the past four years $22 billion being allocated towards new construction, Newsom is still 87% below his goal.
Lee, what happened or didn't happen in California towards Newsom's vision for housing? >> Lee Ohanian: Jonathan, there's a couple of interesting points here, and they really connect back to the vision of California and a failure of governance that we've spoken about a number of times. Newsom's major campaign promise when he first ran, which was in 2018, where he defeated John Cox, the Republican, I think it was about, I think the vote was somewhere around 60 40. It was a substantial difference.
His major campaign promise was housing. He promised a Marshall plan for housing, making reference to the investments the United States made in western Europe after World War Two to try to rebuild Europe with all the wartime destruction. That Marshall plan investment was incredibly successful. Europe recovered very, very fast. Newsom promises a Marshall plan for housing.
What's happened is that housing permits, new housing permits, which are, of course, a good predictor of future housing activity as well as housing starts over his four plus years in office, they are at a level that is about the same as they were in the 1981 recession, when California had about 13 million fewer people. When mortgage rates were 18%. If you could get a mortgage when inflation was about 12%, when unemployment was over 10%. That's what we're seeing.
The needle hasn't moved at all in California housing. You mentioned that performance relative to his goal is 87% below what his goal was. My God, what happened? We're 13% toward his goal. What strikes me as really worrisome is that the governor has proclaimed that his policies have been a success despite the fact that he's only 13% on the way there. Why does he proclaim their success? Because he signed a lot of bills and he spent a lot of money.
And what's really wrong with California governance, and you see this in other states as well, is that success is measured on the basis of spending taxpayer dollars, not in terms of what the outcomes are. And what we're seeing today in California is literally 180 degrees different than what California delivered back in the day when the leadership was from the Democratic Party.
Roads and bridges and hospitals and universities and schools were built at lightning speed when California was growing like nobody's business. We're just burning up money today. So you see $22 billion spent, and it hasn't moved the needle. The governor thinks this is success, and we're spending up to a million dollars per apartment unit to house the homeless. Just think about that, a million dollars should buy a really nice house.
And you can buy probably three houses on average in the United States right now, single family homes with three or four bedrooms for a million dollars. No one in state government is asking, isn't something wrong when we're spending a million dollars per apartment unit? No one in state government is asking that question. Again, we go back to accountability and we go back to incentives. There's no incentives within state government for anyone to ask, can't we do better here?
Isn't there something wrong with spending a million dollars per studio apartment unit? >> Bill Whelan: Let me chime in here, Lee. This is just a problem with Gavin Newsom as governor. I know loyal listeners of our podcast probably thinking, boy, here we go with the Newsom bashing. But I think this is very fair criticism in this regard. You mentioned that Newsom ran in 2018 the promise to deliver on housing. He's failed, as you, as you very well document in your California You're Mine column.
That's not the only thing he's failed to deliver on. When he ran a 2018, Lee, he said that he was open, he supported single payer care when he became governor. He's avoided that like the plague. It's bad for his political health. He won't go near it. He said he'd end chronic homelessness, just as he said he would do the same when he was mayor of San Francisco. Every year seems to be the year of homelessness. We spent how many billions of dollars on homelessness, Lisa?
$35 billion now or something like that, and it's not getting solved. Promised 100% renewable energy, that's not happening also under his watch. There's just a very bad pattern with this governor and that Gavin Newsom loves to throw out big, splashy ideas. Why? It seems bold. It seems futuristic. It gets him fawning coverage. He makes him feel good about himself, I imagine, as a politician. But the problem, Lee, is twofold. Number one, he's terrible at follow up.
If he wanted to make housing happen, Lee, I think it's very simple as he would have to, and I'm usually kind of blanched at this, but he would have to have a housing czar in state government, some very serious person who's a point person who could really kind of drive the train, make sure the train is still on the tracks, keep everything moving, work at the legislature instead of just walking away from it, as the administration seems to have done here. That's problem number one.
But problem number two, it's Newsom seems to have a very short attention span, and he just kind of flits from issue to issue. And once he throws out the big, splashy ideas, he doesn't want to spend a couple of years making sure, actually, that it happens.
This is a problem with his governing style, I find, and it's going to segue into something that we're going to talk about something else in a minute here, which is him going around America, red states in particular, lecturing them on their failed ways. There is a serious issue in California right now with Gavin Newsom. That's really how much attention he is paying to his day job. He seems just very smitten with national politics.
He seems very smitten with what's going on in other more conservative states in America. Meanwhile, back home in California, he's just not delivering on these promises. If it were not for one party rule, supermajorities, and two legislatures and no real watchdog who could hold him accountable, he'd be in political trouble. He gets a pass on these things. He gets to pass on these things. >> Lee Ohanian: And, Bill, he strikes me as a person that just can't keep his eye on the ball.
And there's a lot of balls in California you could pick to keep your eye on and make some progress. What I fault him for is that not that he had a vision on how to make and how to accomplish things which failed, but that he's not rethinking that vision and ask himself, hey, what we're doing now is not working. We need to make some changes and he's aggressively not pursuing alternative ideas, he and the democratic supermajority in the House and the assembly are unwilling to work with Republicans.
To give an example, Republicans have asked time and again for accountability in terms of where all those homelessness dollars that were being spent, where are those homelessness dollars going? Because Bill as you know homeless has become a more severe problem under Gamma's watch, and he and his colleagues in the Assembly and the Senate have refused to pursue accountability and oversight.
So that's where I really fault him, there's no Mea Culpa, there's no willingness to look outside of the grandiose visions that he has created. And to me, it's almost like he's living in a fantasy world where I do believe that he loves the state and he wants to see good things happen, but he's unwilling to confront the failures that are associated with his vision and engage others who might have better ideas.
And that's where I really fault him on this, he just can't keep his eye on the ball, he can't think about what it takes to solve the issues that he has promised to fix. >> Bill Whelan: Yeah, what's interesting Lee, is California politics becomes much more tapered, I would argue, and that rather than having competitive statewide races or the idea of the legislature flipping. There's one battleground now, I think, in California, Lee, and that's at the ballot box, and that's initiatives.
And what you're seeing repeatedly now are California businesses going to the ballot to undo measures that they find pernicious. You've written about this for California in your mind, in terms of what's happening with ride shares, this is now going on with another issue which you've followed, which is fast food. Its really your only option if you're doing business in California and you want to push back against the establishment, if you will.
Even that's become trickier because there's now a bill in Sacramento making its rounds, which would actually change how you do referendums, trying to undo things. You would have to get a higher signature level from citizens on the measure and so forth is trickier, It's just another way to just kind of constrict business. But that's kind of like the last battleground in California right now, it seems to me just going to the ballot and fighting these things over.
And we think about it, just how incredibly inefficient the system is, Lee, where you elect people to office and they write bills, and then we have to spend millions of dollars having expensive battlefights over then whether or not to undo the bill. That's just, boy, this is not productive, is it? >> Lee Ohanian: No, it's incredibly inefficient, that's the system we've created, we're in a super majority state where if you're a business and you've got regulations that are just hammering you.
And, Bill, you mentioned the fast food restaurant council, this is nothing more than a payoff to unions. And a big problem within state government is that there's a political politician union nexus that has just become so embedded, there's so many dollars involved. And this California fast food council essentially has the power, I believe it's beginning this year, Bill, or is it beginning next year?
>> Bill Whelan: There'll be a 2024 initiative, these will be 2024 ballot measures, their repeal measures already qualified for the ballot. >> Lee Ohanian: Yeah, okay, so, I mean. >> Bill Whelan: In oil is doing the same thing in California, by the way. >> Lee Ohanian: Yeah, so, you're so imagine somebody who's got a McDonald's franchise, and you've probably sunk a million dollars into that franchise and you're working your tail off.
And then suddenly there's a politically appointed counsel who's gonna tell you how to manage all your worker relations, unless you choose to allow unionization and engage in collective bargaining. And so the restaurant association is fighting this, they're going with the ballot initiative because they have no other option.
And again, though you go back to the issues that California faces, the big issues, an education system in which only one out of three kids is competent in math or science or English language arts. A Medi-Cal system servicing 13 million people that's performing abysmally.
But what we have instead is a legislature and a governor who's signing those bills, who are creating fast food restaurant councils and laws that prohibit a drugstore from selling women's deodorant at a price that's greater than, than men's deodorant. That's where they're prioritizing their needs in terms of things that are silly or that are politically expedient, such as the restaurant fast food council that benefits their political friends.
And it, and this is why California is becoming what it's become. >> Bill Whelan: So I have a homework assignment for our listeners, which is go to the California Chamber of Commerce's website and look up what they call their job killer bills each year. They look at the legislative batch, the thousand or so bills that get brought up, and they determine what they consider to be job killers, things that are just pernicious to the economy.
I mentioned this, Lee and Jonathan, because historically the chamber has a pretty good batting average of striking these things down. Just governors look at these bills and they either tell the legislature don't do it or they veto them, one or the other. It's certainly true, Republican governors is a reliable backstop, Jerry Brown, when he was a two term governor, he was a pretty good backstop as well.
But just look at these bills in 2023 and see how many of them actually see the light of the day, and that'll kind of tell you how things have changed in Sacramento. >> Lee Ohanian: Yeah, absolutely, and Bill, just to go back to the fast food that, just the silliness and the inefficiency and the cost of this fast food restaurant council, over in the average fast food franchise, more than 100% of the employees turnover every year.
>> Bill Whelan: Right. >> Lee Ohanian: Meaning there's about 120% turnover per year, meaning that the workers in these restaurants are moving in and out, they're finding other opportunities. If they don't like the job of McDonald's, they're going off to another job, there's incredibly rapid turnover. This is a business that's not generating, they're not generating profits like Google or Apple or Microsoft, they're barely earning competitive return on capital.
And again, if you think about what are the priorities of California, this should not have even seen the light of day, and yet now they're having to spend millions of dollars to try to get a destructive law off the books. >> Bill Whelan: I think an enterprise who reportedly should go to the legislature and ask the 120 members of the assembly and the Senate how many of you worked in a fast food joint?
>> Jonathan Movroydis: Gentlemen, let's go back to what Bill was talking about with Newsom's eye on national politics. Politico was reporting that Newsom, quote, has expanded his offensive against national Republican figures by channeling $10 million into a new political organization that will wade into Red states through the 2024 cycle, Newsom said in his new launch video.
Quote, the problem in our country right now, authoritarian leaders who are so hell bent on gaining power and keeping it by whatever means necessary that they're directly attacking our freedoms in state after state, unquote. But Newsom this week has toured red southern states that he is probably unlikely to win should he choose to run for president. He made a tour through Montgomery, Alabama, Jackson, Mississippi and Little Rock, Arkansas, all iconic cities during the civil rights movement.
A few questions come to mind, why is he choosing these cities? He could have been in Wisconsin this week, a key swing state at the center of a state Supreme Court race which will likely have national implications in the 2024 cycle. Or is this A, or is this a primary play to win those southern states during the democratic primary? And does it impact him by not being present in California and not tending to the challenges of the state that you all just talked about?
>> Bill Whelan: Boy, where to unpack this one? The two word phrase I love to use, cynics delight. The governor unveils this pack in the aftermath of the shooting in Tennessee, saying he's inspired by the shooting to do this. Packs just don't appear overnight as this one did. A lot of thinking goes in terms of legality, collecting money and so forth. So this thing was in the works for some time, you can't tell me it was just triggered.
I'm sorry, that's a bad choice of words, but you can't tell me it was sparked by the event in Tennessee. He's been thinking about this for some time. You mentioned, Jonathan, that he did nothing get involved in the Wisconsin election. This, to me, kind of shows a bit of the hypocrisy, what he's up to here. Newsom, at all times, rails about abortion rights. He rails about voting rights. That's what the Wisconsin Supreme Court election was about, plain and simple.
A big moment between the conservatives and liberals over abortion in that state and really kind of a preview of the 2024 election in that battleground state, he stayed out of it. Instead, he went on this tour of the south. He attended a black church on a Sunday in Alabama. Boy, if that doesn't look presidential. You have been watching presidential politics for some time. I'm glad we broke news here, by the way, that he will not carry Alabama, Mississippi or Arkansas as a presidential candidate.
You always come here for your news, but what he's doing here is he's creating some photo ops going to black church. A very cynical take on this, by the way. Lee and Jonathan is why is he doing this? Well, he has a very uncomfortable choice to make about reparations coming up soon. The legislature is soon gonna get tossed a proposal on offering reparations to African Americans in California. The price tag is gonna be exorbitant, the state can't afford it.
Newsom's got to find a way out of it, so maybe it's kinda laying the groundwork for that. I'm not sure I buy that as much as this is simple. This is something different which is that he has said he will not challenge Joe Biden in 2024, take him at his word on that. But if Joe Biden surprises us all and decides he's not running in 2024, here's Gavin Newsom, having now laid the groundwork to pack, starting to go around the country. This is how you put a presidential campaign into motion.
I will point out, by the way, that this comes with, you know, a backlash. It's always interesting to watch Newsom's Twitter feed in this regard because he does rather slick things. For example, he shot a Twitter video outside of the church of Montgomery, Alabama, that Martin Luther King Jr. preached at and then he used a rather unfortunate word. He talked about how we just had the 55th anniversary of Dr. King's passing. It's a very southern phrase, by the way, that say that somebody passed.
In the South, you don't say somebody died, you say somebody passed. And he got lit up very quickly on Twitter saying the man was assassinated. Don't say he passed, he was shot to death. But then you go further into his Twitter feed and I found two rather kinda amusing pushbacks by his Twitter followers. He's in Alabama, he's in Arkansas. He's in Florida complaining about the awfulness of it all.
And so here's one Twitter follower who writes, quote, maybe they can point you in the direction of, point you in the direction of an atlas so you can figure out where California is. And then this person adding, quote, my kid didn't learn much history of any kind when you kept him out of school for a year and a half. So Newsom has to kinda understand that when he goes out and puts himself out there, there's gonna be a backlash of sorts. Are you really doing your job or not?
One final note, by the way, I wanna get Lee's thoughts on this as well. I noticed that Newsom went into Florida and he got on the issue of education at the new university in Florida. I noticed that Ron DeSantis did not push back at him, nor did republican governors when he went to those various states. And I think this is a simple boxing metaphor, Lee, that you don't punch down. You just don't punch in a lower weight class.
And I think, especially if you're Ron DeSantis and you're trying to figure out what to do whether or not to run for president which is very complicated because of Donald Trump's legal status. I don't think you engage with Gavin Newsom because I don't think you want to give Newsom attention. I don't think it really gives you anything to go after him. So I just kinda wonder what Newsom is gonna achieve here at the end of the day.
The purpose is to go into these red states and rally Democrats and get them juiced up. I'll notice, by the way, he has not set foot in Kentucky where there's a democratic governor or Louisiana, where there's a democratic governor. Why would that be? They do not want Gavin Newsom coming to their state, why? Because you don't wanna make your campaign, your candidacy, a referendum on California.
So I just don't see what Newsom is doing here at the end of the day other than just promoting Gavin Newsom. >> Lee Ohanian: Yeah, Bill, another great example of that, he just can't keep his eye on the ball. And at some level, he seems to be living in his own world. Wherever he thinks he's being invited to parties where he's not really being invited, these are states where I don't think there's a lot of love for him. They're certainly not welcoming in with open arms.
And Bill, it's interesting that he went on this tour of red states that I believe started a day or two after California ended its ban on doing business with, with red states, which was, of course, silly at some level in terms of the overall well being in California. Why would you ban doing business with the State of Alabama when businesses in Alabama can provide goods or services that Californians really want? So yeah, again, is Gavin not tending to what he really should be?
And since when does a governor start running for, start running politics outside of his home state when there's a sitting president who you probably should presume is going to run for a second term. I don't know if he will or not, but he certainly hasn't said he won't. So I really don't get what he's doing and I agree with you totally that DeSantis made the right political decision not to respond, not give Newsom any press.
Who cares about a California governor who comes to Florida and starts and speaks to a crowd of 50 or 60 people about a college there? Don't give them the attention. Don't give them the time, I think Sam has made the right call. >> Bill Whelan: Now, there is a bit of a parallel here to what Newsom is up to and it might be Bill Clinton in 1990. In 1991, Lee, who was very active with a group called the Democratic Leadership Council. Clinton didn't found it, but he was a charter member of it.
And what the DLC was, was back in the late 1980s. Southern Democrats in particular realize we're getting killed down south. Our party is too liberal, we can't keep nominating the lights of Walter Mondale and Michael Dukakis. We've got to nominate somebody who is more centrist, who just plays better in America than our past nominees have.
So this became a platform for Bill Clinton, who became the chair of the organization, to go around the country and basically lay the grassroots for his presidential campaign. But you'll point out that, a, there was a Republican in the White House, not a president, but b, Clinton was part of a much larger political movement at the time. Al Gore was a member of the DLC, Virginia Senator Chuck Robbin, none from Georgia.
A lot of people with presidential prospects whereas you look at Newsom, if you go on his pack, which is called campaign for democracy. There are a couple photos of him with Joe Biden, but you don't see a rogues gallery of other democrats. It's just Gavin Newsom all the time and the first partner with him. So it's really just kind of a vanity project. But, he's out Galileo around the country. And meanwhile, they're kind of rather shady things going on in California.
You pointed out one to me, Lee, and that's Gavin Newsom, something of a piker. California's defaulted on a loan. Would, you like to explain that, what happened there? >> Lee Ohanian: Yeah, Bill, I found this out from House freshman from California, Kevin Kiley, one of the few Republicans in the House from California. And I found this out from Kylie, who said that, who called him deadbeat, Gavin?
What has happened, in a nutshell is that California paid out approximately $33 billion in fraudulent unemployment claims during the pandemic because of a stone age information technology system that couldn't identify fraudulent claims. So over $33 billion was paid out fraudulently, and California had to take out a loan from the Federal government to cover all these losses. [COUGH] The loan was about close to $20 billion, I believe, and Newsom, despite [LAUGH].
But, Bill, despite the the $40 or $50 billion budget surpluses that we had, Newsom decided not to repay that $20 billion loan. Now, under Federal law, when a state defaults on a loan to cover their unemployment short benefit shortfall, what happens is that existing businesses in the state per employee, their unemployment insurance taxes, are increased to take care of that default.
And so what's happening now is that California businesses now are paying substantially more in unemployment taxes because Newsom decided not to repay that debt. And they will be paying those higher taxes between now and probably 2029 or 2030, another six or seven years. So, Bill, and I'm not gonna say this cynically, I think it's just a total matter of fact statement. This was an under the radar way of increasing taxes on businesses without getting voter approval.
And I think this is absolutely awful governance. You take out a loan and you default on it, and then the businesses whom you're supposed to represent end up footing the bill. So I think this is just awful governance, and I think it's nefarious. I don't think there's any other word for it. >> Bill Whelan: The problem here is the lack of a two-party system in terms of running the government in this regard.
The budget surplus lie was actually $97.5 billion that would have covered this loan five times. But they passed a budget that did not include that loan forgiveness, why? Democrats didn't want to do it, Newsom didn't want to do it. Now, back in the old system of California, when you had a two-thirds requirement to pass a budget, Republicans would have fought this thing to death, and maybe they wouldn't have gone with a complete forgiveness.
Maybe they would have gone halfway and whipped out at the end of the day, but you would still would have seen, I pretty much guarantee you would have seen some money tossed to this. It's just a Republican approach to things, but when one party runs things, this is what happens. And again, in a State like California, where Newsom is just really not held accountable for a lot of reasons, one reason being the press corps is not what it once was. So it doesn't talk him.
There have been people in Sacramento shouting about this, Republicans have shouted about this special interest hemp, but it just doesn't get traction. And to me, it's just kind of shady. By the way, it shows one other thing, Lee, and then we'll, we'll move on another topic. Times have changed now and that California is just not gonna get a lot of money from Washington. This ties into San Francisco as well. San Francisco is sitting there praying for money from Washington.
It's now a divided government, it ain't gonna happen. >> Lee Ohanian: No, it's not gonna happen [LAUGH]. The house is gonna shut the door on money to California. And Bill, when you just think about the fact that there was a $300 billion budget during the fiscal year, we're currently in $300 billion, $20,000 per household, an increase in inflation adjusted terms, probably 50% over the last five or six years.
And I'd love listeners to write to us and let us know whether they feel like the government goods and services they are being provided with are 50% greater than they were six years ago. I think we know what the answers are gonna be, and it's not just because of who our listeners are. >> Jonathan Movroydis: Exactly, Jim, let's close out this podcast by talking about another Californian with probable presidential ambitions, and that's Kamala Harris.
Bill, in your article for California on your mind this week, you describe Vice President Harris's struggle to find footing in national politics. Her negatives remain above 50%, but it is highly unlikely that Harris will be jettisoned from the 2024 ticket. You write, quote, the idea of jettisoning the nation's first woman of color to hold the job doesn't jive well with a 21st century democratic party that thrives on identity politics.
Nevertheless, Bill, why she struggled to find a footing and carve out a niche for herself like her predecessor's had? >> Bill Whelan: Well, it's an interesting story. And what sparked me to write this was that Kamala Harris just came back from a three-nation tour of Africa and had, by most measures, a pretty successful trip. It was a good photo op, she was pretty much on message for the whole time.
But in the world of Kamala Harris, even a good development can be a bad development, in that the trip quickly got overshadowed by Donald Trump's indictment in New York, and she found herself in Africa having to answer uncomfortable questions about Trump. So she just can't seem to catch a break at times. Now, why is she in this spot? It's interesting, part of it is her own fault. As I write in the column, successful Vice presidents have been very proactive on the job, Jonathan Lee.
They've gone out and they've carved their own niche. You might remember Al Gore with reinventing government and doing some other matters, the Clinton administration. Dick Cheney was very active in all kinds of policy. Of course, we had that narrative about, narrative of Cheney really being the president, not Bush at times. These are people who really just embraced the job and really just kind of created an identity out of the job. That was not her approach when she came in.
Her approach was to be a little more behind the scenes, like Walter Mondale, to try to be a unifier of sorts with Capitol Hill. And that hasn't worked. But then, secondly, she's caught a bad break, and the bad break comes from her boss. Joe Biden has handed her two-political grenades in her rather brief time as vice president. He tasked her with being the border czar, which is all great, except they don't have a border policy. So there she is, it takes her 90 days to go to the border.
She just looks terrible. And when she does sit down for an interview about it, she's very defensive. Remember, she had the famous comment about Lester Holt from having gone to the border. She goes, well, I haven't been to Europe either [LAUGH]. Just really kind of tone deaf. And then the other grenade which Biden handed her was voting rights. This was the ill-fated measure they wanted to do in terms of changing voting rights in the country.
Joe Manchin, Kirsten Sinema, the two democratic senators did not wanna touch this, so didn't have any chance. And so there she is with her name attached to and her face attached to an idea that's not going anywhere. So she's kind of quickly associated with failure. But I'm glad you read that passage here, because you hear talk about her getting dumped off the ticket. This goes with the job.
Historians have long speculated that John Kennedy would have tossed Lyndon Johnson if he had the chance in 1964. Richard Nixon's on tape, he's talking about wanting to dump Spiro Agnew in 1972. Mondale was not tossed by Carter in 1980. Mondale is actually a unifying figure within the party. George H W Bush was not tossed by Ronald Reagan. Dan Quayle certainly suffered years of talk about being dumped. There was buzz about dumping Dick Cheney in 2004.
There was buzz about dumping Joe Biden in 2012 in favor of Hillary Clinton. So it goes with the turf, which I think she needs to understand, number one. But then secondly, she's just going to have to affix herself to something that she could actually accomplish. Getting back to the idea of Newsom and big ideas that don't follow through, she's going to show some competency here. And the question, at the end of the day, is she really just up to the task?
I like to tell audiences this, that a problem with the California Democratic existence is it's just getting to a jetstream. Once you get in statewide office, you just are flying at 30,000ft with a 200 miles wind behind you. And it's great in terms of winning elective office in California. And in Harris's case, she got elected state attorney general. The jetstream then took her into the Senate. And then from the Senate she becomes vice president.
And really at no point along the way has she kind of had to struggle with a challenge and really just kind of prove her chops. And now kind of the bill is coming due, and it's kind of analogous lead of what Gavin Newsom goes through as well. So anyway, that's a long way of explaining what her problem is. But she's going to remain underwater. You're gonna hear a buzz about her getting dumped off the ticket. But you just look at the Democratic Party right now and she's historic.
She is the first woman to hold that job. She's the first person of color to hold that job. And yes, the Democratic Party is beholden to identity politics. There'd be hell to pay if they kicked her off the ticket. >> Lee Ohanian: Yeah, but Bill, I agree, they can't kick her off the ticket. I think at some level Biden views her, the Democratic Party views her as being somewhat that they bought a lemon. She didn't establish herself as a competent politician in her 2020 presidential campaign.
It really ended shortly after it began. She couldn't get any traction. In fact, she doesn't even really have much traction in her home state of California. Her approval ratings here, I think are under 40% nationally. Her approval ratings are under 40%. I don't think she's an effective politician. She doesn't have a level of competence that would be adequate to succeed as a vice president. I believe Biden had hoped that she would grow into the job.
She would be able to make some accomplishments that she would be able to develop at some level, not just what he handed her, but to develop her own agenda and to be able to get some traction from that. But she hasn't been able to do that. Every time she speaks, she seems to put her foot in her mouth, whether it's about the Ukraine and explaining that it's a country near Russia, or having a group of kids in a staged press conference to talk to them about the space program.
Everything comes out as scripted. Everything comes out as somewhat, a little bit disingenuous or phony. She can't get out of her own way. She's not what they'd hoped she would be. I think at some level, I think they would love it if she said, hey, you know what? I'm gonna step aside for the good of the party. But of course, she's not gonna do that. And so they're stuck with her now.
And I think, [LAUGH] despite the fact that Biden will be, I believe, 82 around the time in the next election, and we all know what [LAUGH] his gaffes have become almost a daily occurrence. I think the Democratic Party is just keeping their fingers crossed that he will agree to run for a second term. Because she would, I think, be the presumable frontrunner if he decided not to run for a second term.
And I don't think there's a whole lot of people in the Democratic Party who would be excited about that. >> Bill Whelan: It's interesting, Monmouth University did a poll, I think, about a week ago, Lee, and they asked Democrats, should Joe Biden run for a second term? And I think 30% of the people in the poll said yes and 44% said no. But then Monmouth did something very clever. They turned to the people who said no and said, okay, who should run instead?
Well, your front runner is Kamala Harris. But Lee, she got 13% of the vote. I think Elizabeth Warren and Bernie Sanders both came in at 6%. Gavin Newsom was nowhere to be found in that poll, by the way. Sorry, Governor Newsom. Anyway, it shows that while she would be the leader of the pack, it's a tenuous position. But here's what I find fascinating.
On the one hand, you can rather cynically say that her being kind of incompetent as vice president actually helps Biden in an odd way in this regard, she's not outshining him on a daily basis. In other words, if she were just very good at her job, then I think there'd be a lot of pressure on him to step aside and say, okay, let Kamala do the job. Your age is going to be an issue, Mr President. You've done fine in your first four years. Let her run because she is more electable than you are.
But here's the problem. Because she's incompetent, it actually, I think, strengthens his candidacy, if you will, in terms of within the Democratic Party. But the problem is in the long term. So I think this is one reason why they just pray night and day that Donald Trump is their opponent. If he were in election against a more conventional Republican, unlike Trump, and the election were not a referendum on Trump, but instead on Joe Biden's age and Kamala Harris's competency.
Cuz you're right, Joe Biden turns 82, I think, like two and a half, three weeks after the 2024 election, she would be a real problem for him, a real drag. Because voters would think, my gosh, we're looking at a likelihood of a terrorist presidency at some point, but as long as they draw Donald Trump, that's probably not the issue. So anyway, with all things with Kamala Harris, it's complicated.
But I just find it rather amusing that she has this good time in Africa, that it's a successful trip, but then Donald Trump kind of spoils the trip for her. >> Lee Ohanian: Yeah, that's certainly bad luck for her. But, Bill, what strikes me as really just a telltale sign of her lack of effectiveness as politician, you look across Democratic Party, the progressive wing is not a fan of hers.
They look at her track record as a prosecutor and view her as part of the problem and not part of the solution, no matter what she says now. And so I view that the two plus years she's been in office, that's plenty of time to try to develop your own agenda and try to connect with a large swath of folks within your party. She simply hasn't done that, there's no natural constituency for her. You might think African Americans or woman would be that constituency. It's not really happening for her.
She doesn't have the fan base necessary. And at this stage, I just don't see her ever developing that. And you're absolutely right. This is really good news for Joe Biden. >> Bill Whelan: Yeah, one final thought here, and I'll let Jonathan close the podcast. We have a Senate race here in California, and people tend to forget the California primary is coming up soon. They very quietly moved the primary up to march. This was to keep California relevant in 2024.
It may backfire if Biden runs, because then if Biden's running, there's no excitement, on the Democratic side, at least. Anyway, if you look at that Democratic field, Lee and Jonathan, there are three Democratic House members who are running to succeed Senator Feinstein. One is Adam Schiff, another is Katie Porter, and the third is Barbara Lee. They represent what is today's Democratic Party in this regard. And that there are three lanes for Democrats right now.
There is the Bernie Sanders lane, and that's where Barbara Lee is. She's basically a democratic socialist. There is the Elizabeth Warren lane, which is where Katie Porter is, where she rarely misses an opportunity to bash finance and bash corporations, that's Liz Warren's thing. And then there's the establishment lane, and that's where Adam Schiff is. Because Adam Schiff is supported by Nancy Pelosi and benefits financially from being connected to Pelosi.
If Harris were to run for president in 2024 at least you would have to decide which of those lanes to be in. It's pretty obvious she would be the establishment Democrat. So this is, she's gonna have to kinda figure out where she fits within the Democratic Party right now. I mean, not just historic in terms of her getting that job, but really what she stands for and what she believes.
And so, you know, I know she's been sitting down and talking to historians about her job, but I think she probably needs to kind of sit down with some people and have a little more real politic conversation about what, what her future is. >> Lee Ohanian: Yeah, Bill, she needs a lot of advice and a lot of help.
And Bill, interesting enough, when you mentioned the primary season starting up in California's primary in March, my understanding is that Biden is unlikely to make an announcement before summer, which suggests to me that he is gonna be running. Because I don't see how he could decide by July not to run and give his party only six or seven months to sort out who's going to be running for president from the Democratic Party.
So at one time I thought, you know, given the guy's age, he's not going to run again, but now I'm thinking he's going to be running. >> Bill Whelan: People who get that job don't like to give it up. People who work for the guy in that job don't like to give up their positions as well. So it is hard to unroot an incumbent vice president. It's also hard to discourage a sitting president for not seeking a second term. But, yeah, so we think he's running.
And if he were to announce in the summertime that he's not running, then that would screw over a lot of lesser known Democrats, people not named Kamala Harris or Bernie Sanders or Elizabeth Warren. Enter Gavin Newsom with his $10 million PAC going around the country. So there's, as much as we criticize Newsom, it's a clever move on his part if he wants to stay relevant and be prepared in case the unexpected happens.
>> Lee Ohanian: Yeah, he has on his track shoes and he's in the starting blocks just in case, [LAUGH] just in case the race begins. And if he runs, then we'll have a lot of fun podcasts talking about past California governors, including one I worked for, who have tried to multitask, who've tried to run the state and run for president at the same time. And they all have one thing in common, Lee and Jonathan. It doesn't work out well as always, gentlemen, thank you so much for your time.
>> Jonathan Movroydis: This has been an interesting and timely analysis. You've been listening to Matters of Policy and Politics, the Hoover Institution podcast devoting to governance and balance of power here in America and around the free world. Please don't forget to rate, review, and subscribe to this podcast wherever you might hear it. If you don't mind, please spread the word. Get your friends to have a listen. The Hoover Institution has Twitter, Instagram, and Facebook feeds.
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Again, this is Jonathan Movroydis sitting in Bill Whalen's chair this week. He'll be back for another episode of Matters of Policy and Politics. Thank you for listening. >> Speaker 4: This podcast is a production of the Hoover Institution, where we advance ideas that define a free society and improve the human condition. For more information about our work, or to listen to more of our podcasts or watch our videos, please visit hoover.org dot.