California Update - Proposition 1 Wasn’t The Yeast Of The Governor’s Worries

>> Bill Whalen: It's Wednesday, March 13th, 2024, and welcome back to Matters of Policy and Politics, the Hoover Institution podcast devoted to governance and balance of power here in America and around the world. I'm Bill Whalen, I'm the Hoover Institution's Virginia Hobbs Carpenter Distinguished Policy Fellow in Journalism, but I'm not the only Hoover fellow podcasting.

I recommend you go to our website, which is hoover.org comma. Click on the tab at the top of the homepage it says commentary. Head over to where it says multimedia and up will pop a menu of audio podcast, including this one. Now this is the California version of Matters in Policy and Politics that we do every month.

And things are a little different today. My colleague Jonathan Movroydis, who ordinarily handles the moderating chores, is not here, he's taking a well deserved vacation. So I have the con, that begins with welcoming my colleague, Lee Ohanian. Lee Ohanian is a senior fellow adjunct at the Hoover Institution.

And a professor of economics and director of the Ettinger Family Program in macroeconomic research at the University of California, Los Angeles, that's UCLA. He's associate director of the Center for the Advanced Study in Economic Efficiency at Arizona State University. And a research associate at the National Bureau of Economic Research, where he co-directs the research initiative, macroeconomics across time and space.

He is also a fellow in the Society for the Advancement of Economic Theory. Lee and I write weekly for Hoover's California On Your Mind web channel, Lee doing mostly policy, me doing mostly politics. Lee, it's great to see you.

>> Lee Ohanian: Well, always fun to share ideas about our Golden State.

 

>> Bill Whalen: So here we are, eight days after the California statewide primary on Super Tuesday. The voting is overly, the ballot counting is not over. For those people who love speed in society, California is not the place to be. I was on the secretary of state's website, Lee, last night, looking up the numbers.

About seven and a half million ballots in all to be counted, of which about six million have been counted, means a million and a half are still sitting out here. So some races cannot be declared. That includes a congressional race here in Silicon Valley that is of great interest.

It's also kind of a statement about how people like to vote, Lee. I noticed that of the six billion ballots that have been processed, about a million of them were actually turned in on or before election day. So Californians are just sticking these things in the mail after the election.

It's kind of frustrating, but let's spend a few minutes walking through the super primary Tuesday results. I'll just start with you Lee, did you find anything particularly interesting, exciting here? Because California voters didn't find this primary terribly exciting. At last count, turnouts about 30%, are they gonna get up to about 33%, Lee?

And four years ago, also in a presidential primary, turnout was about 47%. So this was kind of a chilling primary.

>> Lee Ohanian: Yeah, Bill, I think what was most striking to me is just the lack of engagement among voters. 30% turnout compared to 47%, as you noticed last time.

Bill, I think what this shows, and a lot of what voters, those who did vote, actually engaged with, I think the big loser here is Governor Gavin Newsom. People simply are not interested, they simply do not have the energy. We knew that from a couple of months ago.

His approval rating has gone down to 44%, which is a 20% fall from his peak in 2020. Only 44% approval for a governor in a state with only 29% Democrats, it's hard to figure out how. It's hard to figure out those numbers. And Bill, among that 44% approval rating, only 18% are strongly approving of what he's doing.

So to put that in another way, about one out of five Californians, a little bit less than one out of five, are really excited about Newsom traveling around the country and calling Trump names and calling DeSantis names and calling Greg Abbott in Texas names. Because that's pretty much what Gavin has been doing the last few months.

So I think he's the big loser here, Bill. And included in that is the outcome of his baby, which was Proposition 1.

>> Bill Whalen: Right.

>> Lee Ohanian: Which would be a $6.4 billion bond for psychiatric treatment and some housing that Newsom said was a clear winner, full stop, that's it, victory lap.

And, Bill, where's that polling that's coming in? I know it's been too close to call since the election, but it's looking like that's around 50/50.

>> Bill Whalen: It's gonna pass. The no campaign yesterday, Lee, said words, in effect, that it's gonna pass. The last I checked, it's ahead by about 40,000 votes, which is about one half of 1%.

So I don't think the no campaign is gonna make up. But it's interesting, Lee, when, again, you dive back into the numbers. I referenced the 2020 primary in California. Lee, about 5.78 million democrats turned out for that election. Bernie Sanders, by the way, won that primary, beat Joe Biden by 14 points.

This time around, Lee, and again, these numbers are gonna bounce north. But right now, about 2.9 million democrats took part in what was a nothing burger of a presidential primary because Biden really had token opposition, Marianne Williamson. But it's interesting, though, you go down to Prop 1, Lee.

Prop 1, the last I checked, has about 2.93 million votes. So if you have the same turnout in the presidential primary as you did in 2020, that thing sails to victory. But here, Lee, its kinda limping along to victory. Now, its gonna win, I think. But I think the lesson here for Newsom is what went wrong?

You referenced polling. Back in December, Lee, Prop 1 was getting about 68% in polls. As of last month, it was about 59% and now its at about 50.5%, so, what happened? Lee, I'm gonna give you three theories here, three crackpot whaling theories. Problem number one is, Gavin Newsom starring in the ads.

If you had your TV on in the weeks before the primary, you saw ad after ad featuring Governor Newsom talking about selling this proposition. I think that was just a terrible strategy, Lee, because as you referenced, the man's numbers are underwater here in California. So that doesn't make him a bandwagon popular politician.

Why you would make him the salesman and not safe frontline medical professionals or even recovery success stories, I just don't get. So I think, number one, bad tactics. Problem number two, Lee, this also ties into Newsom. Homelessness has been a problem in California for decades now. And it's the problem that's been caused by a class of California politicians who just cannot solve the problem.

Gavin Newsom is part of this class, Lee, because he, in December of 2003, talked about pledging to answer San Francisco homelessness in a decade. So again, just, he's part of the problem, not the solution, I think to some voters. And then thirdly, Lee, and I think this is the big one.

You knew it was gonna be a low turnout election. And in California politics, low turnout elections work to Republicans' advantage because Republicans tend to come out larger numbers than democrats, so they have disproportionate presence. Making Gavin Newsom your public face of this is just like waving a red flag in the face of conservative voters.

So I think, Lee, that's what explains why it's down to 50%, by the way, a little nugget. I think people need to know, Lee, this is a bond. This is not cash, this is a bond. And a bond is like taking out a mortgage, which means that California has to pay this off over the course of 30 years, the state's gonna be on the hook for something like $310 million a year over the next 30 years.

 

>> Lee Ohanian: Yeah, Bill, exactly. And you know what's even more striking was the amount the two campaigns, the yes on one and the no one, had to work with. I believe yes on one had a war chest of, what, over $10 million?

>> Bill Whalen: It's closer to 20, actually.

>> Lee Ohanian: $20 million, what was the size of the wallet for the nose, was it something like $20,000?

 

>> Bill Whalen: Yeah, they were in five digits. They did not run any kinda media campaign, Lee. I didn't get any flyers in the mail, I didn't find anything on the Internet. They are just nowhere to be found and their strategy was it would just collapse under its own weight.

They almost got away with it.

>> Lee Ohanian: Yeah, well, Bill, a couple of weeks ago, I wrote negatively about Proposition 1, and it's not because. My opinion is that we don't need more psychiatric treatment within the state, particularly for those who have drug abuse issues. I've written a number of columns indicating that we have to massively increase investment and get drug abusers off the streets and into treatment.

But this is, in my opinion, this was not the way to do it. And, Bill, one reason is because in a state that is enormously challenged by a failure to be accountable, particularly within the state's ruling party. We have done just an abysmal job in terms of dealing with bond issues.

So one statistic I noted in the piece I wrote is that the last 25 years, Californians have voted positively on, I believe, six or seven water bonds that are worth about $27 billion going back to 1999. Okay, over a quarter of a century. What do we have to show for that?

As far as water reliability, water availability, even the very low bar of providing clean drinking water to every Californian, we've made virtually no progress. And yet voters trusting politicians provided $27 billion. We also provided $10 billion for high speed rail in 2008, and we know where high speed rail is.

So we've just done an absolutely abysmal job in managing budgets, particularly those associated with bond issues. So it does look like it's gonna struggle across the finish line, what, 50.5%, or 49.5%. But for those who voted, I think they're saying that they don't trust California politicians to manage a budget.

They don't trust California politicians to be fiscally responsible. California politicians certainly have given no reason for voters to trust them in decades. And, Bill, I thought it was interesting that Newsom was the front man for the yes on prop one, rather than a professorial looking psychiatrist who could tell us just how much of a difference this might make.

As far as I can tell, Gavin is not gonna give up the spotlight.

>> Bill Whalen: Well, it was kind of a vanity effort, Lee, and it's a legacy for him. So I'm gonna push back here, you said he was the loser in the primary. I'm gonna disagree in this regard.

He gets his legacy item, even though it's gonna get 50-51% of the vote, he still gets his legacy item. And his talking point that he wants, I think the primary loser, Lee, is Congresswoman Katie Porter. For this simple reason Katie Porter, who ran in a very crowded Senate field, finished a very distant third.

Adam Schiff, at present has the most votes, followed by Republican and Steve Garvey. And there is Katie Porter, finishing a distant third, about a million votes behind Garvey Lee. She has a temerity after the election to go up in front of a microphone and say that the system was rigged against her because a super bat came into the race late and spent money on her.

Immediately the world came down on her head, especially from fellow Democrats, because rigged is a very Trumpian choice of words, I think we would agree. So this is really just kind of, this is to me, Lee, this is probably the worst concession since Richard Nixon walked off the stage in 1962, telling reporters, you won't have Dick Nixon to kick around anymore.

 

>> Lee Ohanian: Yeah, I agree. Porter was a loser as well. And she's upset at Schiff because Schiff, in the bizarre travails of California politics, of course, the top two finishers go on to November, could be from the same party, often has been from the same party, particularly within California.

Schiff did not want to face Porter in November. So Schiff, lavish spending on Steve Garvey. So now we're gonna have Steve Garvey and Adam Schiff and Porter really doesn't have anyone other than herself to blame. She couldn't provide a blueprint for what she was going to do for Californians, she was a little bit all over the map.

She talked about housing, she talked about energy, she talked about big pharma, and she talked about tech. And it was all kind of wrapped around antitrust issues. And, Bill, you've been consulting in politics for a long time. I don't think framing your message around the country's antitrust laws is the way to get votes.

 

>> Bill Whalen: It works for Elizabeth Warren in Massachusetts, maybe not in California. Lee, look, Katie Porter took a risk. She left a congressional seat in southern California, that's competitive. But I would wager she probably would have been reelected if she stayed in it and she went for the Senate.

Why she go for the Senate, Lee? Because the Senate seats in California are about the closest thing to the papacy in terms of lifetime appointments. It's just, you get in and you just get reelected. You can stay in there for 30 years, so she was going for it.

If she wants to lash out, she should probably start with Nancy Pelosi, because here's Nancy Pelosi. For all the talk about women in politics, Nancy Pelosi put her money into and put her money network behind Adam Schiff and not Porter. So Porter is kind of deprived of that but she just lost because of a basic democratic tactic.

You go back to 2018, Lee, in the government governors race that year, Gavin Newsom spends money in the primary running ads against the Republican John Cox for the same reason that Schiff ran ads against Steve Garvey. He wanted raised Cox's profile just as Garvey got raised by Schiff as well.

So Katie Porter is a victim of a very familiar pattern now in which you spend money to elevate the Republican. This is the failure of the open primary system, I think, plain and simple. So it's very much sour grapes on her partly. The other interesting story, I thought coming out of this primary, Lee, was the dichotomy, if you will, between San Francisco and Los Angeles.

And that down in Los Angeles, George Cascone, running for reelection as the DA, he finished first in his primary, so he will run again in November. But up in San Francisco, Lee, the voters in that city took a decided turn to the right on matters having to do with crime and welfare.

 

>> Lee Ohanian: Yeah, interesting outcomes there, Bill. And just one last item about Katie Porter and Pelosi. I was also surprised about Pelosi decision to bless Adam Schiff. One reason being obviously, California has been a home for a woman senator for many decades. I think if you wanted a more effective senator from California within the US Senate, I think Porter would be more effective than Schiff.

Schiff is now, I believe he's running neck and neck with Garvey. Not to say that Garvey will win in November. I just don't see Schiff as a particularly compelling, attractive candidate. And, Bill, if it does end up, not to jinx Steve Garvey, but if it does end up being Schiff in November.

I suspect we will have a very uncompelling pair of senators from California within the US Senate with Alex Padilla, who is largely an invisible man, as far as I can tell. He was not even involved with the Biden Senate negotiations, the failed negotiations on funding Ukraine and the border deal and Israel aid, he wasn't even involved in that.

And then we'll have Adam Schiff as the junior senator. So California's not gonna have very effective representation, but.

>> Bill Whalen: Compellingly is a very diplomatic choice of words. Imagine there's a Trump administration in 2025, Lee. And imagine, God forbid, something very bad happens here in terms of natural disaster.

What happens when Senator Schiff calls up? About Trump administration? I mean, if his number is not blocked already. Donald Trump is not gonna do that, man, any February, which I think, by the way, Lee, ties into why Nancy Pelosi took care of him in this primary. Adam Schiff carried considerable water for her on Donald Trump.

When Trump came in, he pushed the Russian narrative. He was the impeachment manager, so maybe she felt she owed him for that. But, yeah, she's very interesting. She made a very political calculation that rather than trying to continue the female narrative in the Senate, she just took care of McCulloch.

 

>> Lee Ohanian: Yeah, she paid for what he was able to do for her early. I think the cost of that is gonna be a very ineffective senator. One who was called by who Steve Garvey called during one of the Senate debates on statewide television. He called Schiff a liar, he said, you lied to the American people.

How did Schiff respond? He babbled, he didn't have a response.

>> Bill Whalen: So let's go back to San Francisco now, Lee. So the New York Times wrote a piece the day after the primary with the headline has San Francisco lost his liberal soul? Sort of like the headline, is God dead in the 1970s.

But here's what they're referring to, Lee. They're referring to two ballot measures that passed in San Francisco. One is measure E, which allows the San Francisco Police Department to deploy surveillance technology like facial recognition cameras, drones to go after car chases and crooks. That got about 54% support, Lee, and then Proposition F, which requires adults who receive cash assistance from San Francisco to undergo drug screening.

And enroll in free treatment program if they're determined to be drug users, Lee, that got 58%. So this is San Francisco, what's going on here?

>> Lee Ohanian: Yeah, people are finally coming to their senses, Bill. Being a liberal politician or having liberal political views doesn't mean that you eschew personal responsibility.

Or common sense from the standpoint of when nobody wants to step over passed out addict on the street. Nobody wants to step over human feces on the street. Both of those occurrences are many times daily for many San Franciscans. So, yes, they are demanding that drug screening be associated with public support.

Common sense, I don't see that as particularly liberal. I think I see it as crazy and it seems crazy that it persisted so long. But there's a growing movement in San Francisco, number of political groups that are being led by Democrats, that are demanding more accountability regarding homelessness, regarding drug use.

Regarding managing an out-of-control city budget that exceeds $14 billion per year. On a per resident basis, it dwarfs everything, including New York City. You've got people really worried about crime, San Francisco has become the poster child for break ins and smash and grab from cars. It's almost become a joke.

So, yes, they've passed a proposition that's gonna be much more lenient for police. Again, I think that would be more common sense than politically liberal vis a vis the New York Times. And, Bill, I'll throw in one more proposition, which was Proposition G. Proposition G passed, I believe, with 82%.

Proposition G was restoring algebra one to 8th grade instruction. And again, you've got the vast majority of people within San Francisco are Democrats, very few Republicans. San Francisco public schools have become a nightmare, they're incredibly expensive. They have been historically managed very poorly by a school board that doesn't seem to figure out what parents want, what students need.

And for years, there was this narrative that kids would do much better if algebra was postponed in 9th grade rather than 8th grade. To some level, this seems like an arcane detail, turns out it's not. It turns out that math performance within San Francisco, despite the poorly done studies that the proponents of delaying algebra had trotted out, those studies are actually abysmal.

No conclusions can be drawn from them. But nevertheless, the school district said studies show, studies show kids are better off if we delay algebra. Turned out that was a disaster, it truly was. Math scores are way, way down. So now you've got 82%, I mean, Bill, how often do you see something passing at 82%?

So 82% of voters voted in favor of restoring algebra. This was really more of a payoff to a school bureaucracy that really has lost sight of itself. So I think we're seeing more political sense within San Francisco. And again, I don't see this as necessarily right left, progressive, reactionary.

This is about people who are fed up with crime, who are fed up with a badly performing school system, who are fed up with homelessness and drug abuse. And simply want to develop, simply wanna foster a quality of life that they haven't seen in a long, long time.

 

>> Bill Whalen: Yeah, Lee, I would love to see some exit polls from San Francisco. And I would love to see an exit poll that asked one question in particular. How mad are you right now? And my theory, Lee, is that some of this primary is cooked after the APEC summit in San Francisco.

You remember that when the leaders of the world came to San Francisco, it was a big deal for San Francisco, its first time on the world stage, really, since the UN meeting in 1945. And what happened before that meeting? A vast cleanup around the city, just sanitizing the city the way it had not been sanitized in decades.

What happened, Lee, soon after the summit was over, the city relapsed to its dirty former self. Homeless encampments popped up again. And I think, Lee, that maybe I'm reading too much into it, but I think things like that just kinda put the voters in a sour mood and they decide enough is enough.

The status quo just cannot continue and I think that maybe helped explain some of the tailwind behind these measures.

>> Lee Ohanian: Yeah, absolutely. Newsom admitted that San Francisco was gonna get a two-week whitewash and it would be back to business as usual. And San Franciscans were incredibly irritated with this.

I spoke to a couple people who live within the city who are involved with some of these grassroots political movements for a sane or San Francisco. These are people who are Democrats, who traditionally had been Democrats. And they were just very angry about this, that the fact that they were gonna clean up the city, they were gonna get rid of the drug trade.

They were not get rid of the drug trade, but they were gonna push it into back alleys where people couldn't see. And then it would be, well, you know what? Xi matters, but you don't matter. So once Xi moves off, once Xi moves out of San Francisco, we're gonna go back to business as normal.

So there's a lot of animosity about this and just a cavalier statement from Newsom and Bill. Just the city racked up enormous overtime bills for police and of course, San Francisco police is critically understaffed. It's not exactly a desirable job right now, given what the politics are. Perhaps we'll get a little bit better now that Proposition E has passed but I think there's a lot of anger there.

There's a lot of anger directed at the board of supervisors and at London Breed, who is relatively a lot more sane than many of those people on the board of supervisors. She's facing reelection, we'll see how that panels out in a few months. And then, Bill, you mentioned Georges Gascon, La County DA, who's been like Chesa Boudin, who took over his position in San Francisco, who was recalled and is now out of that job.

Gascon has been pilloried among LA residents for being soft on crime, for not prosecuting, for not arresting. Or police are not arresting people, cuz they know their cases won't be prosecuted. So, Bill, here's something that's striking. There were many who were in that race. I believe it may be 11,12, maybe even 13 who were running for that, including a number from his own office.

He received, I believe, 22% of the vote. And, Bill, I wonder how many of those votes were purely uninformed, I'm going to vote for the incumbent wrote pull the ballot trigger on that. I suspect he's gonna be in real trouble in November when it comes to the two person runoff, morale within his office is horrible.

They've got, I believe, hundreds of open positions. They can't fill them, nobody wants to work there. His assistant TAs were running against him very aggressively. There's a political association of Southern California attorneys that has come out about as sharply as you can against him. So, so far, he got through the 13 person primary, Bill.

I think he's gonna have a really hard time when it comes to November.

>> Bill Whalen: He may have one ace up his sleeve, though, Lee, and that's that he drew as his opponent a gentleman named Nathan Hochman. Now, Hochman ran in the state attorney general's race in 2022 as a Republican.

He is no longer Republican. But I can assure you, Lee, that George Gascon is gonna spend a lot of money reminding good people of Los Angeles county that he was a Republican. He'll tie him into Donald Trump, he'll tie him into Steve Garvey. It'll be kind of a repeat of the Senate primary.

He'll just create the Republican boogeyman, and maybe that gets him over the top. So if could be a fascinating race, Lee. And that I think Hochman, who's a pretty clever campaigner, is gonna just push very hard on quality of life in Los Angeles and crime. And Gascon is gonna push back with Trump, Trump, Trump.

 

>> Lee Ohanian: Yeah, Bill, I wrote a piece for California On Your Mind a couple of weeks ago about Gascon failing to prosecute, essentially, a home invasion. So there was a mansion in Beverly Hills, long story short, it was being sold by the court. There was a felony case involving the former owner.

Criminals managed to break into that house, renting it out nightly for parties and for drug use. And there are all sorts of drug sales going on in Beverly Hills two, three, four in the morning. Gascon's office refused to prosecute, refused to investigate because, Bill, these were the words, quote, squatters have rights too.

And not just to give you a crazy headline that people will say, well, that's just nuts. That's against the law, squatters don't have rights, at least the squatters in that particular case. So yeah, that will be one to watch, Bill. Gascon under fire substantially, Hochman, former Republican. I remember LA mayor's race, Rick Caruso, who had been a Republican and became a Democrat for the purpose of running against Karen Bass.

How much did he spend out of his own wallet, $75 million on his campaign?

>> Bill Whalen: At least.

>> Lee Ohanian: And he was painted as a guy who called himself a Democrat. He was painted as a Republican, as a white, male Republican businessman, despite spending $75 million. That seemed to have worked to Karen Bass's favor.

So, yeah, that could come back and bite Hochman.

>> Bill Whalen: You know, you mentioned the Beverly Hills story, Lee. And the narrative of squatting in Beverly Hills and Beverly Glen has now become a national thing. It's on my Apple news feed as of yesterday. Let's talk about a few California items that have national legs, and one begins with Panera Bread.

Now, Panera Bread may have been a winner of the primary, Lee, in that it's changed media focus from talking about it to other topics. And here's what I'm getting at. What is at issue here is a bill which you've written about for California On Your Mind a couple of times, AB 1228, signed into law last year by Governor Newsom.

It's the Fast Food Accountability and Standard Recoveries Act, or FAST for short. What it does, Lee, is it raises the minimum wage for fast food workers in California to $20 an hour. Now, this is a select group of fast food workers. They have to be working in chains that have 60 or more locations around the nation.

But apparently, within their bill, there is an exemption. And the exemption is for those fast food chains that make their own bread. Now, here's where the yeast rises and the plot thickens. Because you ask, okay, well, what chains do this? Panera Bread comes to mind, why is Panera Bread germane to California politics?

A gentleman named Greg Flynn, who is Greg Flynn? He owns a company called the Flynn Group. They own Applebee's, Pizza Hut, Arby's, Taco Bells, Wendy's, Panera Bread franchises around the country. He owns Panera Bread franchises in California, Mr. Flynn went to the same high school as Governor Newsom.

They were not buddies in high school. Flynn says his company purchased the Carneros Inn from Newsom's PlumpJack company. Flynn has made political contributions to Newsom, $100,000 in the 2021 recall, $64,000 to his re-elect. And apparently, Mr Flynn was talking to Governor Newsom's people about this bill. And lo and behold, what appears to be a carve out that benefits Panera Bread shows up in the bill.

But now, Lee, all kinds of confusion because the governor claims it's not really a Panera Bread exemption. And then Mr. Flynn turns around and raises the salaries of Panera Bread to $20. Anyway, I'm confused, Lee, could you kind of explain what's going on here?

>> Lee Ohanian: Well, it's a total mess.

And I think the long story short that what this really illustrates is just the very sad and enormous amount of corruption within California state politics.

>> Bill Whalen: Okay, let's get to that second, cuz I know you have a column coming up this week on that. But first, let's talk about AB 1228, Lee.

Was there an exception in it for Panera Bread, or was there an exemption that benefited Panera Bread? Because the governor is telling us there is no exemption there.

>> Lee Ohanian: Yeah, there is an exception in there that benefited Panera Bread. And, Bill, to go back a few months before that, imagine raising the minimum wage within one of the least profitable industries in the state.

And an industry which tends to hire workers who tend to have much less education. Who tend to have much less job experience, such as 17 and 18-year old kids, and an industry which tends to experience over 100% worker turnover every year. So, for example, if you're running a franchise and you have 10 people on January 1st of last year, well, by January 1st of this year, you will have hired 13 people.

And none of that's because you're firing people. Workers in the fast food industry, they move in and out. Teenage workers move in and out, they sometimes go back to school or college. They sometimes find a different job, because those fast food jobs, those aren't career jobs. So just think about the economics of forcing a higher minimum wage than every other industry within the state pays.

So, Bill, if you ask yourself, where did this come from? This came from a payoff to unions, because who is exempt from these bills? Unions, so we'll get to Panera Bread in a second, but unions are always exempt from the.

>> Bill Whalen: Can I put a note in here about Unions, Lee?

 

>> Lee Ohanian: Yeah.

>> Bill Whalen: I kinda know what happened behind the scenes here, because apparently there is an NDA, a confidential agreement around this. Unions representing restaurant workers signed onto this. And the industry groups or restaurants also signed on this because, in part, it's how you do it. The governor would say it's how sausage is made.

But you sign the confidentiality agreement, cuz these two sides don't trust each other. But unfortunately, that means we can't shed any light as to what exactly went on behind the scenes.

>> Lee Ohanian: Well, despite the NDAs being signed and the SEIU, the Service Employees International Union was the big winner here.

Because the negotiations behind this bill were with the Service International Employees Union and they don't represent. They don't represent fast food workers in California, but there's over 300,000 fast food workers workers in California, and they would love to represent those workers. So this is a backdoor way of trying to open the door for Union representation, because if you are engaged or if you have collective bargaining agreement, you're completely exempt from any of these laws.

And as Gavin Newsom would stay full stop, you're completely exempt. So, Bill, what we have is this negotiation taking place between the Service Employee Internationals Union and restaurant groups. And AB 1228 replaced a bill called AB 257, which was going to be the possibility of a referendum. That was a regulation bill that would not just set minimum wages, but that would have placed virtually all employee-employer relations under the purview of a politically appointed board.

It would have been the death of the franchise model within California. Now we get to mister Greg Flynn and Bill, I can, you know what? I can write a movie script about this whole shameful situation. Greg Flynn goes to Gavin Newsom's people, and Greg Flynn actually has Gavin's cell on his text.

As you mentioned, they were in high school together, very careful to say they weren't close in high school, but they do have a business relationship that dates back many years. And Flynn went to Newsom's people and said, this is gonna be so destructive. Our margins are getting so thin and absolutely right.

Fast food margins are very, very small. We're not talking about Google or Apple here, we're talking about a few pennies on the dollar in the fast food industry. These types of regulations can literally be the difference between survival and failure. So, for instance, this is really gonna be damaging to our margins.

Long story short, we have these meetings under the radar that include non-disclosure agreements. And the union, SEIU says, well, we have to do that, so we trust each other. Well, Bill, I don't buy that. This is simply a way of making the thing opaque and not being accountable, and not being transparent to California taxpayers.

I don't think it has much to do with trust. There's all sorts of ways to engender trust other than having non-disclosure agreements, which very conveniently provide little information for the public. But, Bill, despite these non-disclosure agreements, KCRA and Bloomberg in two different reports interviewed people who were at those negotiations who said.

More than one person who ended up saying, Gavin Newsom was not going to support this $20 hour minimum wage legislation unless it had a carve out for a politically important constituent in the bakery industry. Bill, who is that? That's Panera Bread, now Bloomberg breaks the story. It hits national media, and suddenly Newsom is scrambling.

Newsom's lawyers are scrambling, Greg Flynn is scrambling. And a day or two later, state attorneys come out and say, Panera Bread is not exempt. And Gavin Newsom says, hey, Panera Bread is not exempt. This is not corruption, you know what, full stop. There's nothing to see here, folks, go away.

And Greg Flynn is silent on whether the exemption applies to him or not. But again, to make this thing go away and not become a prey within the state of being able to pay $16 an hour rather than $20 an hour, Flynn says, well, we'll just go ahead and pay $20 an hour.

And Flynn and Newsom are hoping the thing will go away. But of course, Bill, there's a really important question here. And that question is just who was that carve out for if it wasn't for Panera? Newsom has been completely silent, there has not been one word from this.

 

>> Bill Whalen: Well, that and leave if they weren't getting the exemption, then why did he have to go raise it to $20? It would be $20 anyway, wouldn't it?

>> Lee Ohanian: Well, maybe at $20 an hour there's gonna be a lot of people, a lot of kids, 17-year old kids, a lot of them with great work ethics.

A lot of them really talented, a lot of them great possible workers who are gonna get shut out of those $20 jobs who still would maybe very willing to work as $16.

>> Bill Whalen: What I'm saying is the law is the law. And if you run a fast food operation, which Panera qualifies under this and you now have to pay $20 an hour, if he was not paying $20 an hour, when the law says he has to pay $20 an hour.

Why is he now announcing that he's raising his wage to $20 if he's not been exempted from it?

>> Lee Ohanian: Yeah, I think it's just simply to make this political hot potato go away. I think if he said, you know what, we're gonna fight this in court. This exemption applies to me.

And Bill, here's what it boils down to the law says those fast food restaurants that have a bakery that produce bread, and it's got to be bread, croissants. Nope, it's got to be bread. Who produce bread as a single standalone sales item are exempt, that's what the law says.

So why is Newsom and his attorney saying that Panera doesn't qualify? Bill, it boils down to this. Panera obviously brings their dough in from a centralized dough processing site. The dough arrives and then they produce bread. They're not gonna, every Panera bread would be very inefficient for every Panera outlet to try to make their dough from scratch right there in the restaurant.

So they just bring it in. So now suddenly, Newsom and his attorney just saying, we're gonna move the goalposts. What it means to produce bread means you've got to make it from scratch right on the premises. Bill, this was never the understanding when this carve out was created.

Multiple people within those meetings are saying, of course, it was for Panera. Yes, it was for Panera. Newsom and Flynn and the rest of what he calls an interesting left Newsom said in a moment of rare candor, this is how the sausage is made. My God. Yes, this is how the sausage is made.

And so California is just seeing a piece of this. And, Bill, interesting enough, and not surprisingly, Republicans sent a letter to Attorney General Rob Bonta asking for an investigation. Do you know what Bonta's response was?

>> Bill Whalen: Was there any?

>> Lee Ohanian: Well, there wouldn't have been any, except there's one KCR reporter, Ashley Zavala.

She's terrific, she has been pursuing this story. She said, what are you gonna do with the Republican request for an investigation? He said, we received a letter, we're reviewing the letter. And then she asked, do you think the letter has merit? And he said, we receive hundreds of letters every day and we review them all.

And he said nothing more than that. So Rob Bonta, Gavin Newsom, Greg Flynn, they're all just hoping this dries up and blows away. But, Bill, what it really illustrates is just the amazing amount of corruption here. And, Bill, I'm still waiting to hear who was that exemption for, if not for Panera Bread, who is that exemption for?

And despite these non-disclosure agreements, Bloomberg and KCRA had Plenty of people willing to talk about this.

>> Bill Whalen: Yeah, so, Lee, I think one thing is this shows a real design flaw at state government in California. And that a story like this comes up, and it's pretty clear, it should at least be, further investigated just to find out what exactly happened.

There's no vehicle for doing so. The legislature, which is two thirds democratic to three votes democratic, not gonna touch it. The state attorney general, who, by the way, first got appointed to that job by Governor Newsom before he ran for reelection, he's not gonna touch it. There's no independent watchdog that does this stuff.

So really at the mercy, of journalists. And there's one, TV reporter who's after this, but that's about it. So it's just shows what's wrong with Sacramento, Lee. But I think it also, it's a segue into your column for this week in California on your mind, and that's a general question of just kind of shaky, dubious, financial donations in California.

And here, Lee, I'd like to talk about the topic of behested payments, and for our audiences not familiar. A behested payment, this is perfectly legal in California. A behested payment is when an elected official solicits or suggests that a person or organization give to another person, or organization for legislative, governmental, or charitable person.

Let me repeat that, legislative, governmental, or charitable purpose. But what we have, Lee, is a lot of money being kicked around Sacramento, basically for special needs, to do favors for lawmakers, in particular, the governor.

>> Lee Ohanian: Yeah, Bill, this is something most people don't know about, and I think if they did, they would be just really upset about it.

There are no limit on behested payments, and I believe there's no limits. They need to be reported if they're over a minimal amount, I believe over $5,000.

>> Bill Whalen: Over $5,000 in a calendar year, you have to report.

>> Lee Ohanian: There's some questions about whether those behested payments, behested by Newsom are being reported correctly or not.

I don't know if they are or not, but there have been some questions within the media about whether they are. And so what this means is that the governor can say, here's a charitable cause. I think that's really wonderful. Would you mind sending a check to my friends at this homeless shelter?

And of course, there's hundreds of possible, thousands of possible institutions or programs that the governor can solicit for. And Bill, interestingly, the governor's wife, Jennifer Siebel Newsom, makes films.

>> Bill Whalen: Yes.

>> Lee Ohanian: As far as can tell those films make absolutely no money. If I was a betting man, I would probably bet that they lose money.

And yet, Miss Siebel Newsom receives an awful lot of contributions from corporations as large as Pacific Gas and Electric. Why are they investing in Jennifer Siebel Newsom's film? Bill, it's not because this might be the next Martin Scorsese, but this appears, this would appear to, I think, any reasonable person.

This is pay to play.

>> Bill Whalen: It is, there's actually a question with her if she's actually running charities or not. So, the Sacramento Bee actually went down this road with Newsom, avoided the Newsom administration pushback hard for going after the first lady. But you're right, that's a question or pay or play.

Here's a good example of how this works, Lee. In 2020, Newsom raised $45 million from Blue Shield of California and Kaiser Permanente for his housing initiative. And then guess what? He chose Blue Shield and Kaiser Permanente to manage vaccine distributions in California. Now, maybe they were the best candidate for it, but when $45 million goes to a charity of his choice and he turns around and gives them a very juicy contract, you got to wonder if it's pay to play.

 

>> Lee Ohanian: You gotta wonder if it's pay to play. And in fairness, Newsom is not the only governor who has been involved with behests. But Bill, interestingly enough, the same questions about propriety were not raised about previous governors. And I don't know the extent that Jerry Brown did this or Arnold Schwarzenegger did this.

I certainly don't remember the types of media stories, that related to this issue, as we've seen, just come under explosion for Gavin Newsom. And Bill, about a week ago, there's an LA reporter, longtime LA reporter, well known fellow at the NBC affiliate LA named Conan Nolan. He's been around probably since the 80s.

He had a really hard interview with Newsom about Panera, and he asked a lot of interesting questions, including who's the carve out for if not Panera? How can you possibly say that the exemption doesn't apply to Panera when then they bake bread? And so, Newsom was pushed to the point of trying to make these silly statements about, well, they don't make their dough on site.

They have it brought back in, so then the exemption doesn't apply. And then Nolan asked, well, who is it for? Why did you put in this arcane, idiosyncratic exemption, if it wasn't for anybody? And there was a lot of ooing and eyeing and Newsom tried to bully in the interview and just saying, this is outrageous, full stop.

No one didn't have any of it, it's on there on YouTube for people who are interested in watching. And it's a good six or seven minute interview, it's not one of Newsom's highlights.

>> Bill Whalen: Lee, do you remember the late Dan Rostenkowski?

>> Lee Ohanian: Yes, the fellow who went to prison, I believe, at some point, Bill.

 

>> Bill Whalen: No, no Rosti stayed on prison. President Rosti was the Chicago Congressman who chaired the House Ways and means committee for seemingly forever back in the 70s and 80s. He's probably, the most powerful man on Capitol Hill. At various points, I mentioned him, Lee, because Rostenkowski was very clever in terms of asking for favors from people, rather than rack up huge amounts of campaign donations.

Lee, because he didn't need it, he ran in a very easy district. If you wanna do a ball with Rostenkowski, you would find out that, gee, the Congress would really love it if you parked $10,000 into this Polish catholic church in his district or something like that. And other Congressmen have been this way, too, over the years.

It's just, it's how you get on their good side and so that's what California does here. But, Lee, is there any way to legislate ourselves out of this situation, or is this just, are we up to the mercy of lawmakers to be on the straight and narrow?

>> Lee Ohanian: Yeah, Bill, I mean, corruption and pay for play has been around as long as politics has been around, it's tough to solve.

But, I don't think these situations would be nearly as prominent within the media. If there was more of an arm's length distance, if it didn't involve Newsom's wife, and if Newsom been a lot more effective at doing his job. I mean, as we talked about earlier, his approval ratings down to 44%, when put into polls on hypotheticals.

If Newsom were to run for president against Trump, because it's obvious now he has very national political aspirations, and any reasonable person would say that. He ends up looking worse against Trump than Joe Biden did this before the State of the Union address. Newsom is in a state that should have loved him, that should continue loving him.

Doesn't love him anymore, Bill, and it's obviously because he's just not doing his job. He said, homelessness is gonna be my number one priority, building housing. We're 82% below that goal of building housing. Drug treatment, homelessness, California schools, water, electricity, you go down the list, Bill. I just don't know what box you would check off that indicated that he has substantially moved the needle, and at a cost effective manner.

So, I think California is just getting tired of this, and I think this one, I think if you have a really effective politician Bill like Rostenkowski was, some of this is gonna kind of fly under the radar. If you got a politician that's just not delivering, then it's gonna come to light.

 

>> Bill Whalen: Let me offer one other take here, Lee, and that's that if you live by the sword, sometimes you die by the sword. And that, Gavin Newsom has achieved a lot of attention around the nation for going after red states, for being a surrogate for Biden, putting himself very much in the national political conversation.

So, that's live by the sword. But die by the sword is when you raise your profile like that, you make yourself a very inviting target for publications that don't like you. So if a story like this comes out, the New York Post. Which clearly is not a fan of Gavin Newsom.

They're gonna run with it, and once the New York Post runs with it, it's now national news, and so that's the risk he runs by making himself this national player. But let's quickly go through two other items here Lee, that legislature acted on this week that I think are gonna get national attention.

One, Lee, is Assembly Bill 20 316, like Panera, we're back in the issue of food, and this Bill, Lee, would propose the banning of seven food diets from products served in schools. And why I think this is gonna get national attention, Lee, is California seems poised to go to war with the likes of Cheetos and Doritos, and Gatorade and hostess doughnuts, where once again, kind of, we're the food police again.

This is a year after the Skittles ban was kicked around in Sacramento.

>> Lee Ohanian: Yeah, and I think, Bill, this just shows an out of touch sense with the realities of what California parents are dealing with. Our schools are failing at an abysmal rate, one out of four kids are proficient in Math, English or Science, English, reading skills, writing skills.

We shouldn't be worrying so much about food dyes, not to say that we shouldn't worry at all about food dyes, but there's the 800 pound gorilla in the room, which is, schools are failing. We're spending a lot of money on them, make them better. Worry about vending machine food, somewhere down the list.

So it really just highlights the California policymakers are just so out of touch with what people are dealing with in terms of the challenges of trying to get their kids an education. And, Bill, ironically, the state's leading party is always advertising, they're standing up for those who are marginalized, for people of color, and these are the people who are hurt most by this.

Marginalized families are those that have lower incomes, that can't afford private school, they can't afford tutors, they can't afford after school programs. And they tend to go to the worst schools in the state, they're the people who are being hurt. Bill, I think between whether blue Gatorade should be sold on the school grounds or not, whether they have a competent math teacher, I think we know what parents are gonna vote for.

 

>> Bill Whalen: So for those snack house, listening to this, what's in the bullseye appears to be Cheetos, Crunchy Flamin hot, and Dorito Flamin hot nacho chips. They contain the likes of red dye, 40 yellow die, 5 and 6 other dyes. Green Gatorade has yellow dye 5 in it, and Houston donuts contain titanium dioxide, which I got Lee's bit of a turn off for me question.

Lee, if AB 2316 makes it to the governor's desk becomes law, what are the arts? There's a carve out for Panera Bread with vending machine.

>> Lee Ohanian: Bill, the last time I was there, I don't think they have flaming hot Cheetos colored bread, but you just never know.

>> Bill Whalen: Let's move on to one other measure here, Lee, and that is the question of let there be light in California?

This, Lee, is SB 1413, introduced this week, it would put an end to daylight savings time in California, which currently is running through November 3rd. Lee, why are we mucking around a daylight savings time here?

>> Lee Ohanian: Yeah, there'd be a lot of confusion to pay for that bill, I believe Arizona and Hawaii do not have daylight savings times.

So, yeah, there's the coordination issue with everyone else, and God help all the things that will get messed up for the next few years as a result of that. So again, I think this is really about, it's really about priorities. There's just so much broken within the state for most families earning under six figures, the daylight savings time is just not a priority item.

But then again, it's one of those things that the legislators think is a priority. I think it also just highlights that legislators think that what the rest of California wants is what they want, it's their agenda, it's their way or the highway. There's a real problem in terms of listening to what people value, that's just not getting done much in Sacramento.

 

>> Bill Whalen: There's a potential leap for real western US mischief here in that California is now got this in play, I don't know how far it's gonna go. Oregon has been talking about ending daylight savings time in the Pacific Time zone part of the state, how's that for confusing?

Idaho has talked about this Nevada of California, as California goes, so does Nevada, because Nevada has to tie into California for tourism purposes. Further add confusion, California voters have acted on this lead, proposition seven back in 2018 gave the legislature the green light to change the clock and make daylight savings time normal all year round.

But, Lee, it's contingent upon the federal government taking action first, so there it sits. So, question for you, as an economist, is there any economic argument, pro or con, to savings time? I know we always get in the conversation about one extra hour of light, and does that mess up with sleep when it's kicked in and so forth.

But is there anything economically to be yay or nay on daylight savings time?

>> Lee Ohanian: Well, in terms of economics, not rolling the clock back in the winter months, particularly in northern California, has some dangers associated with it, you've gotten kids going to school and it's dark. This raises the possibility of crime issues at a time when voters are particularly sensitive about crime, so personally, I don't see the net economic benefit of doing this.

And for me, the primary reason is just that it's awfully dark, if we don't roll the clocks back, it's awfully dark. And there's gonna be safety issues for kids going to school and more parents having to get up and drive their kids to school. So I think for me, for that reason alone, and as a parent of, I mean, my youngest now is driving himself.

But if I had a parent of kids who were young, elementary school, I would be very legitimately worried about this.

>> Bill Whalen: I'm not an economist, but I think it's one of life's great bargains that you lose one hour of sleep in spring, but you get, what, seven, eight months of an extra hour of daylight?

And I will gladly take that.

>> Lee Ohanian: Yeah, it's, I mean, it's one of these issues that bill, it kind of boils down to night versus morning, there gonna be some morning people or some evening people, I know. What do they do in Europe, do you know?

>> Bill Whalen: I don't know if Europe loses clock or not, I don't think they move at, Lee, because look at travel to Britain, for example.

Britain is, we spring forward, so Britain is now five hours ahead of us, and then we spring back six hours, I don't think Britain changes.

>> Lee Ohanian: Yeah, and you've got the northern European countries where I mean, it's already, it's dark and it's dark in the wintertime, no matter what time you put the clock at.

I've been in Stockholm, I gave some lectures in Stockholm a number of years ago, I was there in January, sun never really gets over the horizon. It kinda peaks out around 9 o'clock in the morning, and it's pretty much setting by 3 o`clock on the afternoon in the afternoon, so whole different lifestyle.

 

>> Bill Whalen: Although remember once being on a cruise ship in St. Petersburg, Rusher Lee, and the sun was up at about 10 o'clock at night, and it was just absolutely freaky.

>> Lee Ohanian: Yeah, yep, no, absolutely. Something we don't experience being closer to the equator here, and while you in northern California, me in southern California.

 

>> Bill Whalen: One final note, Lee, and we'll go, we now have two nominees for president appears, I think Joe Biden went over the top last night, I think Donald Trump went over the top in terms of delegates. This has to be the most anticlimactic ever clinching of a nomination I can remember Lee but, eight months till the election, you gonna hold up?

 

>> Lee Ohanian: Eight months? Yeah, I'm gonna try to hang in there and, interesting, Bill we keep saying that we kept seeing all these polls in which 95/96% of those polled did not want to see Trump versus Biden rematch. And that's what we have, so I don't know what that says about polls, I think it does say something about a lot of voters is just disenchanted and disengaged.

Now it goes back to our discussion earlier today about 30% turnout within California. And you're not gonna have the representative democratic institutions that we want, we need within the country and within the state if we don't have a lot more people voting. But on the other hand, I really understand how voters are just really, really fed up in this state and across the country.

So, Bill, we've got several months. So we've got several months to go of Trump and Biden calling names at each other, and we've got Trump looks like he's taken over the Republican National Committee, as far as I can tell. I don't know, it seems like we're in uncharted waters.

Do we have to go back to the 50s or something like that to have this type of rematch?

>> Bill Whalen: So the last time we had a rematch was 1956, that was Stevenson and Eisenhower. The last time a former president was on the ballot, Lee, would be 1912, Teddy Roosevelt.

And then the last time you had an exact rerun of the former president run against the guy who kicked him out of office four years prior 1892, Grover Cleveland.

>> Lee Ohanian: 1892, yeah, there you go.

>> Bill Whalen: Well, remember.

>> Lee Ohanian: And, Bill, it's interesting, you look at the approval numbers.

Biden's approval numbers are down around 38%, I believe that's the low in modern times. And you mentioned you have to go back to the mid 1950s. That was the time of Dwight Eisenhower being president. Bill, I suspect you're gonna see approval ratings around 70% at that time. So we've got an incumbent president at 38% approval.

We've got a former president who's, I don't know, his approval perhaps is maybe marginally higher than that. I still shake my head in terms of how we got here.

>> Bill Whalen: So how this pertains to California, I think, is as follows. The presidential race will not be competitive even if Robert F Kennedy Junior gets traction in California, Lee, the traction is worth maybe 10, 15 points at the most.

That just is not gonna change the democratic advantage, so California goes blue. I don't think the Senate race is gonna be that competitive. I'm sorry for you Steve Garvey fans out there, but just history tells us republicans are an uphill battle there. Garvey is gonna be really hard pressed, Lee, to get money from outside of California.

Be hard pressed to get money from inside California, Lee, cuz Republicans here, they haven't won a Senate race since 1988. There's kind of a loser's mentality, if you will, to giving money inside the state. They'll look outside the state, and it's a pretty good map for Republicans around the country.

So you might be tempted to go park your money up in Montana or maybe in Ohio, where they're winnable, racist Republicans. I think it's gonna be a very selective race for California, selective election for California, Lee, in this regard. If I'm in the Central Valley and there's a competitive district, I'm gonna see a lot of advertising in that district.

Down in southern California there are four seats down there that probably will swing the Congress one direction or the other. You'll get a lot of advertising down there. Otherwise, we're just kind of on the sidelines, as we are every four years presidentially.

>> Lee Ohanian: And, Bill, in terms of reference about Steve Garvey versus Adam Schiff, Garvey, of course, is running an uphill race in a state with only 29% Republicans.

But, Bill, I think that he may have maybe had a fighter's chance if Nikki Haley had been the Republican nominee, because you know what's gonna happen now. Schiff is gonna say Garvey voted for Trump in 2016, he voted for Trump in 2020. He's amidst this, he's voting for Trump again in 2024.

If you're voting for Steve Garvey, you're voting for Trump. And I think that'll just be the death knell for Garvey's candidacy. It may, perhaps it would have been different if Nikki Haley had been the Republican nominee. But, Bill, I agree with you, we're gonna have Adam Schiff in the Senate.

There's no doubt about what will happen presidentially within the state, RFK is sort of an interesting candidate. He saw a lot of stuff going back to the days of his uncle and his dad that I think would be. I think it's very attractive to people in the political middle.

Never did really get the traction. But I agree, whatever votes he pulls away from Biden is not gonna be enough to make a difference within the state.

>> Bill Whalen: So, Lee, he has floated at least two people as his running mate, you know who they are?

>> Lee Ohanian: No, I haven't seen that.

 

>> Bill Whalen: One is Jesse the body Ventura, former governor of Minnesota, and the other one is Aaron Rodgers, quarterback from the New York jets.

>> Lee Ohanian: Okay, Bill, I'm not sure either one of those are gonna really move the needle for him. I taught at the University of Minnesota when Jesse the body Ventura was governor.

First couple years, I thought he did a good job. A lot of common sense things he implemented. But Aaron Rogers, not sure how that will work out for him.

>> Bill Whalen: Lee, I think RFK Junior has the perfect running mate sitting right in front of him and he doesn't realize it, you know who that is?

Larry David.

>> Lee Ohanian: Larry David, they have my vote if it was Larry David and RFK junior, I'm in.

>> Bill Whalen: The connection, of course, is that RFK junior`s wife, Cheryl Hines, is married to Robert F Kennedy Junior. So there's that connection, and, Lee. If this is a depressed, low turnout, cynical electorate, who better for that than Larry David?

 

>> Lee Ohanian: Larry David, curb your enthusiasm. Who doesn't like Larry David? It would be a breath of fresh air for US politics.

>> Bill Whalen: Lee, great conversation, I enjoyed it and look forward to doing it again soon.

>> Lee Ohanian: Always great fun, Bill.

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