Bill-Signing Recap – Deep Fakes, Deep Dodges...And Deeply Indebted To An NBA Owner

>> Jonathan Movroydis: It's Tuesday, October 1, and you are listening to Matters of Policy and Politics, a Hoover Institution podcast devoted to governance and balance of power here in America and around the free world. I'm Jonathan Movroydis, senior product manager at the Hoover Institution, and I'm sitting in the chair of Bill Whalen, the Virginia Hobbs Carpenter distinguished policy fellow in journalism.

So that he can answer questions and provide commentary about California policy and politics in which he is well versed. Bill Whalen, in addition to being a Washington Post columnist, writes weekly for Hoover's California on Your Mind web channel. Whalen is joined today by Lee Ohanian, Hoover Institution senior fellow and professor of economics and director of the Ettinger Family Program in macroeconomic research at the University of California, Los Angeles.

Ohanian also writes weekly about the policy environment of the Golden State for California on Your Mind. Good day, gentlemen let's talk about the latest developments in policy and politics in the Golden State. Bill, in your upcoming California on Your Mind column this week, you talk about the end of California's bill signing session.

You highlight in particular Governor Newsom's veto of Senate Bill 1047, formally the Safe and Secure Innovation for Frontier Artificial Intelligence Models Act,  which would have required a developer, before beginning to initially train a covered model to comply with various requirements, including implementing a safety and security protocol. It would also have prohibited developers from using the covered model for a purpose not exclusively related to training or evaluation.

Or making that covered model available for commercial or public use if there is a risk that could enable critical harm. Bill this could have allowed Governor Newsom to score points with Hollywood screenwriters and the like, who are threatened by the diffusion of AI in the economy. Further, Newsom could have been a pioneer in AI regulation nationwide, why do you choose to veto this bill?

>> Bill Whalen: Well, I'm gonna defer to Lee in terms of artificial intelligence in California, how it plays in the economy, I don't wanna hear his thoughts on that. But it was not a good bill and that the open question about its impact on the economy. I think we need to take a step back for a second here and look at bill signing in general.

It ended yesterday, the governor has all of September to sign bills. And the day after on the first day of October is kind of like drinking from the fire hydrant in terms of just all the stuff he's acted on that we're still looking at. And Lee and I have been kind of talking about that offline.

If you look at the New York Times today, it would tell you that Newsom, quote, taxed to the center or taxed to the middle on what he did. Addressing these 990 plus bills, I think that's kind of a ridiculous assessment of what he did. He did shoot down some bills that were clearly just too, too much to the left.

For example, he blocked a bill that would have offered free condoms in high schools, for example, I don't think he wants to be known as the guy who hands out free birth control in high schools, not his legacy he wants. So getting back to the question of AI, this bill is interesting in that it pitted, as you mentioned, Silicon Valley against Hollywood.

And that Silicon Valley is just absolutely concerned about how government's going to regulate this emerging artificial intelligence technology. Hollywood is deeply protected images, and so the two kind of clashed on this. And I would note that Newsom did look out for Hollywood and a couple other measures having to do with deepfakes, which earned him the wrath of Elon Musk, which we'll get into later.

But here he sided with the tech bros, and this is a governor who's very comfortable in the tech community. You might remember a few years ago when he got married and Google saw fit to take it 767 and fly members of his wedding party up to Montana. And he was just the other day hanging out with Mark Benioff at a Salesforce Dreamforce meeting in Stanley, San Francisco.

So given a chance, Newsom will kind of opt with tech, and he opted with the tech bros on this one, Lee. But maybe you should describe, Lee, just how artificial intelligence fits into California right now.

>> Lee Ohanian: Well, it's a fascinating and difficult issue for public policy because California with Silicon Valley is really the center of a lot of AI developments, including ChatGPT, Google's efforts into AI.

And the challenge that this bill was trying to deal with that is the potential misuse of AI. So the way I think about it, we all have been hacked at one time or another, possibly many times. And the bill was intended to try to put some safeguards into the development of AI by those who develop those products.

In particular, two of the main requirements were that those developing substantive AI would need to put in some type of failsafe in case there was a catastrophic event. And then take reasonable precautions that their products would not be obviously misused by bad actors. So there's, on the one hand, I think the bill is very well intended because you talk to any cybersecurity person and they will tell you just how dangerous the world has become as we've become more connected.

On the other hand, you worry about stifling innovation and you worry about bureaucrats interpreting terms that could be vague. Such as make reasonable good faith efforts towards making sure the products aren't easily exploitable by bad actors. And interestingly, Bill, the CEO's of both Google and ChatGPTs AI efforts, both supported the bill.

There was a lot of pushback from others in tech, some for legitimate concerns, including how this is gonna be interpreted and who would do the interpreting. And then also, interestingly, by Nancy Pelosi, who pushed back very, very hard, is very close to a lot of people in the tech world.

And I believe who is she Newsom's aunt? Okay, I thought she was connected with Newsom in some particular way, but Newsom sided with tech in this. I think with it going down, I think one thing becomes obvious, which is this does need to be dealt with because artificial intelligence can have the potential to be very, very dangerous.

No one who's in that world disputes that. This bill was far from perfect, but I hope we get a better bill on the road because we do need to take some precautions here. And I don't think we wanna be walking in the precipice of the wild, wild west when it comes to something that is very hard to know what will be developed and how it could be exploited by bad actors.

>> Bill Whalen: Yeah, you raise a good point here, Lee, that this issue is not going away. Newsom said he's gonna convene experts to develop regulations to promote the safe development of AI, and so we'll see if he signs a bill next year. But if you look inside of SB 1047, it would have created this oversight enforcement done through what it called “Frontier Model Division”.

This is the first time I've heard this phrase in government. But Frontier Model Division, which would have been in the business of oversight and regulatory, and it would have been funded by fees and fines on developers. The agency would have established safety standards and advice on advice on AI laws misrepresenting a model's capabilities, this agency could have landed a developer in jail for perjury.

So now you're looking at the possibility of government intervention, litigation, tying up companies in court, and that's gonna stifle innovation. But I think Lee Newsom was looking at one other thing, this is a goose that's laying a golden egg in California right now. If you just look at in terms of potential for public offerings, in terms of revenue coming into Sacramento.

So I think that somewhere in the back of his mind, he had to be thinking. Making money, coming into Sacramento and doing a bill like this, that could have complicated the industry's life, just not a good move at this time.

>> Lee Ohanian: 100%, this would have likely driven AI to other states.

And it would have had a deleterious effect on the California economy, including tax dollars coming into Sacramento, coming from iPOS, which are fewer and far between than they were back in the heyday of Silicon Valley.

>> Bill Whalen: Yeah, but Lee, I want to get back to this concept of Newsom as the centrist now of bill signing, because you pointed out conversation we had, at the same time that he is shooting down the idea of free condos in high schools.

So, if you notice, kind of the two step he did on slavery reparations, where he did not sign a bill that would have started the idea of eminent domain claims by slave descendants. Instead, what he did was he signed a bill which offered an apology, that's his way of just getting around the financial side of this.

This is a governor who nonetheless, Lee, signed a bill that bars local governments, from enacting laws to require residents to show a valid form of ID in order to vote. So he's anti voter ID. He also signed a law that requires certain insurance providers to cover the costs for infertility, treatment and in vitro fertilization.

That's not exactly the move of a centrist, and if you look at his signing statement on that, he is decidedly political, where he's going after republicans. So that's not centrism, that's politics, that's California politics.

>> Lee Ohanian: That's California politics. I'm not very surprised he signed the voter ID law, meaning that no California city or county can adopt a voter ID law that deviates from the state.

This goes back a few months to Huntington beach, which is a city that always is at loggerheads with Newsom, and state attorney general Rob Antae. And their position was, as charter city, they have substantial independence in terms of how they manage elections. The law certainly seems to suggest that bought to file the lawsuit against them, but just to make sure Huntington beach didn't get their way, this bill came through this bill came through and passed on party lines.

And, bill, in terms of thinking about voter ID, and when you think about all the things one needs a photo ID for. These days and what Huntington beach was going to do and what any city or county would do, if they were to implement such a law would be simply valid photo ID.

If you're gonna live at all on the grid one has a photo ID. Driving, boarding an airplane, applying for housing, any type of banking activity, opening a checking account, signing a check, cashing a check, applying for Social Security, Medicaid, other forms of public assistance, you need a photo ID.

So if you don't have a photo ID, you're pretty much off the grid in its entirety, and I doubt you're probably gonna be voting. So this is always these argument spot photo ID, have always puzzled me. Most countries in the world require photo ID, including some very poor countries.

So, I think that was Gavin at his worst, a relatively small city was pushing him in a direction he didn't like, and so he took out the hammer to hit the fly. With respect to IVF treatment, I believe, California the first in the country that requires IVF treatments.

It requires three cycles, involved when it's biologically complicated. I'm not a biologist, but what I do know is, is that these cycles in terms of egg harvesting, can be around $15,000 per cycle. So when you look at the total cost of IVF treatment, it can exceed 50,000, $60,000, and the new law will require three cycles to be covered.

And there's a number of interesting issues involved with, this for a variety of reasons, ranging from what should insurance cover to the fact that we're kind of running out of babies, as many other developed countries are. But on the, other hand, it's expensive, it will drive up insurance costs in California.

And what I worry about, is whether health insurance in California will start to look a lot like property insurance in California. Where we're seeing more and more insurers leaving the state or not covering a lot of properties. But what this means is get ready for insurance premiums to go up on health plans.

Certainly an employer provided health plan that's being administered by, the largest insurers.

>> Bill Whalen: Yeah, I didn't realize the property insurance issue was about in California recently until I was up in wine country last week in Sonoma, giving a talk and ran into several people there who had problems getting insurance on their houses, couldn't get it simply because they live in a fire territory.

But you mentioned Newsom was worstly, I'd actually say Newsom was worst was his signing statement on the IVF bill. And here's what he said. Quote, California is a proud reproductive freedom state, and that includes increasing access to fertility services, that help those who want to start a family, okay, fine, but here's where he went too far, quote.

As Republicans across the country continue to claw back rights of block access to IVF, all the while calling themselves the party of families. We are proud to help every Californian make their own choice about the family they want. That's just so sanctimonious and, you're the governor of California, you're not running for president, just stay out of national politics, please, stay in your lane.

>> Lee Ohanian: Yeah, bill, I saw that as well, and that was another head shaker. I mean, this is purely performative politics, why flaunt is, there's no point. And who was really listening to Gavin these days on the national stage? But, yeah, I thought that was, yeah. Sanctimonious and completely superfluous.

>> Jonathan Movroydis: Gentlemen, another bill that got vetoed by the governor was assembly bill 2903, authored by Josh Hoover, who represents the Sacramento suburbs. This would create a California Interagency Council on Homelessness to identify mainstream resources, benefits, and services that can be accessed to prevent and end homelessness in California by creating partnerships between federal, state, and local and nonprofit entities.

It would also require a state agency or department that administers homelessness programs, to report annually to the council, cost and economic data for their efforts and then make that data public. Lee, you note in a recent article for California undermined that despite 24 billion spent over the last five years on combating homelessness still rose about 23%.

You say, quote, with little or no accountability over spending, and by expecting taxpayers to be responsible for housing all who are homeless. There is no way I see California ever succeeding in dealing with this issue, unquote. Lee, if this bill were enacted, would this have been a proper approach in ensuring government accountability on homelessness spending.

>> Lee Ohanian: It certainly would have moved the needle in the right direction, by reporting cost data and by reporting outcome data. And these data were remarkably absent from what the state is currently reporting, based on a state auditor's assessment of homelessness. And I was surprised Newsom vetoed this, because it certainly gives Fox News and those who don't like Newsom just enormous ammunition.

Not only because of the veto specifically, but because it comes on the heels of just a devastatingly negative report by the state auditor. And a headline that was, that's been in virtually every mainstream media source, including the New York Times. Including LA Times, certainly, every local source, which is that we've spent $24 billion on homelessness since Newsom has been governor, and homelessness has risen by 35,000 people, nearly 25%.

Homelessness is just going in the wrong direction. It's hard to fathom how you could spend $24 billion and have the problem get so much worse. Put differently, you could have given everyone of the homeless when Newsom took office in 2019, every one of them $160,000. That's a lot of money not to be homeless.

Homelessness has increased from about 150,000 when Newsom took office to 186,000 today. So you just throw up your hands, you just say, how is this even possible, I mean, how could this happen? So the state auditor came in, they looked at the various programs and said, we can't even find a lot of programs that have any kind of cost accounting data.

I mean, we spent $24 billion over five years, and evidently the standard principles of accounting weren't followed. So after the scathing otters report, Josh Hoover and Bill, I'd love to hear what you think about this. Hoover, I believe, is in the state assembly following Kevin Kiley, who moved to the House of Representatives.

And we know Kevin Kiley is not Newsom's favorite person. Seems like every week Kiley goes to the House Floor and Ransom raves about California policies and Newsom in particular. So this was written by the person who followed up after Kylie. But it's a totally common sense, common sense legislation is very short.

It simply requires various stakeholders and those who administer programs to report their costs and report the program outcomes. Now, when Newsom vetoed it, he kinda vaguely alluded to some other bills what seemed to be similar types of accounting, and he essentially said, these will be duplicative. But the real issue is that the same agency that failed is what he is tasking to do this cost accounting and outcome reporting activity.

And I don't think anyone has any confidence whatsoever that the existing legislative actions are gonna be sufficient. And in particular, this was a bill that was put forward by Hoover, pretty red guy, and went through the supermajority of the assembly and the supermajority in the state senate. Everyone there, yeah, it's not easy for a republican author bill to get through, and this one did.

The legislator is telling Newsom, no, we need more accountability. He vetoed it, there's no real cost reason to veto it. So I thought his veto message was weak. And this did indeed leave him wide open to criticism from Fox and not just places like Fox, but a lot of different venues that have been critical on what's going on with homelessness in California.

>> Bill Whalen: Right, Lee, if you look at his veto message, he uses the phrase similar measures are already in place. So I can tell you, having worked from a governor, that when you don't like something, one of the things you always fall back on is the redundancy argument that we've already got this.

We don't need this, it's just piloted what we have. So he use that as an out. But you're seeing two different views on homelessness. The lawmakers who are much closer to the ground and are up for reelection this year, they know homelessness is a burning issue in California, along with inflation, along with jobs, the economy.

So they wanna show that they are on top of the issue. The governor, why would he not sign this? I think, Lee, because it would be admitting that you have a problem. And there's one consistency with Gavin Newsom is he will not let go of issues that work against him, he will argue to the death that actually things are better than they are.

And you know this well, Lee, because you follow day in and day out the saga of California's fast food law where Newsom just refuses to admit that the bill has cost the $20 minimum wage for fast food workers. He refuses to admit that that's cost jobs in California.

So he continues to push back, showing contrary economic numbers, which as economists, you always point out, are fast and loose economic numbers. But the point is he will just not give into the admitting that fact that there's a problem here, and he's very much the same way on the homeless issue.

He'd rather talk about things he is doing, the ways he's trying to solve the problem, rather than admitting that we spent all this money and nothing's worked. So that's just how he works, he just digs in or writes something out.

>> Lee Ohanian: Yeah, he doesn't want to admit defeat, and he's got, what?

About two years to try to turn this off Lee sinking ship around. I don't see any evidence that that's gonna be the case. And Bill, in the column I wrote, I picked out a quote from his state of the state speech in 2020 where he said we must do everything we can to ensure no Californian is homeless.

Now, at some level, that's kinda, okay, cheap political statement. But on the other hand, California homelessness policy has been aimed at that very statement. And for that reason, it's never going to succeed, because we simply cannot house every single Californian who is homeless and who will become homeless.

And the real problem that we've seen over the last five years is that a lot more people are becoming homeless. There's a variety of reasons why they are, some of which are disabilities, which, in my opinion, the social safety net should cover. But there's an awful lot of households who are just living on the edge.

I mean, they're paying way over 50% of their pre tax income and rent, the industry standard is 30%. There's no vision of the social safety net of providing social insurance for every possible contingency that can come along. And that's the way the state has been approaching this, and this is one reason why it continues to fail.

>> Bill Whalen: Yeah.

>> Jonathan Movroydis: The California Senate has enacted a constitutional reform of its recall processes, and this was spearheaded by Josh Newman of Fullerton. Which would effectively end opponents of state officers to put an alternative candidate on the ballot. So instead of two questions on the ballot, for example, yes on recall, check to Arnold Schwarzenegger back in the 2003 recall election, California will just be limited to the recall question.

And if the recall is successful, the official will be replaced by another state officer in the line of succession. Bill, what would be the impact of this reform? Does this effectively chill Republicans even long shot hopes of at least, in the immediate term, electing a candidate to statewide office?

>> Bill Whalen: Yeah, I view this, Jonathan and Lee is just a good example of tightening the noose on the republican existence in California in this regard. You mentioned Arnold running in the recall in 2003. Ray Davis, the incumbent governor, probably survives the recall under this new system proposed by Newman, Senate Constitutional Amendment 1.

Because absent Arnold being the choice as an alternative, he is not running in that recall election, he's not involved in that recall election. And I think the recall would have fizzled out as a result because he would not have Arnold making it the splash that it was. Now, Newman, we should note this, is very personal.

He was recalled as a state senator over a tax increase, the voters recalled him on that issue. So he has been burned by the process as well. But if you just take Republicans out of that question number two and just create a system where if a democratic governor is recalled.

The lieutenant governor, who's likely a Democrat, takes his place, you're not gonna get a Republican in office on the shortcut as well. And it just takes the whole fizzle out of it. By the way, there's another recall with Newsom that's kind of circulating right now, or percolating, I should say.

We'll see where it goes anywhere. But I liken this, what Democrats did back in 2010 with another ballot measure called proposition 25. This was done in the 2010 election under the guise of better budgeting in California. The idea being that if lawmakers did not pass a budget by its constitutional deadline, they would get docked pay.

But what they quietly did in the initiative was they changed the rules for how you do a budget in California. Instead of a two thirds vote in both chambers, they changed it to a supermajority as Republicans were minority there and now a super minority now. That ended the republican involvement in the budget process of California, which was not ideal, but at least Republicans had a say and could do some leverage.

So here you're now taking Republicans out of the business of recall elections pretty much by taking away the second question. And it just raises the question of if we're gonna see statewide Republicans elected in our lifetime at this pace.

>> Lee Ohanian: Yes, it is disappointing in the sense that, in my opinion, it whiles away at the democratic process.

The purpose of the recall is to say, look, I don't like this guy or girl, and we wanna find a new person. So what this effectively does is to say, okay, well, you don't like the pilot of the plane. We're gonna put the copilot in, and the copilot looks pretty much like the pilot.

So, yeah, this would, I think, effectively do away with recall. California's prop 187, almost 30 years ago now, has been losing Republican influence. And you need to have political competition, whether one's on the right or the left or in the middle. You need to have competition within the legislative branch because we need to be able to see the best ideas come forward.

And we would like to make sure that the worst ideas don't see the light of day. And there effectively is no statewide political competition. Now, every major elected office holds a Democrat bill, I think in both houses now in the assembly and in the state senate, I think it's about 75% for Democrats.

So, yeah, Republicans just don't have much of an effect, certainly at the state level, and this whittles away more at that. So I think it's a step in the wrong direction.

>> Bill Whalen: Yeah, by the way, the way things work in California, a Senate constitutional amendment does not get signed by the governor.

It goes to the secretary of state, who will then put it on the ballot in the next statewide election. So California voters will have a shot at this in 2026 and be very curious to see how the argument goes down.

>> Jonathan Movroydis: Gentlemen, as Cal matters reports, Newsom is in Mexico for the inauguration of their new president, Claudia Shinebaum.

He cleared nearly 40 bills remaining on his desk Monday morning. And since the legislature adjourned on August 31, he vetoed 183 of about 990 measures total, making his veto rate roughly 18%. Gentlemen, recapping bill signing season. Who are your winners and losers, Bill?

>> Bill Whalen: Well, let me start.

I'll go first. Legislative Democrats are winners in that they spam the governor with about 1000 bills, but they're losers in that about, as you mentioned, about one in five of the bills got vetoed. And this speaks to kind of a rocky relationship between the governor legislature in this regard.

If you go back to 2021, the veto rate was only about 9%. And why is it a lower rate? Governors have a lot of leverage in the process, not just the signing or vetoing of bills, but also signaling and working with lawmakers ahead of time that if you send this to me with X, Y and Z provisions in it, I'll veto it.

But if you take out this provision, add that provision, I'll sign it. So when you have a rate of about 20%, that means that the governor legislature aren't working together the way they should to head off a lot of bills. Or you have a defiant legislature that's going to send him stuff ahead of time knowing that he's gonna veto it anyway.

But at least you can send a press release saying, by God, I said this bill. So, Lee, that would be my first choice of winners and losers, legislative Democrats.

>> Lee Ohanian: Yeah, Bill, those are extremely good points. The idea that, that you're gonna end up vetoing, one out of six bills with the supermajority in his own party, that's just inefficient.

I believe Brown was much more effective in dealing with these types of situations on legislation. But, in terms of the biggest loser, I think Californians, the key issues that continue to affect Californians for years now have just gotten much worse. Housing affordability, homelessness, affordability of energy, particularly gasoline and electricity, road quality, cost of living, quality of life, functionality of K-12 schooling, despite record budgets.

These have been problems for us for many more years, for decades, and they continue to worsen despite the fact that we're getting, what bill, 1000 new laws passed every year. So what I did was I divided the number of bills that went through the assembly and the Senate this year, which was about 2,000 in total.

About 1,000 went to news, and there were about 2,000 that were discussed. You take those 2,000 bills, you divide by the number of days in the legislative session, not counting special sessions, about 115 legislative session days. 2,000 divided by 115, that's about 18 bills a day. How can you ever discuss, interpret, analyze, assess, evaluate 18 bills a day, some of which are about very complex issues such as regulating AI.

So the real losers are Californians. And if there's one data point I can really highlight, the median value of a California home now is $900,000. And the median home value anywhere near the coast is much higher than that. Certainly in Silicon Valley, San Francisco, La, San Diego is closer, probably 13 to 17.

That affordability has continued to drop despite the fact that we've had way over 100 new bill signed by the governor since he took office. So this is like the record on homelessness. We just spend more money. Homelessness gets worse. We pass more laws about housing affordability. Housing affordability continues to deteriorate.

It's really time for those who have influence in Sacramento to step back and ask, what are we gonna do about schools that are gonna move the needle? What are we gonna do about homelessness that will move the needle? What will we do about housing affordability that will move the needle?

And the idea that we can discuss 2,000 bills in 115 days is just silly to me.

>> Bill Whalen: Okay, for another set of winners and losers, I would like to push you in the direction of John Fisher, the owner of the Oakland As, and Steve Ballmer, the owner of the Los Angeles Clippers.

Why John Fisher? Well, Sacramento never showed any love to the Oakland As during their long saga looking for a stadium in the Bay area, a new ballpark. In fact, the As are now moving to Sacramento for next year. Good luck in the Sacramento heat, guys, before they head off to Vegas.

Good luck in the Vegas heat, guys. So whereas Fisher got no help from Sacramento, let's now look at Steve Ballmer and the Clippers. Lee, there is a bill signed by Newsom over the weekend which does a huge Break for Steve Ballmer, and what it does is it creates a pilot program for the remainder of the decade.

And it allows for the sale of alcohol between the hours of 02:00 AM and 06:00 AM, excuse me, 02:00 AM to 04:00 AM. In the new Intuit Dome, which is opening up later this month, this is where the Clippers are playing basketball, it's in Inglewood. Lee, it's a fascinating bill when you dig into it deeper, the bill's language, quote, alcohol beverages sales to occur between 02:00 and 04:00 AM.

On the on sale license premises, operated in a fully enclosed arena with a seating capacity of at least 18,000 seats located in the city of Inglewood. So, Lee, that rules out the forum, which holds 17,500 people, and it rules out SoFi Stadium, which holds over 70,000 people, cuz it's not open air.

So there's a carve out right there for Intuit Dome, and let's go deeper, it's for, quote. In the hours immediately following a day in which a sporting event, concert, other major event, or a private event not open to the public has occurred in the arena. So what is the connection to Governor Newsom?

Well, you don't have to dig very deep to find that Steve Ballmer's wife, Connie Snyder, gave a million dollars to Newsom in the 2021 recall election. And then on top of that, well, how did this come about? Ballmer's company, Murphy's Bowl LLC, spent $700,000 on lobbying, and who drove the lobbying?

A friend of Newsom's named, Jason Kinney, Lee and Jonathan, Jason Kinney. It was his birthday party at The French Laundry that Gavin Newsom went to way back when that first got into hot water. So here we have Sacramento, kind of its worst, here is a fellow running a lobbying firm, Jason Kitty, who gives political advice.

And Newsom, at the same time, he's gotten a lot of money from Steve Ballmer over the years, and he's now converted that into doing a big break for Ballmer. And as far as I could see, it's kind of like Panera Bradley, because you see a big advantage for Ballmer and nobody else benefiting under this rule.

>> Lee Ohanian: Yeah, Bill, it's, as you noted, Panera Redux, which harkens back to the fast food $20 minimum wage in which it appeared Panera was gonna be exempted. And then Newsom screamed about that and said, no, no, that's not exempt. We had several people who interviewed with Ashley Zavala at the Sacramento NBC affiliate said no, absolutely it was for Newsom's political donor.

So, yeah, Bill, this is fascinating, Ballmer's wife gives a million dollars to his 2021 recall. I believe she also gave, I think, half a million dollars for some other legislative actions that were near and dear to Newsom's heart. So you have a hundred person capacity VIP Lounge in Embalmer's new venue for the Clippers.

It's the only one in the state, and of course, if you can do only one, you have to say, well, it's a pilot program. We'll see how that goes, well, we kind of know how that will go, though I'm kinda wondering who that's going to be for. The basketball games, they start 7:30 or 8:00 they're done by about 10:00.

No, I'm not 40 years old anymore, but I can't imagine hanging around an after hours club to, my God, 02:00 AM, much less 04:00 AM, or 05:00 AM. But it is intriguing just how, in a state of nearly 40 million people, just how closed this circle of elites are.

And particularly in a party that is always worried about democracy and representing everyone equally, this one just doesn't have the right smell to it.

>> Bill Whalen: I'll tell you who it benefits, Lee, and that's the 1%, people with phenomenal amounts of money to spend. Because again, if you dig deeper into the bill, this applies only to, quote, private areas in the arena no larger than 2,500 square feet.

So what he is singling out are skyboxes, plain and simple. And if you look up prices for the Clippers opener on October 23rd against Phoenix, such as skybox is going for about $20,000. That gets you 13 tickets, parking passes for VIP's and so forth. So these are not regular folks who are kind of bringing two kids to the game and maybe springing for a beer and a couple of hot dogs, this is the view to pull people up in the sky boxes.

And so again, this is for Democrat, for a governor who is very much a populist, very much rails against special interests in the 1%, this is a big carve out to the 1%. And one very wealthy guy in particular in Los Angeles.

>> Lee Ohanian: Yeah, one very wealthy guy in particular, and, Bill, most of the local people in this, it's not gonna be for them.

And Bill, when you mentioned John Fisher of the A's, what's the difference between the two? Well, I think Ballmer has a net worth of about 150 billion, Fisher is remarkably wealthy, but he comes in about 40 times less than that is my understanding. And Fisher is also a Republican, so don't be looking for the state or the governor to necessarily do a whole lot to help him out.

But build the fact that the Oakland A's are moving to Nevada, and I understand they'll be playing, what, the next three seasons or so in Sacramento?

>> Bill Whalen: Yeah.

>> Lee Ohanian: That's a case where strong, sensible political leadership was really required from Sacramento. Because Fisher and his partner Bathers, I believe about 20 years ago, ever since they purchased it, they've been trying to find a new venue.

Because anyone who's been to the Oakland Coliseum knows that it's simply abjectly uncompetitive from the standpoint of a modern sports stadium. Fisher has proposed a number of different sites within Oakland. One of them, before Fisher ever owned the team, one of them was shot down by Jerry Brown when he was Oakland mayor.

I believe a total of 13 different proposals have been in place in the last 25 years for the A's, nothing has ever worked. Oakland's a relatively dysfunctional city, this is a case where the governor and the state legislature really could have made a big difference. In 2018, I believe the A's advanced a proposal on the waterfront, five years later.

Major League Baseball was getting very, very itchy, saying, you're not making fast enough progress. The city was not getting permits and approval fast enough and that's what led them to move to Vegas, this, I think in principle could have been entirely avoided. And this really falls on the footsteps of Sacramento.

I remember going to CA's games as a kid in the 70s, back when Charlie Finley owned the team and Reggie Jackson played, and Vita Blue is a signing award winner then. Then it didn't have to happen, but they're gone and it's a huge loss for Oakland. Which is a city that is just snake bit and perhaps has the worst governance in the state for any large city.

>> Bill Whalen: Yeah, so when this new arena in LA opens, the stadium, it will be spectacular. It is a credit to Steve Ballmer putting money behind his team, whereas Mr Fisher does not. But also a testament to having friends in high places, Lee and Jonathan. Because this arena got built in about four years and it got billed in, quote, only four years.

Because they went to the legislature, and the legislature granted CEQA Streamlining to speed up construction. So, again, it pays to have friends in high places, especially friends you can pay.

>> Lee Ohanian: Yes, yes, Newsom is railed against CEQA as being the enemy of affordable housing. CEQA obviously applies to all sorts of development, including the Intuit Stadium, and the state legislature can grant exemptions.

And they did for the Sacramento Kings new Stadium, and that was a few years ago, and then they did it for Ballmer. So, again, with the idea being that California is progressive, is populist, it represents the small family just as much as the billionaire. And then another data point that shows this is just business as usual.

>> Bill Whalen: Okay, let me point you guys to two more winners and losers in the top in the time we have left. The first one, as a winner, I had Paris Hilton, and why? Because she came to Sacramento and campaign for bill SB 1043, which requires California short term residential therapeutic programs.

These are known as STRTPs, to publicly post online all instances involving the use of restraints or seclusion rooms. This is a big deal for her. She talks about being a victim of abuse herself. So Paris Hilton gets her way. Good for her. A loser, I would say, in bill signing would be Elon Musk.

And I wanna get your thoughts on this, Lee, because why? Well, first of all, Mr. Musk supported SB 1047, which we talked about earlier. It put him in very weird country as far as his politics go, because that put him on the same side as the screen actors guild and SEIU.

But Musk has been in a war of words with Newsom, I should say. The war of words continues after Newsom signed a bill banning deep fake political videos. Musk tweeted, quote, the joker is in charge, showing the Joker figure from the Joaquin Phoenix movie that's about to come out.

And then when somebody replied in a post which said, quote, and some people still wonder why X moved out to California, Musk added, quote, hard to be a free speech platform in a state that wants to ban free speech. So, Lee, why does Elon Musk think that Gavin Newsom is the Joker?

>> Lee Ohanian: So I believe that tweet from Musk came out, I believe after Newsom signed the voter ID law. He has been in a war with Newsom in a war, quote, on X for quite some time. And the issue that Newsom signed a bill preventing fake generated AIs of political candidates.

This particularly was relating to Kamala Harris, and some ads that were put up, I'm assuming by the Trump campaign. And they were very realistic looking. It looks like Kamala is saying a lot of things that make her look not particularly attractive as a candidate. I personally found them very funny.

But, yeah, the idea that this could stand up to a constitutional evaluation, I think is silly. We'll see where that goes. And again, if you dig deeper with this and go back in time, Musk was in California for a number of years, starting Tesla. There's a very chaotic exit of his in which he took an awful lot of tax credits from California.

Newsom always thought he would be here. He always thought Tesla would be headquartered here. They still have their plan here in Fremont. But Musk wanted to restart his Tesla plant in 2021 when every other auto plant in the country was open, and California wouldn't permit it. And so he just went ahead and flooded the law, and he restarted, and he said, you know what?

Go ahead. Come down and arrest me. Don't arrest my workers. Come down and arrest me. And in this game of chicken, Musk won. He was not pursued for any kind of criminal charges. And it really highlighted just the silliness of how long California kept a lot of businesses closed.

And it also highlighted the economic pain a lot of Californians suffered during this period and the pain that California school children suffered being kept out of school. So in a partnership that I think was somewhat close between the two men, it's dissolved now to silliness. And again, we go back to the idea of what California loses.

Losing Elon Musk, not a good thing. Losing Tesla headquarters, not a good thing. And again, something that could have been prevented, in my opinion.

>> Bill Whalen: Yeah, it's kind of sad to watch. Here you have Elon Musk, who is, like him or not, is one of the true kind of visionary geniuses of our time.

And here you have Gavin Newsom. Like or not, it's the governor of arguably the most imaginative state in America. And yet they're involved in this kind of high school silly feud between each other. So somebody just needs to sit them down to straighten it out. Let me give you guys one final set of winners and losers here.

And the winner I'd have would be the anti 1% crowd that convinced Gavin Newsom to sign a bill which ends legacy admission and donor admissions in California's private universities. That's Stanford, USC, Santa Clara, and so forth. By the way, I should note, while the Hoover institution is on the campus of Stanford university, we are not officially a part of Stanford University.

So this does not apply to Hoover, if you will. As for losers, probably the Newsom's family's alma maters, which would be Santa Clara for him and Stanford for her. And maybe the Newsom kids one day, especially if their kids apply to Santa Clara or Stanford, where the first partner went.

Maybe their kids don't get in without the legacy benefit. But Lee, your UCLA, where you teach, does not have legacy admissions as a policy. But now he's going after Stamford USC. Do you like this idea or not?

>> Lee Ohanian: Well, I don't think it'll make an awful lot of difference.

The rock being thrown into the pond just isn't an awfully big rock. My understanding is there's not enough legacies to make an enormous amount of difference in terms of whether a remarkably talented kid is not getting into Stanford or USC. And these are the largest state private universities in the state that would be impacted by this.

So the issue is whether there's a remarkably talented kid that's not getting in because a mediocre kid of a former graduate is getting in, one, presumably, who gave a lot of money to the university. Private universities have always operated this way. And the track record of private universities, particularly high performing private universities like Stanford, Harvard, Yale, Princeton, Penn and so forth, put forward an amazing group of undergraduates.

So I don't know really how much of a difference Bill it will make. They do take federal money. So I suspect that this may have happened over time if it hadn't happened in California. But it's certainly one that makes Newsom look very good in terms of being a populist and a progressive.

But at the end of the day, I don't know if it'll make a lot of difference or not.

>> Bill Whalen: Right, so it applies to California in terms of public policy and private universities and that there are private school kids, private college kids who have Cal grant scholarships. So that's the tie in.

But like with IVF, Lee and Jonathan, here you have a democratic governor who's kind of buying into the democratic wave. If you go back to the convention and Michelle Obama's speech, she bemoaned what she called, quote, the affirmative action of generational wealth. So that's coming up. Newsom is getting out here as well, generational wealth.

But here, I think a couple points need to be made that, first of all, Stanford points out it has what it calls a holistic approach. And what it points out is that legacy applicants, which it defines as children of Stanford grads, either at graduate level, donors do not benefit from this.

And what Stanford will say is that every kid, even if they're legacy, they still qualify academically, go to Stanford. So this is not what Tip O'Neill famously said about the Republican Party, where he called it the, quote, idiot sons of millionaires. You're not idiot sons and daughters of millionaires.

They're not getting into Stanford just because they're wealthier legacies, if you will. But my question would be the slippery slope that this now creates inside these schools. So a school like Stanford is very fond of letting in athletes, not scholarship athletes, but kids who are good at synchronized swimming and sailing and sports that don't have scholarships, but allow Stanford to rack up titles and they're showing all around kind of Olympic programs.

So are you now gonna have to go after the athletic preference, if you will? What about letter writing in the process as well? Gavin Newsom gets into Santa Clara, but he has bad academic record because it's excessive. He only gets into Santa Clara because Jerry Brown writes him a letter, and so does a member of the board of trustees of Santa Clara So we take out the letter writing as well.

So I think, very curious to see kind of really how it's carried out and how it's enforced. And also, if you're Stanford and you don't have a boxer, check saying it for legacy. Well, Lee Ohanian's son is just gonna put out in his essay, I come from four generations of Stanford people.

>> Lee Ohanian: Well, yes, yes, yeah, as I say, I don't know how much difference this will make other than just looking like good-looking wallpaper. And it is a slippery slope in terms of trying to have the state tell private organizations how they're gonna run their businesses. And Bill, you make a great point about athletics outside of revenue athletics, which are essentially basketball and football.

There are a lot of, I don't wanna call them niche sports, but we can call them niche sports, niche sports in terms of spectator interests. So, water polo, etc., where Stanford has an awful lot of national titles, as does UCLA. And a few years ago, USC got in trouble because one person fairly high up in the athletics department was receiving kickbacks to admit kids from families who had an awful lot of money.

>> Bill Whalen: Yes.

>> Lee Ohanian: And saying the kids were playing windows water polo when they actually weren't playing windows water polo. This, I think, was two or three years ago, and it was a substantial scandal for the university. A number of people in the athletics department lost their jobs over that.

But yeah, it just goes to show university are complicated places. It's difficult to kinda get them to try to do what you, as the state policymaker, wants them to do. So, yeah, I really don't know if this is gonna make much of a difference in any case.

>> Bill Whalen: One final note that we can close out.

I wish the governor taken a closer look at how Stanford and other elite private university operate in this regard. Yes, there is a high percentage of legacy admits. I think the overall admission of Stanford is about 4%, but about 13% of the incoming class is legacies of about 1 in 7 kids.

So clearly, it's a benefit. But if you look at how the schools financially operate, Stanford, Ivy League schools like Harvard and Yale have enormous endowments, tens of billions of dollars. What do they take with that endowment? They use part of that endowment to allow a lot of kids to go to those schools for free.

And if you look at the admissions press releases these schools put out, what's the first thing they always brag about, the percentage of kids who are the first in their family to be going to a university. So this is how legacy admissions do benefit in this regard. And that legacy families tend to be very generous with their money, because it's a long, romantic, sentimental attachment to the school.

You break that attachment and it might start hurting the finances of the university. So ironically, it could be hurting the kids, who benefit the most from the system, which is the kids who get to go for free. But again, Lee, time will tell.

>> Lee Ohanian: Yeah, no, exactly right.

I believe at Harvard, I think almost none of the undergrads actually pay any tuition. I mean, there's a rack rate. And I suspect that some of the legacy kids perhaps paid that rack rate either explicitly, implicitly. But these universities do have such a large endowment now that they can fund essentially their undergraduate programs, students without charging much, if any, tuition.

And that's a consequence of a lot of these legacy families who have indeed made very generous donations.

>> Bill Whalen: Yeah, well, I guess we'll find out in a few years if Stanford has a long memory, cuz, as I mentioned, is Jennifer Siebel Newsom, the first partner. She's both a Stanford undergrad and Stanford graduate School of business grad as well.

So if any of their four kids apply to Stanford, we'll see if Stanford lets them in. So we'll see.

>> Jonathan Movroydis: As always, gentlemen, this has been an hour of timely analysis. Thank you for your time.

>> Bill Whalen: Thank you, guys.

>> Lee Ohanian: Thank you, gentlemen.

>> 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.

Please don't forget to rate, review, and subscribe to this podcast wherever you might hear it. And if you don't mind, please spread the word. Get your friends to have a listen. The Hoover Institution has Facebook, Instagram, and X feeds. Our X handle is @hooverinst, that's Hoover I-N-S-T. Bill Whalen is on X.

His handle is @BillWhalenCA. And Lee Ohanian is also on X. His handle is @Lee_Ohanian. Please visit the Hoover website at hoover.org and sign up for the Hoover Daily Report, where you can access the latest scholarship and analysis from our fellows. Also, check out California on Your Mind, where Bill Whalen and Lee Ohanian write every week.

Again, this is Jonathan Movroydis sitting in Bill Whalen's chair this week. He'll be back for another episode of Matters of Policy and Politics. Thank you for listening.

>> Presenter: This podcast is a production of the Hoover Institution, where we advance ideas that define a free society and improve the human condition.

For more information about our work, or to listen to more of our podcasts or watch our videos, please visit hoover.org.