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>> Jonathan Movroydis: Lee, let's start off by talking about your calm in California on your mind which explores Governor Newsom's desire for California voters to pass proposition 1. A $6.3 billion bond issued to build additional drug treatment facilities and permanent housing for the homeless and those with addiction, mental health issues. Mind you, that 6.38 billion will be added to an existing $1.6 trillion debt.
Lee, you write, it is about time that California politicians realize addiction is a huge part of homelessness, which is a view that has been flat out denied within progressive policymaking circles for years. But I see no reason to accept that passing proposition one will be anything more than doubling down on California's previous failures to sensibly deal with these issues. Lee, why do you believe it's just doubling down on previous failures?
The homeless issue obviously needs to be dealt with, especially considering businesses and people are leaving the state in droves. >> Lee Ohanian: Yeah, Jonathan. Homelessness is one of the most important issues facing Californians.
And the reason I say that it's a doubling down on previous failures is because when I look at the historical record of the amount of spending that's been done on homelessness and how much has moved the needle, it's very difficult not to say that the state's completely bungled this. Jonathan, give an example. We have about 181,000 people who are homeless in the state today. About 70% of those people have substance abuse and or mental health disorders. Those really go hand in hand.
So 70% of 181,000 is about 125,000 people. And the state just flat out denied that homelessness was a mental health substance abuse issue. Since 2016, the state has insisted that spending on homelessness has to satisfy what is called housing first principles. And that's this idea that if you just build housing, then homelessness will be taken care of, but homelessness is predominantly about substance abuse and mental health issues.
So it's not as if you build four walls and a roof that voila, all the problems are solved. But that's the principle that has been guiding state policy since that time. We have had an increase in homelessness to 181,000 today. There were 115,000 in 2015, so we're simply failing at dealing with this. We've spent $20 billion on homelessness in just the last five years during Gavin Newsom's tenure as governor. So we're not diagnosing the problem correctly.
A lot of those dollars are being burned up, and God knows where Newsom and democratic legislators fought for years against an audit that would identify where the black holes are within the housing spending complex. They finally approved it, but this is just flat out wrongheaded. Proposition 1 is $6.4 billion and one issue about the proposition is that we had $100 billion surplus just a year and a half or so ago. That had just been 6%, 6.5% of the surplus that we had.
So voters should be asking, where did that money go and why are you asking me for more money now? And what voters don't know is that once you properly account for unfunded liabilities in particular pension liabilities which are nowhere close to being fully funded, California's existing state and local debt is 1.6 trillion. That exceeds the annual GDP of all, but 13 countries in the world and works out to about $125,000 per household.
We do need to address mental health and substance abuse issues. There's no question about that, but there needs to be local government input into where that's done right now. Local governments will have no say in how that's done or where that's done if the proposition passes. We can't continue to build million dollar, 600-square foot housing units for the homeless which is what's being done right now.
And we also need to insist that those receiving treatment commit to becoming responsible and taking, and taking responsibility from themselves, and not continuously asking for support without being part of the solution. So I see this as wrongheaded and it's money that the state simply doesn't have within respect of trying to issue more bonds. >> Bill Whalen: Yeah, so Lee, there's an old saying that a cynic knows the price of everything and the value of nothing.
So allow me to be very cynical for a minute here. The State of California, Lee, has spent, I think something like $20 billion now in the past, what, four to five years on homelessness? And what, Lee, do we have to show for progress after spending $20 billion? >> Lee Ohanian: Well, Gavin Newsom's office will say, my goodness, just imagine what would have happened if we hadn't spent that money on homelessness.
We don't have the parallel universe, but what we do have is that homelessness fell between the early two thousands up to 2015. When we weren't widespread, imposing housing first harm reduction principles on the application of policy. The idea that we just build housing, everything will be fine. We're not going to demand, much less, even ask those who are dealing with substance abuse or mental health issues to take responsibility for their lives.
And, in fact, we're going to ask people living in cities and people who are managing local governments to accept substance abuse, as this is just part of these people's lives, and you're just going to go ahead and accept that. And that vision as much as some people might say, well, that just seems crazy for those who don't necessarily say, that vision seems crazy. We've tried the experiment, it's absolutely failed.
No other state is spending this kind of money and having such awful outcomes in terms of homelessness and the failure to deal with mental health. So Bill, yeah, there's not a lot to show for it and the policy sphere needs to confront this. It's a big change that they even are now willing to agree that substance abuse is an issue within the homeless Calciprie, 70% are dealing with this.
But they're not willing to change the details of policy by saying, if you're gonna get our help, then you're gonna need to commit to become sober and take responsibility for your life. So that's nowhere within the policy. I don't think we should be asking people to spend more tax dollars on this without asking those who are receiving help to take personal responsibility. >> Bill Whalen: Now let me ask you another question, professor Ohanian, since you are a noted economist.
There is an argument that this is how you go about dealing with homelessness, that homelessness is a lot of pathologies, a major part of which is mental health. And so thus we will spend $6.3 billion, which actually is going to turn out to be ten, $12 billion by the time you put in the interest rates for bonds. California voters don't understand that a bond is the same as a credit cardinal card. There is actually information on your voter guide which explains this to you.
But of course, people don't really read their voter pamphlets. But here's the question, Lee. When you look at homelessness, there is an economic component to this. Yes and the school of thought, I think San Francisco State University does Study on this a year or two ago that said, look, a problem in California, it's not an issue of drug use and it's not just an issue of mental health. It's also economic conditions. People can't afford to make a living.
People can't afford homes, as though people end up on the street. So where's economic relief, Lee? >> Lee Ohanian: Yeah, California is incredibly expensive. The median home price is about $830,000. That's for single family home. Median condominium townhouse price is somewhere around $650,000. So when you look at the number of people who can afford that type of housing, if you don't already own a house, then very few, very few people can afford that.
And if we ask why is California so expensive to live in? And not just housing, but also utilities, electricity, natural gas, gasoline are all among the highest in the country. Those are all policy related. California housing is so expensive because California policymakers have put up enormous regulatory impediments and delays in building that increase the cost of building just enormously.
And if somebody builds houses for a living, they're only gonna build them if they make enough profit to cover their costs and cover their time and get a competitive rate of return on their investment. Those costs are extremely high, those are all policy-related. Bill, to be absolutely honest with you, there are just a lot of people who are living in this state right now.
And without going into, without knowing the details of their previous past history and circumstances, there's just a lot of people here who simply can't afford to live here. And when you confront that, homelessness is never gonna get solved here. Because for every person you build a $800,000, a $1 million unit, and if you're successful enough that they end up becoming sober and are able to live in that unit, you can't build those for all 181,000. There just isn't enough money in the budget.
And for every person that you put into that home, there's going to be more coming down the road, who are gonna become homeless. Who are one car repair or one unemployment spell away from not being able to afford to live here. So we can blame politicians, California politicians until the cows come home for the mistakes they've made that have made California so expensive. That's on them, it's also on them that so many people are struggling to live here.
But it's completely unfair to go back to taxpayers and say, we made a mess of this in so many ways. And now we're going to ask you not to clean it up once or twice or three times. With the kinds of enormous [LAUGH] Budgets we've had and the enormous surpluses that we seem to have frittered away, we're gonna ask you for even more money that we're gonna use poorly and trying to deal with homelessness and drug addiction.
>> Bill Whalen: Yeah, there's a couple other elements to this, I think, worth noting. One, Lee, is this really contrasts what the state did on COVID in this regard. COVID broke out, and what Newsom and the government in Sacramento did was to say, okay, we're gonna let the 58 counties in California, each one, kind of decide what path to go down. And that made sense, why? Because COVID varied from county to county.
Now, it personally drove me crazy because I happen to be in a very draconian county here in Santa Clara County, which was very harsh, very restrictive. You could literally walk across a county line into a different existence just based on your case numbers and so forth. But Prop 1 is a different approach, Lee and Jonathan, in that what Prop 1 does is it revisits Prop 63.
Not to make our listeners too dizzy here, but this was a millionaires tax passed back in the early 2000s, and the money went to mental health care. And it allows counties to decide how to move forward on mental care. And that makes sense because a very rural county like Lassen is very different in its needs versus, say, Los Angeles County. So Prop 1 reverses that course and it centralizes as it runs it through Sacramento. So I'm not sure, Lee, if that makes sense.
The other thing I note here, this is power politics, plain and simple, in California. I've looked up the numbers on this, and I think the Prop 1 campaign, which is advertised aggressively in big markets across California, it has something like $16 million in the bank the last time I looked. I looked up the opposition campaign, $1,000 in the bank. Now, why such a disparity? This is something very important to Gavin Newsom. This is a legacy item. He dearly wants it passed.
He's in the advertisements himself. If you oppose this and if you put money into it, you are now risking the wrath of the governor and the legislature, and he cannot operate. And to that, I would point you to page 15 on your voters' guide where there is a rebuttal to the argument against Proposition 1. And included in this is a woman named Jennifer Barrera, she is the CEO of the California Chamber of Commerce.
That tells you, [LAUGH] Plain and simple, if you wanna do business in Sacramento, you gotta stay on the governor's good side. >> Lee Ohanian: Yeah, power politics, [LAUGH] 110%. And Bill, the proposition is 69 pages long. >> Bill Whalen: Yeah, [LAUGH]. >> Lee Ohanian: It is incredibly obfuscatory. And even within those 79 pages, and as you mentioned, local governments lose a lot of control over this. And this is about state mandates, and this is about one size fits all policy.
Within those 69 pages, it is not only incredibly opaque, but it's incredibly nonspecific about where these treatment facilities are going to be built, what's gonna be built, how they're gonna be built. And there's no specification for how continuing staff and operating costs will be financed down the road. This is really for construction, this is really for building treatment facilities. And they should absolutely be built.
They should be built at about one third of the cost that will occur under Prop 1. And they should be built in areas that I guarantee are not gonna be chosen, areas that aren't so expensive to be built in. And then there's not gonna be enormous pushback from local people who are gonna be understandably concerned about having drug addiction treatment facilities right down their block.
>> Jonathan Movroydis: Bill, let's move on to your column in California on Your Mind this week, in which you discuss the Calexit 3.1 ballot measure. Which aims to establish a new nation of, quote, Pacifica along a coastal section of the present Golden State stretching north and south from the San Francisco Bay Area, from Mendocino County through Monterey County, end quote. Bill, there have been similar movements in the past.
Could you maybe provide a brief history of them and explain why altering the state's government plan or framework is complicated, perhaps when advanced by ballot measure unconstitutional? >> Bill Whalen: People have been talking about breaking up California or breaking away from the United States, gosh, going back to the 19th century. But in more recent decades, and Lee and Jonathan, this seems to come up every decade. It seems somebody has a scheme for what to do with California.
I remember back in the 1980s, there was an idea that you just draw a line across the middle of the state, just bisect it, cut it in half, and have a north and a south. In more recent years, we had the Calexit movement. This came up after Donald Trump was elected. And this is progressives thinking we don't want to be part of a Donald Trump America, so we'll break away. The prominent venture capitalist Tim Draper came up with not one, but two ideas for not seceding, but breaking up California.
First he wanted to do it into six pieces, then he wanted to do it in three itty bitty pieces. And each time Draper ran afoul of, well, he had a hard time collecting signatures. He failed to get it verified one time, so that fell apart. So now we have the new land of Pacifica. And a listeners' note that it's Pacifica, ending with an A and not an O, so there is no clash with the beer company of the same name.
But, Jonathan, you're right, Pacifica would do the stretch of land from Mendocino to Monterey County. So this is the The bluest of blue California would be a very liberal enclave. California would still exist, so you would not be taking a star off the flag. It would just be a pared down, more humbled California, if you will. The organizers have done the math. They claim that California would come out with about 40 electoral votes, which would put it on a par with Texas, if you will.
So the question is, you asked, will this move forward? Does it have a chance? The answer is no. Well, first of all, it doesn't appear to be a very serious movement. I think something like 92,000 people have signed up for the movement. Lee and Jonathan, we don't know how many of those 92,000 people are in California. So if this were to go on the ballot, you first have to collect about 560,000 signatures. So they would have to put money into collecting signatures. Good luck with that.
Secondly, there's a constitutional question or not. The state's legislative analyst office looked at this issue a few years ago with regard to Calexit, and it determined in its opinion, you look at the state constitution. And seems written pretty clear that if you want to really modify the state, if you wanna change the state's existence, you have to do it through the legislature.
You just can't have a simple vote of the people, or you have to have a constitutional convention, which we haven't had in California since 1879. So it is in some regards, Bill Whalen wasting 1,400 words in the space of the Hoover Institution cuz it's not gonna happen. But you know what, Lee, it's kinda fun to write about. >> Lee Ohanian: Bill, do you know much about the people who are advancing this idea? >> Bill Whalen: I know a little bit, and they are colorful, to say the least.
One fella apparently has ties to Russia. There are questions about whether or not the Russians at one point were trying to get engaged in breaking up California, at least causing mischief. And I think he lived in Moscow at one port and his partner in this, and I think they've since had their own secession from each other. They've broken apart. He has ties to Iran, apparently. So these are just kind of very shady characters.
So it's not like Tim Draper, who is a prominent California figure, or any kind of vox populi. It is, to borrow a term from Nancy Pelosi, it's kind of astroturf outrage, if you will. >> Lee Ohanian: Their marketing and public relations statement is just. I mean, honestly, it's just off the rails. So they state not being part of the US will make California less likely target of retaliation by its enemies. Well, actually, let make it much more likely target of attack.
And they talk about how California's electoral votes haven't affected presidential elections since 1876. Guess what? California has the most electoral votes of any state [LAUGH] In the country. That's just completely silly. And then it talks about the need for European-style single-payer healthcare and the need not to drag us into free trade agreements which, quote, conflicts with our values, unquote. And Bill, they want to carve off.
The piece of California that they want to carve [LAUGH] Obvious is an awful lot of income. It would include the San Francisco Bay Area down through Silicon Valley, I believe, stopping somewhere around central California, maybe Morro Bay. >> Bill Whalen: It's right at the bottom of the Monterey County line. So, yeah, you're just about to get into SlO at that point. >> Lee Ohanian: Yeah, yeah, so [LAUGH] that's a lot of income, a lot of tax revenue.
It would take two thirds of both houses of Congress to approve this. Yeah, so it's an obvious non starter. And then when stuff like this pops up, you just wonder what the ulterior motivation is for the people who do this, because it's, of course, complete fantasy land. >> Bill Whalen: It is, we got into this discussion with the Draper initiatives when you wanted to break California to six or three pieces.
And one of the same questions, Lee and Jonathan, was California as a whole has all of these resources. It has natural resources, intellectual resources, energy resources. And when you start breaking these off, for example, if you break away northern California from southern California, what happens to the water relationship?
And if you break away the eastern part of the state, in the Central Valley, from the western part of the state, and the coast happens to food, and then likewise, what happens to coastal access with ports and so forth. Here you'd have a very narrow stretch, as Lee described. It would kind of look like a very, kind of less long chile, if you will, but still narrow. It would be very heavy on wealth, as Lee noted, intellectual capital. It would not have any natural resources.
And the question which kind of interested me was how exactly it would govern itself. And that got me looking at the San Francisco election that's coming up, San Francisco voting in the March primary as well. And Lee and Jonathan, I was interested in two ballot propositions that are coming up. One is Proposition B, and one is Proposition E. Prop B would add more police on the streets in San Francisco. It would change law enforcement formula there.
And Proposition E would give police more tools for things like drones and suspect pursuits. And this, to me, kind of is an instant question of how weary the San Francisco electorate is with crime, if they're willing. A city that historically has been very tough on cops, very wary of any kind of rough policing, if you will, if they've just decided enough is enough when it comes to crime and theft and just wants to give police more tools.
So, Lee, I think it's kind of an interesting vox populi in that regard. >> Lee Ohanian: Yeah, yeah, Bill, it is. Interestingly, I did, I did a piece with CNN of all outlets about a year ago about if California were to secede. And the show was called Upside Down. So we got in some of the constitutional issues associated with this and just how difficult this could ever be.
And the parallels with San Francisco are interesting because you look at, I have to think that the median voter in that city, probably a homeowner, they're not happy with the fact that the value of their real estate has dropped so much, that crime has increased so much.
Of course, we talked a number of times about the deterioration of neighborhoods and large decline in quality of life, reflecting the large number of people living on the streets there, which has been de facto just accepted by policymakers, and how drug use has really hit the city. So I don't have a good sense of the mayor's race coming up between Breed and, I can't recall how many people she's gonna face.
>> Bill Whalen: They're so challenging her, including one member of the Haas, the wealthy Haas family coming after her. I think what's interesting looking in San Francisco in terms of elections. So the Wall Street Journal had a really fascinating piece on this about a week ago. The wealth class in San Francisco appears interested now in attacking the political class in San Francisco and what the journal reported.
You have some very wealthy tech people who are engaging in city supervisor races and they wanna kick out the incumbents and put presumably more moderate, more business friendly, just kinda more measured, more sane, if you will, [LAUGH] more common sense supervisors. And this is unusual because to the extent that wealthy people play in San Francisco politics, it's Mark Benioff, the Salesforce CEO, putting measures on the ballot.
But they historically have stayed out of the nuts and bolts of San Francisco governing, if you will. But again, this is assignedly that, again, enough is enough from their perspective. And if you really wanna go to the root cause of politics in San Francisco, you can go after the mayor, but really you wanna go after the supervisors because it's the supervisors who you can count on each year for nut bag ideas.
>> Lee Ohanian: Yeah, relatively speaking, Mayor Breed has a much better understanding of what the challenges are. And, yeah, she's very much hamstrung by a very strong board of supervisors. And so, what's really only a matter of time before people with money started pushing back against the Dean Prestons of that board. Dean Preston, he proudly likes to call himself a socialist.
He's from his background, including his family's wealth and his wife's wealth is enormous, so [LAUGH] it's good to have a lot of money when you don't really need to make a living anymore. And he's really been viewed, including among people in the Democratic Party, as an impediment to progress within San Francisco, both in terms of crime, police, housing initiatives. Many view him as standing in the way of development.
Because at the end of the day, among the progressive crowd development is not something they really want to see. Because that means a neighborhood is gonna be given over to more well-heeled tech people and more people that don't have their political views. >> Bill Whalen: Yeah, as we were debric, they keep an eye on her and see if she also sort of moves toward the center as her election moves closer.
It's worth noting that recently she came out in favor of the ballot measure which is in circulation right now, which would go after Proposition 47. For our listeners, Proposition 47 was a criminal justice reform passed years ago which changed the penalties for grand theft in California, elevated it to $950 as a threshold. There's a school of thought that it is one of the drivers of this rash of theft that you see in California, so now this initiative would re-toughen the penalties on that.
She came out in favor of this, Lee, so did the mayor of San Jose, and so you see this kinda frustration at the city level. Interesting enough, by the way, Gavin Newsom has not said where he is on this initiative. But I think, again, you see a mayor like Reed trying to stay one step ahead of the mob on an issue like this and saying that, look, I get your frustration and I understand. >> Lee Ohanian: Yeah, you're seeing this pushback among local governance.
You're certainly not seeing it at the state level with, say, Attorney General Rob Bonta, who has gone out of his way to blame retail theft on organized crime, which is just so tone deaf to me. If someone has a retail store, whatever it is, that's robbed it doesn't really matter whether it's organized crime, or the person is working for a gang, or whether they're not working for a gang, you've just lost a lot of merchandise. It's becoming harder to find people who are willing to work in retail.
And Bill, of course, there was that tone deaf response by Newsom not so long ago. When he asked a poor, when he asked a woman working at a checkout line at Walmart, hey, why didn't you go and stop that guy? I wish she would have said hey, Governor, why didn't you go and stop him? You're running the state, I'm just a cashier, I'm not getting paid to go risk my life and tackle some guy who's walking out of my store with unpaid merchandise. That's beyond my pay grade, you're the guy to go do that.
>> Bill Whalen: By the way, it's a surefire sign of how much power Gavin Newsom has right now, you do not see the California Retailers Association leaking video. I guarantee that that is on tape somewhere, because this happened in a checkout line at Target and Target has video cameras everywhere. I guarantee that's recorded somewhere but, boy, whoever released that would just be a dead man walking if they did that. But it was a remarkable tone deaf moment.
We'll move on to the next installment here in a moment, Jonathan. And here is Gavin Newsom standing in line. As he told the story, this was on a conference call regarding Proposition 1, getting back to our first topic. He was talking to other mayors, and he just started riffing on a story that he claimed happened to him last December, the holiday season, where he's standing in line at a Target.
And he says he's looking ahead of him in line and he sees this guy grabbing a bunch of goods and running off, and then he notices that nobody chases him. Now this is kinda curious because the governor has a security detail. And I guess the security detail is in the business of protecting the governor, not enforcing other laws. So Newsom is kinda shocked by this, and he asks the clerk what's the deal?
And then the clerk says the governor is to blame [LAUGH] because of Prop 47, she didn't say Prop 47. And this set off Newsom, so he starts going after her and just wants to start berating her and lecturing her on Prop 47. It was really just kind of a sort of quarter Versailles moment, if you will, in that Newsom is kind of aghast that somebody would actually rip off a store like that and not get least and all that.
And boy, if I'm the Prop 47 campaign, the anti-47 campaign, I'm just finding that videotape of Gavin Newsom. The moment, it went very viral when it came out, by the way, he did that Zoom call so people just had a field day with it. But yeah, it was just one of those moments where just he realized that does the governor understand this has been going on for years now in his beloved San Francisco, and even his adopted Sacramento.
So it'll be very interesting to see if that 47 measure qualifies, and then if so what Newsom does on it. >> Lee Ohanian: Well yeah, Bill, just one last postscript on that. The woman working as the checkout clerk at, was it was a Walmart camera, Walmart. >> Bill Whalen: It was a Target, it was a Target. >> Lee Ohanian: When she once she found that Newsom was governor she said could I have my picture taken with you, and he declined.
And then just a couple of days ago I saw that he was doing plenty of photo ops at the Super Bowl, including he and his wife, along with Lady Gaga and her husband or partner. So again, he turns down the opportunity for that poor girl to have her photo taken with him. And then apparently he complained to her manager about her blaming him for the crime that's going through California, so go figure.
>> Bill Whalen: Yeah, and he was upset that he had to pay $380 for his goods, whereas somebody ran off. So [LAUGH] welcome to California, Governor Newsom. >> Jonathan Movroydis: Gentlemen, in a video posted on X ahead of the Super Bowl, President Biden called on companies to put an end to shrinkflation. That is when snacks like Doritos and sport drinks are coming in smaller amounts but charging consumers just the same.
The message echoes Massachusetts Senator Elizabeth Warren's X post earlier this month. Bill, is this just an attempt to shift the inflationary blame to the private sector? And to work in a California angle here, Representative Katie Porter has taken a similar anti-corporate approach in her campaign to become California's next US senator, is it working? >> Bill Whalen: I will defer to our distinguished economist on the economics of shrinkflation.
I think politically it's sort of like the pasta test of politics, Lee and Jonathan, you throw something against the wall and you see if it sticks. The Democrats, President Biden and his supporters have a problem, inflation is a real concern with voters. They're mad because they're paying more money, so, what do you do? You have to go to the root cause of inflation, explain what you think the root cause of inflation is.
And rather than trying to fess up the fact that you spent a lot of money, poured a lot of money into the economy and overheated it and perhaps caused inflation by doing that. You turn on evil corporations, who care not for how much money you spend, and on top of that they're ripping you off by putting less goods in the products.
I do know this, it just kinda strikes me as very funny that if you work for Elizabeth Warren there's some poor person in her office who is sitting there every day counting Doritos and counting Oreos. [LAUGH] Where do you find an eight-year-old bag of Doritos, by the way, to see how many were there? Maybe go into Joe Biden's messy garage where the classified documents were, maybe there's a bag of Doritos hidden in there.
But no, I think this is just when in doubt, when trying to shift the blame, you scapegoat somebody else. And if you're Joe Biden and Elizabeth Warren, how convenient to take on evil corporations. Although I'm not sure how many people think the makers of Doritos and Oreos are evil, necessarily. These are products that people like, this is not the same as going after Or big oil, let's say, but I don't know, Lee, you're the economist on this, what say you about shrinkflation?
>> Lee Ohanian: Yeah, it's a nice way of kicking the can down the road and passing the buck and presidents aren't supposed to pass the buck, at least that was Harry Truman's line, and President Biden is passing the buck. He poured an enormous amount of money into the economy at a time when unemployment was down to low fours, 4.3, 4.2 4 .3% there was absolutely no economic reason to have that enormous spending bill.
Inflation went up to somewhere around 8%, maybe a little bit higher, and to give you an idea of just how much people worry about inflation, a couple of days ago, we had the latest inflation numbers, which were 3.1%. Stock market crashed on that and 3.1% is about 1% higher than the Fed's target, but that just gives you an idea of just how sensitive people are to inflation.
So when I saw the commercial from Biden sitting there saying, if you're anything like me, you'll kind of cozy up to the screen with a little bowl full of snacks and my goodness, they're a lot smaller than they used to be. Hey, come on, give me a break, we can't have corporations doing this. And, when you start having a president start worrying about the size of a bag of Doritos or Tostitos or Nacho, the size of the Nacho Cheese Sauce, it's not very presidential.
>> Bill Whalen: Well, we're into the land of Jimmy Carter in the tennis courts, I think, when you started to do that, but there is a California angle here, and this goes back to when California gasoline prices took off, and what did Governor Newsom do? You blame big oil, it's a conspiracy is what corporations do, they're ripping you off. >> Lee Ohanian: Yeah, I think there was an executive order about a quote price gouging and excess profits facts?
And this followed up what on the meeting that was at the air resources board and the other energy regulators had, when big oil was supposed to come in and start telling them about their costs and their profits and their operations. And I believe no one from an energy company showed up to that meeting, so, yeah, this really has not to do with the economics of inflation.
This is purely, let's try to pass the buck and let's try to get some sympathy for a president who is not really facing his best moment right now. >> Bill Whalen: I have a bag of Oreos sitting in my kitchen right now and looking at my waist right now, if there are four less Oreos in that bag, that's probably not a bad thing for me. >> Lee Ohanian: Yeah, maybe they're doing in this a favor.
>> Jonathan Movroydis: Gentlemen, I mentioned Katie Porter earlier, she's locked in a four way race with Barbara Lee and Steve Garvey and representative Adam Schiff. What's interesting is that this primary environment has been created by proposition 14, which is a decade in the making, which created a primary process in which the two top vote getters, regardless of political party, are supposed to face off in the general election.
The intent of this new process for candidates to broaden their appeal beyond their own party and would thus have a moderating effect on their positions, gentlemen, has it worked out that way? Bill, why don't you start off. >> Bill Whalen: So I wanna write about this next week for California on your mind, so, Lee mark you my turf here.
The Prop 14 was passed in 2010 with a promise that what it's gonna do is because it changed California's primaries from two parties to one vote, where the top two vote getters advanced in November regardless of party affiliation. So you could have two Democrats, two Republicans, two independents, two Greens, two Martian party candidates, whatever you had, just the top two move forward.
But part of the sale was that because candidates are gonna have to think creatively, they're gonna have to reach across the aisle and build coalitions of votes. So if Ohanian Whale are running in different parties, they're gonna try to appeal to other parties to widen their base. But if you look at the Senate race, and I watched the debate was on Monday night, the second debate they had, it's very clear that Proposition 14 is not working in this regard.
Katie Porter, who you mentioned, Katie Porter is running on a very simple campaign of standing up to corporate power, that's her slogan. If you go on her website, she defines that as Wall street, pharma, oil and gas, and corporate lobbyists who cheat California. That is not a republican oriented message in any way, she's going against her party's base. Adam Schiff is running ads against Steve Garvey, attacking him, why? Because he wants Garvey actually to finish second, it's a very cynical ploy.
His campaign is sinking, the more we attack Garvey on the airways because Republicans despise Adam Schiff for his role in pushing the Russian narrative and then being the manager of the first Trump impeachment, Schiff's people figure out the more he attacks Garvey the more it elevates Garvey. Very cynically, Garvey finishes second, and Garvey has no chance of bidding him the general election, so they wanna bump out Porter, if you will.
Garvey, meanwhile, he doesn't have much money in the bank, he's not doing much advertising, when you watch him on debate, he's not really reaching out to Democrats, others. So to me, this is kind of the collapse of Proposition 14 in this regard, that promise hasn't lived up and probably may make it even more local. We have an open congressional seat here in Palo Alto, Anna Eshoo has had the job here for the last 30 years.
So it's a very competitive democratic primary again everybody is just competing for the most votes in the democratic base. There is one guy who brags about having worked in, quote, Hillary Clinton's state department, another one who brags about having a of going after Donald Trump. I hate crimes, nobody is running as a fusion coalition candidate and, Lee, this is sad. So, in what 14 just hasn't lived up to the promise of just really having kind of more creative, more fusion candidates?
>> Lee Ohanian: No, it hasn't, there is a germ of an idea within the proposition that it would be important to give a California, two high quality candidates, irrespective of party. So, yeah, we can all see the logic in that it hasn't worked out that way, go back to 2018, when Tony Thurmond and Marshall Tuck ran for state school superintendent, Democratic Party put all their resources behind Tony Thurmond.
Marshall Tuck was a fellow who had a track record of actually running schools, creating enormous, I mean, just jaw dropping improvement in school quality even within two to three years of him taking over failed schools. But he wanted some school reforms, the reforms that made his school so successful, they were reforms that were anathema to teachers unions, other people within the education policy complex.
So Tony Thurmond barely won in 2018, and now you look at California schools today, five plus years later, and performance is awful, $28 billion budget, one out of four kids are proficient, so, and now when we look at the state Senate race. Yeah, Bill, I agree with you completely in terms of the complicated intricate strategy of Adam Schiff, hoping that he faces Garvey for among the top two vote getters.
And, Bill Moore broadly, I also watched that debate and, my goodness, I saw one column said, what a bunch of nobodies, and without casting personal aspersions on any of those people. I looked at Barbara Lee, who wants a $50 minimum wage and who was represented the city of Oakland for what, three decades, roughly three decades. And Oakland is, frankly, is a governance dumpster fire. I mean, Newsom sent the the highway patrol in because crime has just gotten so far out of control.
There's Katie Porter, who is insisting California's problems have to do with big pharma and big oil and Wall street. No matter what you think about big pharma and big oil on Wall street, our problems are primarily we're shooting ourselves in the foot. And you've got, there's Adam Schiff of the Steele dossier fame, who is still insisting that his family escaped the Holocaust in the 1930s. Both of Schiff's parents were born in the United States [LAUGH] Long before the Holocaust ever occurred.
Steve Garvey is a fellow who's, I think it's from an economic standpoint, he starts in the right place. He's just not said very much, other than he seems to repeat himself an awful lot. I think he's got some reasonable economic instincts, he's certainly not offering any detail. And, my God, perhaps the old saw about you get what you deserve in politics, the idea that our junior center is gonna be one of those four people.
Well, it's probably gonna be Adam Schiff, and I'm not particularly happy about it, my friend. >> Bill Whalen: One last note before we move on here, and this is in defense of Proposition 14, having thrown it under the bus. It was, as I mentioned, it was passed in 2010. And that was after the previous election in which Arnold Schwarzenegger was reelected in the landslide, Arnold a Republican. And Steve Poizner was elected state insurance commissioner, Poizner also running as Republican.
So in 2010, it was feasible for Republicans to win statewide offices. So you can defend this idea, thinking that if Republicans are competitive, that will force Republicans and Democrats who are running neck and neck are in a viable race to have to think creatively. But what has happened since Prop 14 has been the further collapse of the Republican Party in California, where you just don't have competitive statewide races.
So in defense of Prop 14, why think creatively if you're a democratic candidate in particular, if the Republican you're running against is not going to crack 40% anyway in the race? So it's an interesting idea, but it's just not really practical in today's California, where Democrats outnumber Republicans two to one. >> Lee Ohanian: No, it isn't. And in some ways, 14 years is not all that long ago. But on the other hand, I can't, you'll know this better than me.
I don't believe there's one Republican who holds a statewide elected office. >> Bill Whalen: Not one. >> Lee Ohanian: Not one. >> Jonathan Movroydis: Gentlemen, yesterday saw the passing of CC Myers, a construction giant who the Sacramento Bee headlined as the rebuilder of California's freeways.
Gentlemen, you wanna say a few words about Myers, who he was, and what you remember about him, especially you, Bill, what you remember about him during your days working for Governor Wilson in Sacramento? >> Bill Whalen: Yeah, thank you, Jonathan. Because I came to California in February of 1994, almost one month the day after the Northridge earthquake, and California was in a world of hurt, and, Lee, remember what happened?
The quake hit, and the quake really laid waste to Los Angeles freeways, in particular the Santa Monica Freeway. Which is the east-west artery, the end of the I-10 that runs across the country. What to do was a real problem. California had a very bad history of rebuilding freeways in 1994. None of the damaged freeways, and the 1989 earthquake in San Francisco, the Loma Prieta quake, none of those freeways, their reconstruction been completed by then.
So this was how bad California was at freeways. So enter CC Myers in this regard. I was working for Pete Wilson, he was running for re-election. He did recognize that this was crucial to his political chances. But Wilson also, to his credit, thought outside the box. And he thought, we cannot have a situation where the Los Angeles economy is losing at least a million dollars a day because the roads are closed here. So what do we do?
So he got busy, he did executive orders which sped up the contracting, cut through red tape. Then enter CC Myers, who ran a construction firm in California. Myers actually offered the second lowest bid to Caltrans, he was not the lowest bidder. But he had a record of working around California, and Caltrans trusted him, so he got the bid. He promised to rebuild in 140 days. And he actually did the job in 66 days, which was 74 days ahead of schedule.
This is a great example of a carrot and a stick. The carrot in this regard was that for every day that Myers finished the job early, he got paid extra for it, an extra $200,000. Every day that it was late, he got charged an extra $200,000, so that was part of that, that was the carrots. The stick was Myers himself. Myers was kind of a giant of a man, not in terms of record, but also his stature. He stood 6'4, wore these [LAUGH] Intimidating ostrich boots.
So you'd wonder if it ended up in your backside if you offended him. And he was down on the job, Lee and Jonathan. There just constantly just kind of riding herd, doing little things like giving them coupons, and cash, and food to kind of keep them going, having his people working around the clock. And they got that job done lickety-split fast, 66 days, 74 days early.
Lee, it might be the last example of California's government, really, in a time of crisis, shining and outperforming in ways that people didn't expect. And sadly, we just passed the 30th anniversary of this. >> Lee Ohanian: Yeah, Bill, what a remarkable story and what a remarkable example of economics in action. You provide the right incentives and good things happen. [LAUGH] And CC, he received those bonuses and he was better off, California was better off.
What people fail to realize today is just the inordinate delays that we see are harming virtually everyone. And Bill, the 405 freeway, which is about 73 miles, one of the most highly traveled freeways in the state, primarily in southern California, so 73 or 74 miles. It was built, and I don't believe he was involved with this. I think this may have been before his time.
But just to give you an idea of just how fast things were done in California back in the day, that was primarily built in about three and a half years. Near my home, which is near Santa Barbara, there is a stretch of the 101 where one lane is being added to the northbound and southbound 101. That's going to take, I think, close to ten years to complete, as opposed to an entire freeway being built. The whole thing wasn't built in three or four years, but most of it was.
There's these just inordinate delays, they drive up costs amazingly. And when you ask who's benefiting from these delays, it really boils down to an environmental lobby that likes to challenge everything. And otherwise, there's enormous traffic delays now because lanes are closed and there's a lot of construction equipment around. So, back in the day, Pat Brown and the Republican legislature that he dealt with, okay, we're gonna do this. Let's do it fast, let's do it efficiently.
If we don't have all the bells, and whistles, and all the frills, that's okay, but we really need to do this for the state. It was done, we don't do that anymore. >> Bill Whalen: Yeah, it's very funny, I remember back in the day after this happened, it was a great government success story. And then suddenly, the media started coming after CC Myers. They discovered that he was due to make $15 million off this, but because of the bonus, the incentives, that actually was more like $30 million.
So they started accusing him of profiteering. They didn't look at two things. Number one, they didn't look at the big picture, which is, yes, he got more money, but in the bigger picture, saved the state a ton of money by reopening the freeway early, helping the economy. But then secondly, US voters, would you care if this man got an extra $15 [LAUGH] Million to have that free two and a half months open earlier? You get the answer on that.
By the way, it's one of my favorite jokes in Sacramento back in the day, the joke was something like this, why wasn't Rome built in a day? And the answer is because CC Myers didn't bid on it. >> Lee Ohanian: [LAUGH] Yeah, and what people don't understand is that type of managerial talent and leadership ability is just an incredibly scarce supply. So when you have somebody like that who can get things done, yeah, you give them the incentive, you compensate them to get that done.
Because it wasn't as if there were another ten or 15 CC Myers weighting the wings who could have been able to produce that safely and competitively within such a short period of time and get people back to be commuting on those freeways. >> Bill Whalen: Well, California needs all the CC Myers they can get these days, and knock on wood that we don't have a situation like that again.
It's been 30 years since Northridge and even longer since low Ma Prieta, and California has been living on borrowed time when it comes to a very big earthquake and a very big population center. >> Lee Ohanian: Yeah, we have, we'll keep our fingers crossed, not just only for the immediate consequences of those kind of disasters, but just for the complete chaos that will ensue. If we actually did have to have to do a major rebuild of anything, it would take decades.
>> Jonathan Movroydis: As always, this has been an hour of interesting and timely analysis. Gentlemen, thank you for your time. >> Bill Whalen: Thank you, Lee. Thank you, Charles. >> Lee Ohanian: Thank you, Charles. >> Jonathan Movroydis: You've been listening to matters of policy and politics, the Hoover Institution podcast devoted to governance and balance of power here in America and around the free world.
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