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>> Jonathan Movroydis: It's Thursday, January 25th, 2023 and you are listening to matters of policy and a Hoover Institution podcast devoted to governance and balance of power here in America and around the free world.
I'm Jonathan Moroide, senior product manager at the Hoover Institution and I'm sitting in the chair of Bill Whelan, 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 Whelan, in addition to being a Washington Post columnist writes weekly for Hoover's California on your mind web channel.
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 weekly about the policy environment of 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.
On Monday, four contenders took the stage at the University of Southern California to fill the US Senate seat vacated by the late Senator Dianne Feinstein. The four debating were three Democrats, US representatives Katie Porter of Irvine, Adam Schiff of Glendale and Barbara Lee of Oakland. And there was one Republican, the former dodger first spaceman hall of Fame nominee, Steve Garvey. The Democrats wasted no time hitting Garvey with pitches.
Porter pressed Garvey on whether he would vote for Donald Trump in the next election, trolling, quote, once a dodger, always a dodger. This is not the minor league. Well, who will you vote for? No, Garvey spent the last few years of his career with the San Diego Padres. While Garvey is a convenient patsy and not likely to get elected, did any of the three Democrats separate from the others in being possibly the best to represent the state, Bill?
>> Bill Whalen: Yeah, the answer is no. There really was no separation and it was kind of a frustrating debate on a lot of levels. First of all, it started at 06:00 local time here in California. You wish they'd push it back, at least an hour to potentially get more people to watch, but they're not gonna go into prime time because the networks all have all of their own program going here at ran on the local Fox station as I think it did down in Los Angeles as well.
But no, I mean, this is the challenge in this election you have. It's first of all, listeners should know, California is the top two system. So the top two finishers and votes advance November, regardless of political affiliation. You have three democratic House members as you mentioned, competing here. They have their differences, but their differences were not really fleshed out in this debate. Instead, it kind of turned into a pile on, on Garvey.
Now in fairness, Mr. Garvey has not been offering much in the way of policy. And he did just sort of try to tap dance his way through the debate for the most part, especially when asked about Trump and whether he vote for Trump or not. So he's not Arnold Schwarzenegger, he's just not to this manner board in terms of being a politician. He's not a natural, I would say.
But there are two more senate debates and I would hope that they will have some clarity because look, at least one Democrat, if not two are gonna advance to the two in November. And it's important to know that where Schiff and where Lee and where Porter stand, I'm gonna get Lee's thoughts on this, but Schiff then is the establishment candidate in this race. He is supported by Nancy Pelosi, which gives him ample money. He is advertising around the clock here in the Bay Area right now.
He is the closest to Israel, for example, in this field. Barbara Lee, her claim to fame is that she's the only member of Congress to have voted against authorizing use of force against Afghanistan in 2001. That's a challenge when you're running if your greatest hit is 20 years in the rearview mirror, but she is obviously no fan of Israel. For example, she supports Gaza. So there's a policy difference right there. Katie Porter is pretty much staking herself as an outsider, if you will, though.
She's a congresswoman and she runs ads talking about a whiteboard and she makes a point. She doesn't take corporate money and she wants to do away with earmarks. Now, there's the thing about earmarks is, earmarks are one of the most subjective matters in Congress, why? If Senator Whalen from California wants an earmark for California, Senator Ohanian from Wyoming will cry foul and vice versa. Senator Ohania wants money for Wyoming.
I will tell you that my earmark for California is for a vitally need resource and Lee would see the same for his home stand as well. So you need to flesh out Katie Porter and what exactly earmark is and what she would, and want to stand, and what she would not take for California. So again, two more debates ahead. But what stands out, Lee, is this. Dianne Feinstein was a very large figure on the California landscape for three decades.
She was historic and being a woman elected to the Senate in 1992, Lee, she made her claim to fame for many years as being a rather moderate Democrat who liked to work across the aisle, a consensus building Democrat. And as you watch this field of candidates, Lee, it's pretty clear that there is no Dianne Feinstein in terms of either moderate politics or any interest, really in reaching over to republicans and trying to do bipartisan matters. What say you, Lee?
>> Lee Ohanian: Bill, like you, I was extremely disappointed in the debate and I agree with you. There are no Dianne Feinstein's among the group of Lee, Porter, and Schiff. And to paraphrase a bad baseball analogy, if Dianne Feinstein was the major leagues, the rest of the group we're looking at. We looked at on Monday night would be in, I don't know, what's it called, triple D ball. But I mean, that's the way I'm looking at it.
And it brings up a broader issue that, I mean, not all that long ago. When we think about Dianne Feinstein in her prime and if we think about on the Republican side, somebody like Alan Simpson, these people were largely within the moderate space. They did work across the aisle. They didn't call each other names, certainly not publicly. And the whole idea of a politician is you get stuff done, you make the pie bigger.
It goes without saying that both sides have to be somewhat happy with the outcome. But that was the name of the game that no longer seems to be the name of the game anymore with Barbara Lee, just purely from the economics point of view.
Barbara Lee seems to be a person who thinks that spending a lot more money and creating a lot more legislation for programs related to housing and healthcare will be the magic wand that solves all the problems in the spaces of housing and health care, which are areas in California where there are already enormous amounts of money being spent, there are enormous amounts of existing legislation and regulations, and we are getting outcomes that are far from what we should be receiving.
So she wants to double down on what I see as largely failure. She advocates for a $50 hours minimum wage. She's the opposite of Porter in terms of earmark. She wants to spend other people's money. She doesn't really seem to have much economic sense when it comes to understanding how a market economy works. With Porter, the evil that afflicts our world are corporations.
Those include corporations that have created so many innovations, so many technological advances, so many investments that hire so many people, that have created the prosperity that we have in the United States. So when it comes to housing, for example, Katie Porter says, we have housing problems in California because Wall Street writes the rules. Well, most housing policy is local. It's state and local. It has nothing to do with Wall Street.
She seems to have no understanding that the reason we have housing issues in California is because our policies make it incredibly expensive to create housing in California, and those are policies and regulations that have either been put in place or that remain in place because of her party. Schiff didn't seem to really have many ideas. He thinks that Medicare for All is a fabulous idea, as does Katie Porter, as does Barbara Lee.
And none of them seem to understand or are willing to admit that Medicare for all systems in other countries, including in the UK, which has the longest running single perry system, are facing enormous budgetary pressures and ration care. Remarkably, including in the UK, cataract surgery, and a lot of parts of the UK is not covered, and the reason being that it is of limited clinical value. Well, cataract surgery is over 99% successful.
I don't know how much more evidence you need to make the point that is of enormous clinical value, but there was just this simple idea from Porter, for example. Medicare for all, the quality is higher, the service is higher. It's just all around better, that just silly. And it's not just silly, it's remarkably dangerous to think that way. So I was extremely disappointed with the three Democrat candidates.
I think Steve Garvey has a better 30,000 foot level sense of the economics of what it would take to govern and what kind of policies would improve a lot of outcomes in California. But he did not seem to be really close to being sufficiently well informed about housing policy, about water policy, about health care policy. I just don't.
This could have been a breakout moment for him, because, as you pointed out, it's the top two and there are three Democrats and just one on the republican side that has any chance. I don't think he did himself a lot of favors on Monday. >> Bill Whalen: Yeah, I think the Garvey strategy, not to overuse the baseball metaphors, it was to try to play error free ball for nine innings.
So go in there, say really as little as you can, and just kind of get out of there clean, and just try to bank on the strategy that come the primary March 5, you get all the republican votes, maybe a few independent votes, the Democrats will divide their votes, and that's how you get second place, or maybe even better. But here's what I find interesting about the Garvey candidacy. Lee and Jonathan, it's kind of a microcosm of what Republicans are facing nationwide right now.
And that here is Steve Garvey in a state that does not like Donald Trump. Trump has run twice for president here in California. Each time, he has performed woefully in November elections, the worst number since alf landed in 1936 in terms of a two candidate race. His proudest accomplishment as president, he might tell you is that he appointed the justices who helped overturn Roe V Wade. This is a notoriously pro-choice state. If you will. Trump doesn't play well out here in California, in short.
And so if you're Steve Garvey, in theory, you could run a very, to borrow a word from John McCain, a very maverick campaign where you position yourself as a different kind of republican and break with Trump. But here's the problem. Trump is still widely popular with Republicans in California, the people who you need to have vote for you on March 5.
And if you look at actually the way that the California Republican Party has set up this, primarily, and Jonathan, they changed the rules in a very clever, nuanced way to benefit Trump. In the past, primaries have been very simple for Republicans. You do it district by district, get delegates per congressional district. But they added a caveat for this election, that if the top finisher gets over 50%, then he or she will collect all the delegates in California, winner take all.
Why does this matter? If you look at New Hampshire, you look at Iowa, Trump has finished over 50%. So this is a dilemma for Steve Garvey. While it would be in his long term interest in terms of being a November general election candidate, to break with Donald Trump, not to be seen as MAGA in any way, he cannot say it at this point. So that's why you saw him, I think, just go to really, really long efforts just not to say anything about Trump if he could. There are a lot of openings.
I agree with you, Lee, for Garvey to talk about policy, if you will. But I keep getting back to this, and that's the fact that just California is not being well served in the Senate right now. My estimation, we have one full time senator in Alex Padilla, who just does not make a lot of news. He's just, you never see him in big debates. For example, we're having a very big conversation in the Senate right now about immigration reform. Where's Senator Padilla?
And then we have an interim senator, LaFonzo Butler, and she's nowhere to be found because I guess she's a short term or anyway, and she really shouldn't be in that job anyway. Gavin Newsom gave her the appointment because she's tied up in labor in California. I just wonder, Lee and Jonathan, if one of these three democrats does manage to win this election this fall and they go to the Senate, what can they actually do for California?
Because you historically have two kinds of senators in Washington. There are so-called show horses. And this is what Barbara Boxer was when she was a senator for know, two and a half decades. You would always count on boxer to be the voice of, you know, outrage and anger and, you know, you know, symbolism. But then you had Diane Feinstein, who just carried the load, she was the workhorse. And pothole senator is another phrase for it. I just look at these three.
And if you think Schiff is the most likely one to win based on his money advantage and his name recognition claim to fame is impeachment. So let me throw this scenario to Lee. Donald Trump somehow manages to win this election this fall, and there's Adam Schiff in the Senate. He's going to be going after Trump against some impeachment form.
So again, while California has a lot of issues that deserve federal attention, I just don't see these candidates right now, at least the way they're campaigning. I don't see any of them really capable of going to Washington and doing the heavy lifting involved to actually do stuff for California. >> Lee Ohanian: I agree with you. Our state will not be well represented within the Senate.
As you noted, Padilla has nothing, he certainly hasn't elevated himself to the rank of prominence within the Democratic Party. He seems to show up, but he's not moving the needle in any way. And he'll be the senior senator. It's looking like it's gonna be Schiff, if no other reason he's got the support of Pelosi and he's got $35 million to spend on his campaign. I think Lee is far behind in the polls, I don't see her really being realistic. >> Bill Whalen: She's really a straggler right now.
She is third among the Democrats. And financially, she's struggling as well. And that's why, at least you see a lot of advertising up here, the Bay Area by Schiff and Porter, because they see blood in the water. >> Lee Ohanian: Yeah, and Porter, Bill, how many people really are going to care? I mean, her big issue is I'm against earmarks. How many voters? That's not gonna resonate with voters. So it looks like it'll be Schiff and Bill.
I mean, how many times has there been a censure within the House of Representatives? Now, you might put an asterisk on Schiff's censure. But nevertheless, Garvey got in a real zinger during the debate when he said to Schiff, you lied to 300 million people and you can't walk that back, that's out there. Schiff really didn't have a response because, of course, Schiff inserted portions of the Steele dossier, the congressional record, when it turned out that the Steele dossier was largely made up.
And the other day, I just saw that Schiff was, in terms of establishing himself as kind of the pro-Israeli candidate and the pro immigration candidate. He talked about his family had escaped the Holocaust and it immigrated here. And what a wonderful life his family had built in the United States. Bill, do you know when Schiff's parents were born and when they were born in the United States? His father was born at some point in the 1920s, and his mother was born in 1933.
Which is long before the Holocaust, Schiff was already honesty challenged, and yet he seems to be doubling down on that. So I can't imagine a major state that will be worse served in terms of the Senate than what it's looking like we will have. >> Bill Whalen: So I mentioned Steve Garvey is emblematic of Republican politics in 2024, and maybe Adam Schiff is as well.
Because just like Trump wears the impeachment like a badge of honor among Republicans who feel he was victimized, Schiff will do the same thing with the censor. And you see him in ads bragging about going after Trump, but let's close out. I really am fascinated by the issue of earmarks, and I hope that this comes up in future debates simply because bringing money back to your state is part of being a member of Congress.
And we can get into a semantic argument about what is earmark versus pork barrel versus, I think, what they used to call in the Transportation Department demonstration projects. But it's about taking care of your state. So I think it'd be really interesting to just sit down with Katie Porter and just say, okay, here are ten things that Barbara Boxer and Dianne Feinstein did in the Senate. Or Kamala Harris, you wanna add her to the mix, that you might consider earmarks.
Which ones would you would not have voted for? And the answer is, she's an incumbent senator. She would have voted for all them. Because at the end of the day, you want to take care of your constituents. >> Lee Ohanian: Yeah, I mean, you're not going to be elected to not serve the best interest of the people of your state. And bringing money back from Washington is part of serving the self, the self interest of people of your state. Every senator does it.
She'll be standing by herself and I don't believe she's gonna get elected. And, Bill, just to follow up on Garvey and Trump. Yeah, he's between a rock and a hard place. He tried to do what he could to deflect that by saying, I'm my own man. I'm not tied to the hip with Trump or anyone else. And I thought that was a reasonably good response, seeing as how it was Monday and we had just had only Iowa. And [COUGH] now that DeSantis is out, the Republican side is different.
I don't know why he didn't say, look, we've just started the primaries. Why are you asking me who I'm going to vote for? That's to be decided. I think that could have been somewhat of a response. He could have implored. But [COUGH] anyway, they're gonna keep hitting him with Trump. I don't really see what he's gonna do because the Republican Party is small in California, they do prefer Trump. It's gonna be a tough thing for him to get around.
I mean, right now, I just don't see a pathway for any of them other than Schiff. And my goodness, that's not representation that I, nor really any California should be looking forward to, irrespective of party. >> Jonathan Movroydis: Lee, let's discuss your recent California on your mind column in which you address the state's budget deficit, which will be as much as $58 billion next fiscal year and is expected to be $30 billion per year through 2028.
Lee, how did we get here after a record $97.5 billion surplus in 2022? And Governor Newsom has proposed cutting the deficit by pulling from financial reserves, cutting spending, and delaying approved expenditures. Is this plan a feasible solution for the state's budget woes? >> Lee Ohanian: No, it's not feasible. I mean, there's no way around it, California has been fiscally responsible.
The state budget has grown by 43% in the last three years, which is all under Governor Newsom and two legislative bodies, the state assembly and the state Senate, which are obviously, which are super majority Democrat controlled. So growing a budget 43% in three years is irresponsible. There's just simply no way getting around that. How did it get that big enough? Taxpayers in this state pay just ridiculously high state income taxes.
[COUGH] Many within the top 1% pay have over $1 million per year tax bills. You add that up, there's a lot of revenue. And then the state was just awash in COVID funds. I mean, $600 billion worth of COVID funds. There was so much money that it was being thrown at everything and at everyone outside of people really above median earnings. I mean, Gavin Newsom gave away $750 million to people who were willing to take a COVID vaccination.
There were tax breaks for businesses who were willing to move to California if they were in a state that was considered by Newsom to be anti abortion. There was $58 million of climate change initiatives, none of which will move the climate change needle. Irrespective of what side of that debate you're on, carbon emissions are a global phenomenon. Whatever California does is not even a drop in the bucket so why are we spending $58 billion? So the budget was silly.
So now suddenly, COVID funding dries up. Those very high earners were not such high earners in last year, they're not paying nearly as much revenue. And now, suddenly, the budget goes from nearly 100 billion in surplus to 58 billion in deficit, according to the state's legislative analyst office, which is a nonpartisan policy advice organization. They advise Sacramento on fiscal policy issues. They do an excellent job. They are nonpartisan. They see a $58 billion deficit.
Well, Newsom is, and I'll quote, just a little bit less pessimistic than the legislative analyst's office. And so he whittled off 20 billion off their deficit just because he's less pessimistic. Some might call that a gimmick, but that's what the government, that's what the governor did. So suddenly, we're down to a $38 billion deficit because of Newsom's assumption. And that's according to some estimates made by his finance department. If I was a betting man, I would bet more on the LAO.
What else is Newsom proposing? And Bill, I think we're gonna get a May revision. >> Bill Whalen: Let me jump in here, Lee, and explain a couple of things. So the governor does his budget proposal in early January. The legislature, which this week started looking at it, cries foul. They have issues with it. And then both sides kinda go to their corners, Lee, they wait until May. And the governor's revise, which is based on tax receipts that you get come April.
Now that's complicated the situation because you had the federal government extending the tax filing deadline until December last year, which really screwed up California's revenues. That's one of the kind of confusing matters here. But here's what Newsom did, Lee. So when he announced that the 58, it's not 58 now, it's 37.9 billion, he said, well, here's my plan to fix it. And here's what he proposed, Lee. He said, okay, we're gonna take 18.8 billion out of reserves and.
We're gonna cut $11.9 billion in cuts and fund shifts. Keep in mind, this is almost a $300 billion budget, so you're taking $11 billion out of that. And here's where the real smoke and mirrors come in, $7.2 billion in delayed or deferred spending. So that means we're going to spend it at some point, just not this year. To be continued. This is kinda like somebody breaking your car window. And instead of getting a replacement window, you just keep up the window.
Now, that's gonna keep the rain out, it's gonna keep the wind out, but it's not a long-term. Term solution and, Lee, here is the problem. It seems to be plain and simple. California is feast or famine when it comes to revenue. When it comes to budgeting, spending is based upon what you get, because we have a balanced budget here in California.
So, sometimes it rains and sometimes it rains due to the stock market, and sometimes it rains due to pennies from heaven in the form of COVID money from Washington. But other times, Lee, that stream dries up. It dries up when there's a bear market. And there's some ominous signs in terms of this market, in terms of housing and formative capital gains, Gavin Newsom is now the third consecutive governor, Lee, to face this reality. Arnold Schwarzenegger recognized it.
To his credit, he created the Parsky commission, which included a couple of Hoover fellows, John Kogan and Michael Boskin, and they looked at California's revenue problem and how to fix the tax situation to kinda make it more steady. Jerry Brown did not address it for eight years. And Gavin Newsom, unless he has some come to Jesus moment between now and 2026, he ain't gonna address it either, Lee.
So, we're talking about 15 years of kinda neglect here in terms of not wanting to take on this monster. But, what is the state of California gonna do, Lee, in terms of having this appetite for spending if it has just this rickety tax system, this rickety revenue system on which to base it? >> Lee Ohanian: Well, California, Bill, I should point out, California has revenue roller coasters.
When the economy is doing well, and when the stock market's up, and when home prices and business asset prices more broadly are up, those are sold for capital gains. >> Bill Whalen: And this is, by the way, this is by the ultimate thrill ride of revenue roller coasters right now. I mean, like six flags out in Valencia, because you've gone from a $97 billion surplus two years ago, to now the $58 billion [LAUGH]. That is a hell of a swing. >> Lee Ohanian: Yeah, I mean, that just shouldn't happen.
And, yeah, the Parsky commission had a bunch of sensible recommendations to reduce that volatility, to normally reduce that volatility. Brown refused to bind to that. I mean, I have no hope that Newsom is gonna be willing to adopt realistic budgets or much less volatile revenue streams. So, we're stuck with that. And Bill, when you say, what are we gonna do about that? We're just gonna continue to suffer what we have been suffering for a number of years.
And to put that $58 billion deficit into perspective, there's only two states in the country, Texas and New York, that have larger general fund budgets. As of 2022, which is the last year of data I was able to get, only two states have smaller general fund budgets than California's deficit. And, when you think about the amount of spending that has taken place in California, it's $23,000 per household. I mean, [LAUGH] that is an awful lot of spending.
And what are we getting for that within the state? We spend about 125 billion on K-12 schools. Only one out of four kids are proficient in math or reading or science. 75% are failing at the federal level. Infrastructure receives a grade of a D+ from the American Society of Civil Engineers. We've spent billions on high speed rail that was supposed to have been completed three years ago. We were supposed to be taking that 220 miles an hour train between LA and San Francisco.
As of 2020, it'll never get built. The only thing that might get built is Bakersfield and Merced, in maybe ten or 15 years, that will cost more than the original budget. California spent enormous amounts on reducing carbon emissions. We haven't done a good job in managing forests or other areas that can be burned, or regulating utilities who put overhead wires over highly flammable pieces of real estate.
Bill, all the carbon reductions that have been implemented in California the last 20 years have been more offset by the carbon emissions coming from wildfires. So, when you look at this record, you see just an awful lot of spending, and you don't really see the Californians are getting much out of that. So, it's a double lose, and it won't change until voters choose differently.
And the reason they don't is, I think they just have no idea about the remarkable Rube Goldberg system that's been set up in California, both in terms of revenue collection and in terms of spending. So, Bill, I don't know. I don't know what the state's gonna do. I see no signs of hope in terms of getting either better spending policies, they're more realistic, or more sensible revenue collection streams.
And, Bill, this 43% increase in the budget, that occurred when California was losing nearly half a million people. >> Bill Whalen: Right, yeah, no, it's just if you wanna go back over 50 years and look at the state population growth versus the population growth in state workers, it's a mismatch as well. So, I've looked at the crystal ball, and you know what I see in the future, Lee?
I see bonds, lots and lots of bonds, because if you can't spend money through the budget, but you still wanna do things that cost money. You go to the ballot and you put a bond on the ballot. But what's a bond? That's borrowing money. And the problem is you have to borrow money to interest, and now you're saddling yourself with future debt. So, it's not a pretty picture. And we'll probably talk on our next podcast about this. There is a bond on the March ballot that's worth looking at.
It has to do with behavioral health issues, mental health. This is Gavin Newsom's new hobby horse, and it'll be very soon to see if he could send that to the public. But to close out on the budget, Lee, I found it very interesting to see the two camps that the Republicans and Democrats in Sacramento have gone into. The Democrats went into basically two camps. One was to look at the budget itself and the cuts and really cry foul about, attacks on the safety net.
And there's a very contentious issue about this with a Department of Finance official the other day over just what are you cutting? But the other camp that the Democrats went into, Lee, was raising taxes and wanting to do the vaunted global tax that they've talked about before, going after fabulously wealthy people in California, taxing your assets.
And not just taxing your assets while you're in California, but if Lee or Jonathan flee California, which Jonathan's already done, by the way, I will still tax you when you're beyond California. I'm not sure the constitution allows that to be continued. So, that's a democratic approach to this mess right now. Just either look at the budget cuts or find new ways to tax people.
It's the Republican side that unfortunately doesn't get as much play as it should because you have, for example, Brian Dahl was state senator Renegade Zeus in 2022. He's asking a lot of questions about wealth flight. Well, Gee, don't we have a problem. Wealthy California is leaving California. What happens to revenue then? And then, you have Shannon Grove, who's also a state senator, and he's looking at the impact of wage loss. So again, Lee, just put on my propeller head hat here for a moment.
There is a chance to have a real good conversation about how the economy works in California, but, boy, the way this government's designed right now, I just don't think that's gonna happen. >> Lee Ohanian: There is a group of Democrats within the Assembly and the Senate that do think one can continue to tax and you'll generate a lot of revenue and you won't lose people or businesses. And the empirical record is far from that.
>> Bill Whalen: And Newsom, to his credit, has absolutely said, I'm not gonna do this. He got very snappy in his budget rollout when a Wall Street Journal reporter asked him about this. And he just said words the effect of how many times do I have to say no about this? So, to his credit, he says no. But still, the fact that this just intent that your knee-jerk reaction is, we're just gonna go tax wealthy people further to get more money.
It's not a sustainable model, Lee. Sooner or later, the wealthy people quit. >> Lee Ohanian: No, it's not sustainable, in fact, it's just simply unrealistic. There are a lot of high-income people who are leaving California The latest Census Bureau data shows that we've lost, I believe, close to 30,000 taxpayers earning over $20,000 per year in annual income. There's been a loss of, I think, $29 billion in revenue, roughly 10% of the budget coming from high-income taxpayers.
So you look at that and it's simply unrealistic to think, we can continue to tax the high end. And so my perspective is, yeah, you implement a wealth tax, those people are gonna leave. And legal scholars I've talked to suggest, no, that's not gonna be constitutional, you can't go after people after they leave the state. Jonathan, you're spared, my friend, from that. >> Bill Whalen: No one is spared, but Lee, you'd have to go on a hiring binge at the franchise tax board.
Why, God knows how many forensics lawyers and attorneys and CPAs they have to hire just to track down Jonathan's wealth and Lee's wealth and Bill's wealth, because you know what? If this tax is coming my way, I'm gonna hide everything that I have, [LAUGH]. >> Lee Ohanian: Well, yeah, and it's based on global assets, so it's, [CROSSTALK]. Yeah, are those people from the franchise tax board gonna fly out to Amsterdam and look at the apartment building I own there, of course not.
It's pie-in-the-sky thinking, which is not, California can't afford any more pie-in-the-sky thinking. >> Bill Whalen: Well, there's still wealthy people in California thinking creative things, Jonathan, which leads us to our next topic. >> Jonathan Movroydis: Of course, so, Bill, your column on California on your mind this week looks at Solano, California, an hour east of San Francisco.
Where a group that calls itself California Forever revealed its intentions to use 60,000 acres of space it now controls to build a dynamic new community with middle-class homes and safe, walkable neighborhoods. And, quote, a commitment to bring good paying jobs and investments in education, green spaces, and clean energy. Bill, you translate this optimistic outlook to the following.
Solano county, which sits between Sacramento and the San Francisco Bay Area, could see the construction of at least 20,000 new homes, including housing some 50,000 residents in row houses and multi-story apartment buildings. With the population eventually reaching 400,000 if development meets certain economic benchmarks. Bill, can this vision become a reality, and does it help address Governor Newsom's goal of a Marshall plan for housing in the state?
>> Bill Whalen: I'll defer to Lee the Marshall plan of housing cuz he's written brilliantly about that for California on your mind. But the question, Jonathan, can it materialize? Yes, but it's not gonna be easy. So what we're talking about here is California Forever wants to build housing in Solano county, which if you drive from San Francisco towards Sacramento, it's kind of the rolling hills, about an hour outside of San Francisco. You see a lot of cows, it's cow country, plain and simple.
But there's open space, and so what California Forever has done is it's gobbled up about 60,000 acres, which is about double the size of San Francisco, I think that's four times Lee and Jonathan, the island of Manhattan. I think they wanna build something like 20,000 units of apartments, buildings and row houses to put in about 50,000 people.
And they have a grand vision of this swelling one day to about 400,000 people based on, among other things, some environmental benchmarks that they hope to meet. To make this happen, they obviously have the money for it, they are funded by the likes of Mark Andreessen, who's a very famous venture capitalist here in Silicon Valley, Lorene Powell Jobs, who's Steve Jobs widow. She's behind this as well. So there's some financial muscle there, there's a commitment to doing it financially.
But they're gonna have to, first of all, get voters to sign off, because to build something like this in Solano county, you have to get voters to waive a 1980s law which prevents things like this from happening because Solano county is notoriously protective of its open space. It doesn't want sprawl in its very nice city part of California. So if they can get it done on the ballot November, then they can actually start digging.
But, and here's the other but they are now gonna be introduced to the lovely world of regulation in California. They're gonna have to get building permits, they're gonna have to get environmental waivers. Lee, they're gonna have to deal with CEQA at some point, they're gonna have to deal with everybody who wants to stop them and then some very angry citizen groups who don't want this to happen. So it might be kinda their introduction to the reality, [LAUGH] of California in this regard.
This is not the same as buying a nice $10 million mansion in Palo Alto. To actually build something for the ground up in California is very complicated. Lee, what I've talked about in this column, and here's where I wanna get your thoughts, if I gave you $1.1 billion to build in California, a community, here's the question, would you do it in Solano county? Not to bash Solano county, but it's not exactly adjacent to San Francisco or Sacramento, it's between the two.
And it's not part of the high speed rail scheme, because if you look at high speed rail, notoriously, it does not include Sacramento, it does not include San Diego. Would it be smarter, lead to either, a, build something like this in Solano county, which has some tie into maybe, say, improving the existing subpar rail that runs between Sacramento and San Francisco? Or, Lee, would you build elsewhere in California?
And assuming for the sake of argument, that high speed rail ever materializes, fold this into high speed rail. This is what has me kinda confused about the project. They're building a very cool community who's against the idea of walking to work and living in a nice, safe neighborhood. But I'm just not sure if it's the most practical way to address in California's problems. >> Lee Ohanian: I think the choice of the property reflects somewhat the preferences of those who are funding this.
>> Bill Whalen: Granted, they had to find a lot of acres somewhere. And you're not gonna find 60,000 acres in Santa Barbara, [LAUGH] California. >> Lee Ohanian: No, no, it's not everywhere. So, interestingly, California is 94% undeveloped. The density of California population, so the number of people living per square mile is small relative to very densely populated states such as New Jersey, for example. There's a lot of open space in California.
And when California was going through its go-go growth period, so when it rose from about 6 million people in 1940s to over 20 million people by the mid-1970s, the way California grew was by spreading out. So that really is [COUGH] effectively, that's been the low-cost model for growing Californians, is moving to areas where there's open space. I like that aspect of it. And a benefit that comes from that, implicitly, is that you're starting from a blank canvas.
And some of the challenges that you have in terms of buildings, say, in San Francisco or Los Angeles or San Diego, densely populated areas, you don't have there. Now, on the other hand, you've got a lot of people who live in Solano county who love the bucolic aspect of their life and who are, appears they are dead set against this.
I'm a little bit surprised, given the intelligence and the savviness of those who are running this, that they didn't have conversations to maybe pave the way for this to happen. Perhaps they did already, I would be really surprised if they hadn't. But just given the amount of pushback from people who are living in the area, in Solano county who may not even be very close to the area that they're thinking about developing, it looks like there's gonna be a lot of resistance to it, Bill.
I mean, personally, I would like to see it done, because California is 94% empty. And when you're developing an open spot like that, you can use state of their technologies for utilities, for infrastructure, a lot of stuff that You look at San Francisco and there are 80-year-old water pipes. LA is the same thing, San Diego is the same thing. There's failing infrastructure that would be incredibly expensive to rebuild. It can be done really quite efficiently in new areas like this.
I don't think it's gonna get done, I would like to see it get done. But, Bill, I'll put in perspective, there's another community that there's been an attempt to develop, is called Tejon Ranch. It's near Valencia, which is where Magic Mountain is. I think it's about 35 to 40 miles outside of LA. You might call it, pushing at a bedroom community.
Plans were submitted to develop, again, tens of thousands of acres for a community of about 60,000 people, similar to the size of what's being talked about in Solano county. Plans were submitted in 1994. You wanna take a guess how many houses we built? Zero. [LAUGH] Not one house has been built 30 years later. The project, I think, has been bankrupted a number of times. I mean, nobody can carry that, no developer can carry that for decade after decade. Bill, you mentioned CEQA.
There have been just a sequence of CEQA, California Environmental Quality Act duplicative lawsuits. Right now, you would think after 30 years, and they received a go-ahead about six or seven years ago. Another environmental group came in filed a lawsuit saying that there's something wrong with the latest environmental impact report. There is a judge who agreed with the lawsuit, and so now the whole thing's in limbo again.
So it just goes to show, if you wanna stop building in California, you can stop it. >> Bill Whalen: So you raised a great point, Lee. So California forever very quietly was buying land. And this was becoming a great mystery. And you started seeing media reports about who's buying all this land. And immediately, a lot of red flags went up because we're at a time right now, I saw this piece last week, I think, of the New York Times, about how foreign countries are gobbling up US farmland.
And because this land is actually very close to Travis Air Force Base, there's a national security issue. So people are thinking the Chinese buying up Solana county, what's going on? So California forever comes forward, and then says, okay, we're the ones buying it. So you're right, Lee, they probably should have been a little more open in terms of what they were doing. But you have a real culture clash here, you have people in Silicon Valley versus people in Solano county.
They're an hour and a half apart, but their world's apart in that regard. But what could happen here, Lee, is California forever could win the battle. They could get the initiative passed, but they may be in for a very difficult, or they may have basically bought Vietnam in this regard. They could be looking at years of guerrilla warfare to try to prevent them from building anything, as you mentioned, with Tejon Ranch. But having criticized this effort, I would like to give them credit for this.
It would have been very tempting for them to park money in, let's say, downtown San Francisco. And buy a bunch of office buildings and try to recreate a community there and say, okay, we're gonna make a residential community and bring in a bunch of small stores and make this livable. But Lee and Jonathan, you would not get families living there, you would get basically tech hipsters living there.
So I think to their credit, California forever has come up with design which is aimed toward families. That's good, because if there's a problem in California right now, it's middle class families trying to find affordable housing, so, good for them. But, Lee, this gets back to Jonathan's original question, though, about Gavin Newsom and his Marshall plan for housing.
Where is it at this point in his administration, and how does he get anywhere close to the finish line since the clock is ticking on his governorship? >> Lee Ohanian: Yeah, so I think we're about, what, about five years to the day? Five years plus maybe 15 days to his governorship. We had, what, the fifth anniversary of his initial inauguration just in early January, right? So Newsom promised a Marshall plan for housing, that was his main campaign promise when he ran in 2018.
We're about 15% there, we've been 15% every year, there's been literally no change. There's been no change on average in the number of new houses started in California since Newsom's governorship compared to the previous three, or four, or five years. No change whatsoever, and it's not just Newsom's governorship. And he'll talk about the dozens of new laws passed for housing to make housing to do whatever for housing.
And when I say dozens of laws, there have been close to 150 new laws passed for housing in California within the last six to seven years, think about that, 150? So when I talked about Barbara Lee wanting to just pass more laws, let's say Kumbaya over all the anti-homeless initiatives and affordable housing initiatives, none of them make any difference. Literally zero, you could have done none of this, we would still have the same number of housing starts, 15% of Newsom's goal.
There's just public enemy number one for California housing is that it costs way too much to build a home in California. Particularly, for infill housing, particularly for anything called low-income housing, affordable housing. We are spending upwards of a million dollars per unit to build housing, that is just insane. You tell that number to anyone else in the country, they would say, I can go out and buy three single family homes. I can house 15 people in those three single-family homes.
We're gonna house one person for that within 600 to 800 square foot apartment unit, but makes absolutely no sense whatsoever. No one on that stage on Monday night, no one in Sacramento, certainly not within Governor Newsom's office, is willing to confront that number. Until you confront that number will continue to fail. And the clock is ticking, we're not gonna see that in Newsom's governorship, in my opinion.
And for anyone who doubts what I'm saying, just look at the history, 150 housing bills passed, 25 billion spent on housing in the last five or six years, and it hasn't moved the needle at all. >> Jonathan Movroydis: Gentlemen, let's close out this podcast by talking about the Oscars. The nominations for the March 10 Oscar ceremonies are to take place at the Dolby Theater in Hollywood. They have been released as expected, Oppenheimer is an expected favorite.
It received 13 nominations, including best picture, best director for Christopher Nolan, best actor for Killian Murphy, best screenplay, best cinematography, and best original score. We talked a lot about Oppenheimer on a previous podcast. Gentlemen, are there any predictions for this Oscar season? >> Bill Whalen: Yeah, I'm gonna give you a prediction for an officer, excuse me, that politics are gonna be in huge form on March 10. This is five days after the California vote.
And just imagine this, Lee and Jonathan, every time Oppenheimer wins an award, it may win best picture, it may win best actor, best director. Every time somebody goes up there to get the little statuette, he or she is gonna probably save some variation of the same thing. We live in a dangerous time, the threat of people who don't listen to science, shot at Trump, it's gonna be frustrating.
Here's what interests me about the Oscars, and I've taken a lot of grief from this inside the Hoover institution. Because I admitted on a GoodFellows broadcast during the summertime that I want to see Barbie and, boy, my colleagues just [LAUGH] look of dismay on their face. But here's why I want to see it. When something makes a billion dollars at the box office, I wanna know what all the fuss is about.
So I want to see it in Palo Alto, it was about Comical as you could expect, coz I was the only guy in the theater and I sat there thinking, what am I doing here? But I became very curious as to how the academy would treat Barbie because it made a billion dollars. It was a vital shot in the arm along Oppenheimer when Hollywood sorely needed it. But unlike Oppenheimer, it's not a morality tale. Unlike Oppenheimer, it's not a look at history, if you will. It's a farcical movie.
So the nominations come out. Barbie does get a best picture nod. So it's honoring its box office take. But what stands out here Lee and Jonathan, the best actress nominations, five of them. Marco Roby, who plays Barbie, she doesn't get one. And here's what really stunned Greta Gerwig, who's the director, who's really become a force of nature in Hollywood. She gets snubbed, too. So it tells me two things. Number one, Hollywood struggles how to deal with blockbusters.
You could go back to 1997 Titanic wins about every award there is available. But then I went to looked up Top Gun Maverick, which got six Oscar nominations in 2023. And Lee and Jonathan also was a huge it at the box office. And again, a reminder of how great movies can be. It got one award for best sound ever [LAUGH] there's a consolation prize. That's it. Best sound, congratulations. Barbie, I'll be very curious to see what, if anything, Barbie gets in the hardware.
But the other angle here is that, Hollywood has had a lot of difficult conversations about women. This happened a few years ago when they realized that she, a woman, had not been ever given a best director award, a question of how many women get directed for that. The Harvey Weinstein situation underscored the difficult role of women in Hollywood.
So now you have a movie, Barbie, which is a force of nature with women around the country, but you don't give it the complete nods that it might have deserved. So anyway, just kind of a curious [INAUDIBLE]. The other angle to it, and sorry to filibuster here, it's Jennifer Siebel Newsom, the first partner of California. She's a player in Hollywood, at least she claims she is. She's a film documentarian.
She runs what's called the representation project, which focuses on women not getting their due. I'm gonna quote you from it. Quote, in a society where media is the most persuasive force shaping cultural norms. The message that young women and men overwhelm formerly faces that a woman's value and power line, her youth, beauty and sexuality and not in her capacity as a leader. Well, where's the first partner on Barbie? Shouldn't she be a little upset that Greta Gerwig didn't get her due?
So, since the Newsoms were not really that deeply involved in the Hollywood strike, publicly at least. So just for a governor who rarely misses a chance to vent and a first partner who likes to jump into this stuff, too, they've been very oddly quiet about Barbie. >> Lee Ohanian: Yeah, I don't see the Newsom says is wanting to tip over the apple cart of a very powerful, politically influential lobby that loves them or at least supports them strongly.
Yeah, so Gavin didn't dare get involved in the strikes this past summer between the actors and also between the screenwriters. Yeah, it was Democrat support on both sides. [LAUGH] He didn't wade into that. And I don't think we're gonna see anything now regarding women in Hollywood. And, Bill I did not see Barbie. I applaud you for getting in touch with your feminine side.
>> Bill Whalen: [LAUGH] >> Lee Ohanian: I guess 15, let's see, my daughter is 28, so I guess 20 years ago I would have taken her. I've been happy to take her to see Barbie. One interesting quote I saw, and I don't follow Hollywood very closely, but there was someone who was big in Hollywood, made the remark that, gee, what is going on? Is it Greta Gerwig, I'm sorry? >> Bill Whalen: Greta Gerwig, yes.
>> Lee Ohanian: Greta Gerwig and it says, well, there was a comparison between Greta, this person was making comparison between Greta Gerwig and Martin Scorsese. [LAUGH] I just thought, okay, really? Barbie versus Scorsese films? That had me scratching my head a bit. So it's an interesting and unusual industry, somewhat of a unicorn in terms of how little, it's an industry that only now is facing a lot of competition. And that was really what was going on between some of the strikes.
Hollywood is having a hard time figuring out how to deal with changes in technology. So, Bill, my only connection with those films Oppenheimer featured, in addition to Oppenheimer scientist named Enrico, who is a very short fellow who emigrated to the United States on the Manhattan project. My only connection with that is that many years ago I was getting recruited to be faculty at the University of Chicago. They put me up at the Chicago faculty club, has a small number of rooms.
And the fellow at the desk said, we've got a real treat for you. You're gonna be staying in the room where Enrico Fermi and Milton Friedman had stayed in, many, many, many decades before. And so I get up into the room now, Milton Friedman was about 5ft three, Enrico Fermi was about 5ft six. I get in there, [LAUGH] I take a look at the bed. Not only are my feet hanging off the bed, it's almost up to my knees. I'm about 6'4". So that's my one very slight connection to the story.
I have not seen either one of those movies I'm looking for to seeing Oppenheimer. Unless somebody in my household like my wife wants to see Barbie, I don't think I'll ever close in on that. >> Bill Whalen: Let me note that Jonathan Bodrot is the proud father of young children, is being oddly silent here when we talk about Barbie, which means he has actually has a guilty look on his face. >> Jonathan Movroydis: I guess I have to have him see it, but I do wanna see Oppenheimer.
>> Bill Whalen: So to close out of Barbie, not to mock them too much, but the nuisance have been very quiet. But Ryan Goslingen did get a best supporting actor nod for Ken, Newsoms didn't say anything about that. But if you're the newsoms who are rather, attractive people, maybe you don't wanna get us coz it's gonna prompt too many Barbie and Ken jokes. >> Jonathan Movroydis: As always, gentlemen, this has been an hour of interesting and timely analysis. Thank you so much for your time.
>> Bill Whalen: Thank you guys. >> Jonathan Movroydis: You've been listening in matters of policy of politics, the Hoover Institution podcast devoted 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. And if you don't mind, please spread the word. Get your friends to have a listen. The Hoover Institution has Facebook, Instagram and Twitter feeds.
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He'll be back for another episode of matters, policy and politics. Thank you for listening. >> Speaker 4: This podcast is a production of the Hoover institution, where we generate and promote ideas advancing freedom. For more information about our work, to hear more of our podcasts or view our video content, please visit hoover.org. [MUSIC]