California Update: A Not-So-Special Session in Sacramento And Reasons for Hope in 2025

>> Jonathan Movroydis: It's Monday, December 9, 2024, and you are listening to Matters of Policy and Politics at 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's 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. Some of the biggest news comes out of the election is Governor Newsom's pledge to, quote, Trump proof California.

He has called a special session with California legislators to approve a $25 million fund to help cover the cost of anticipated legal battles against what he deems are unconstitutional and unlawful federal policies. Including assaults on reproductive rights, the rights of immigrants, environmental protections, as well as commandeering of state and local resources for federal purposes.

Gentlemen, I'd like to ask you, why did California go down this road while other states with a progressive edge, including New York and Vermont, did not? Bill, would you like to start?

>> Bill Whalen: Yeah, I think the simplest answer is he did it because he can do it. Let me read to you very briefly some language from the state constitution.

This is article 4, section 3B, which says, and I quote, on extraordinary occasions, the governor by proclamation may cause the legislature to assemble in special session. When so, assembled, it has power to legislate only on subjects specified in the proclamation, but may provide for expenses and other matters incidental to the session.

So, can Gavin Newsom do this? The answer is yes, and I should note, I have a column in California in mind coming out in a couple days, which we'll talk about this. Does this really fit into the idea of extraordinary occasions? Keep in mind, it's not like the legislature is going away for 10 months.

They're actually gonna be back on January 6th, ironically, the same day that the presidential election results will be certified in Washington, hopefully without any kind of riots. That gives the legislature two weeks to address the main action item in this special session. Which was giving the California State Department of Justice, that is the Attorney General, extra $25 million to Trump proof prepare for lawsuits against the incoming administration.

By the way, Lee and Jonathan, the California Attorney General has a budget of about $1.3 billion. So, I think it's kind of a sad testament to government that they don't have an extra $25 million lying around under the sofa to throw to this. So, my first of many questions was why the urgency when you're coming back in power?

The second question is, okay, why do it now when other states aren't? And yeah, New York State looked at doing this, and they came to the conclusion, look it, okay, we'll be in session soon enough, we'll deal with they happen. So that doesn't quite explain it, the answer is I think the governor wants to put himself in a very anti Trump posture and be rather unique in doing this doing so, that's the simplest.

It puts him at the forefront of anti Trump measures. Now, what's funny here, what since we look at, is the governor is trying to have it both ways. On the one hand, Gavin Newsom is saying that he wants to deal with the Trump administration with an open hand, not a closed fist, yet he does this Trump proof session with the legislature.

He also goes to the border a few days ago, and talks about immigration, and how he doesn't want the Trump administration to cause pain and suffering in California. So again, he's trying to have it both ways. Lee, what do you think?

>> Lee Ohanian: A lot of this is curious, and I say that because one of the major issues that the governor is worried about, and ostensibly Sacramento is worried about, is abortion rights.

Trump has said a number of times in recent months, before the election, that he believes the right place for abortion is to be within the states. And that's where it is right now, he's happy with that. And then, he would not sign legislation on a national abortion ban.

So, this is obviously the abortion is a real weak point for the Republican Party. It would be politically, I think, very unwise for him to start, you know, backpedaling on that about abortion, and put pressure on California and within California abortions within the state's constitution. So, it would most likely need to become a SCOTUS case, now if that did happen, and now I'm just speculating.

The state's right to abortion is probably on a slippery surface because it's based on an argument for the right to privacy. And of course, in the Dobbs case, Alito talked about, or say it in opinion that the Constitution does not provide support for that. But in any case, I don't see reproductive, or abortion issues being something they need to worry about.

Deportation is another curious one, because every major voter demographic group in the state, including Hispanics, worries about the border. They view illegal migrants as an economic drain on the state. So, trying to preserve the sanctuary status of the state is not aligned with voter interests. The one area I think where the state does need to worry about with Trump, but again is not gonna be within the best interest of the voters, is about carbon emissions.

California, is one of the most aggressive clean energy policy platforms, one that in my opinion, is not in the best interest of Californians because the benefits of reducing carbon emissions, when California accounts for less than 1% of global carbon emissions is tiny and the cost is very high.   

So, I could see that being an issue, and on this end, I believe Trump would be right. And then the other issue I suspect they worry about is high speed rail. So, of course, in 2008, California voters approved about a $33, $34 billion bond for a train system that was gonna connect San Francisco and Los Angeles, connect the Central Valley with the coast.   

Note: The bond was about $10 billion, and the estimated system cost was about $33-$34 billion.  

That was supposed to have been ready around 2018, where in 2024 nothing's been completed. The bill might be as high as 128 billion, that was the figure that came out earlier this year. I suspect it's higher now, the federal government gave California a few billion about a year ago.

Well, they approved a few billion about a year ago for a high-speed rail. I know Trump is, I expect Trump to be very upset with the lack of progress. And I could see him looking for reasons to pull that money back. So, I can see that as possibly be an area.

>> Bill Whalen: Well, you know, Lee, that's not so much Trump, that's Vivek Ramaswamy, who, along with Elon Musk, is running the Doge Initiative, the Department of Government Efficiency, as they call it. Here's what he tweeted the other day, he called high speed rail a wasteful vanity project and accused it of wasting, quote, billions in taxpayer cash with little prospect for completion in the next decade.

You get to see the acts coming down on that, but, you know, getting back to the spirit of this special session, Lee, this is about just revisiting what happened the last time we had a new Trump administration with California. I believe the state filed something like 122 lawsuits against the Trump administration.

You have a hyper ambitious attorney general right now in Sacramento in the form of Ron Bonta, who's one of many Democrats mentioned as running for governor in 2026. Tell me he's not chomping the bit to just file lawsuits. The last attorney general to go through this, Javier Becerra, he ended up getting a very nice job in Washington, the head of the federal HHS agency.

So there is political capital here. But what I have an issue with here is this is not an abusive gubernatorial power, but I think it's a misuse in this regard. Our listeners may know I worked for Pete Wilson when he was governor of California in the 1990s. And I went back and I looked at what he did with special Sessions.

And in 1995, January of 1995 and February 1995, he called for two special sessions. The first one in January had to do with flooding. I believe something like 34 or 58 counties in California have been declared disaster areas by the federal government. He wanted the legislature to deal with this urgently.

And then the next month, he called in the legislature, Lee and Jonathan, for a special session to deal with the bankruptcy crisis in Orange County. These are kind of bona fide house on fire problems in California, not what Donald Trump may or may not do to California in the near future.

So again, I just think that the governor is taking advantage of the ability for extraordinary occasions to deal with a problem that is not necessarily a, a problem so far, but, b, not extraordinary. So just, you know, not a good move by the governor, if you ask me.

>> Lee Ohanian: Well, the language of the reason for calling a special session, as you point out, Bill, is that there's an immediate emergency.

>> Bill Whalen: Yeah.

>> Lee Ohanian: Or there's an emergency we can see coming on the horizon. There's the mother of all storms and it's gonna hit and we need to take some precautions and we need to do it immediately.

So, Bill, I agree with you this. There's nothing here that you can't see having not being able to wait. And until January there are, you know, California has many pressing challenges. And I believe in my opinion, that some of those that are being listed for this special session would be far down my priority list relative to many others.

>> Bill Whalen: Let me point out that I'm not also alone on this island as some sort of partisan professional Gavin Newsom hater. I would refer you to Matt Mahan, who is a very Democratic mayor of San Jose. Now, he's the interesting Democrat, Lee and Jonathan, in that he has taken poke at Governor Newsom in the past.

He's taken pokes over crime. Mahan supported Proposition 36, much to the state of Newsom. Also, he's been very critical of Newsom policy when it comes to clearing homeless encampments. It's a big problem in San Jose. But here's what Mayor Mahan tweeted the other day. Let me read it to you, quote, the best resistance is creating a California that works.

We need a special session focused on getting everyone housed, controlling the cost of living for working families, and ensuring our state is the most economically, viable and competitive. We can continue to lead if we focus on policy instead of politics. Lee and Jonathan, missing from all of that is the word lawfare.

>> Lee Ohanian: Yeah, great ideas for me. And yes, those issues, housing, affordability, other cost of living issues, the state's deficient K through 12 public education system. If you wanted to talk about immediate emergencies, those would be ones that would come to my mind.

>> Jonathan Movroydis: Gentlemen, recapping the year, you've looked a lot into California policy and politics, whether it be California on your Mind at the Hoover Institution and elsewhere.

And recapping the year, what have you learned about the Golden State in 2024? Lee?

>> Lee Ohanian: Well, Jonathan, the issues that trouble me the most about the state, there are two and they're related housing and homelessness. So housing has become, has become, has been unaffordable for many, many years.

The median single family home price today is close to $900,000.

The median value in the condo townhouse category is $670,000. And they're about 16% of California households that can afford that single family home and about 25% who can afford that median price condo. So again, getting back to the idea of the special session, this is an immediate emergency and it's not just those who want to buy a home.

The median rent in California is about 2,800 per month, which would require an annual income about $112,000 to qualify at the normal industry standard of spending, no more than 30% of your pretax income on rent. $112,000 household income is significantly above the state's median income. So housing is unaffordable.

Of course, the way to reduce housing housing costs is to build more. 2024 is going to be one of the lowest housing construction years we've had in qu based on home permits. And you know, this begs the question, why don't we build more housing? You know, my opinion is that we're barking up the wrong tree with our policies.

Over a 100 housing laws have been passed since 2016 and none of them really move the needle. And I think it's when I go back to the analogy of barking up the wrong tree, the state's focus has been to really push, I'll even go as far as to say, force high density housing into areas that are either high income and single-family homes or areas that are high to moderate income but are already very dense.

So these aren't areas that would, that would, you would typically want to, you would, they would typically be seeing a lot of housing in play because those are areas where housing is very, very costly. So a better idea for the state is to emphasize policies that build in areas with much lower land values, so that means away from the coast, and also emphasize much lower cost building technology.

So in California, it's becoming commonplace to spend 400 to $500 per square foot to build a home. Manufactured housing, which is housing that's built from start to finish in a factory that's built on average of about $87 per square foot. And when you think that about 30% of California households have annual household incomes of $50,000 or less, you simply can't imagine how to house those people unless, and for them to be able to afford it on their own, unless you're building houses in the 200 to $250,000 range.

The latest data from the American Community Survey (ACS) shows that 26.5% of households are earning $49,999 or less.

That's what we need to do. But the only way we're going to be able to do that is build away from the coast and utilize much, much more efficient building technologies. But that is not happening, unfortunately.

>> Bill Whalen: Let me ask you a question, what if California wanted to consider what New York did after World War II?

And what if California wanted to create a Levitt town, for those not familiar, Levittown was a community build, I believe, out on Long Island. And it was just a, what is today a modern suburb, if you will, but something groundbreaking, no pun intended, back in the late 1940s.

Lee, if California want to do this, if the government decided that we wanna create a Levittown community, would the issue. Lee, be finding available land, with the issue being deciding how much to charge per house to make it both affordable but also profitable for the endeavor or the issue just being getting around myriad regulations and rules to actually get it done in a timely fashion?

>> Lee Ohanian: Bill, it's the third issue. There's an enormous amount of open space. 95% of Californians live in about 5% of the state's land area. So there's, you know, when we drive around, see all those open spaces, Is not surprising. Most of California is unoccupied, so land is not an issue.  

Note: The percentage of CA residents is 90% on 5% of land, not 95% as stated in the podcast.  

But the regulatory morass would be a huge issue, particularly with respect to environmental. Environmental concerns. There's some legitimate environmental concerns when major developments are pursued and built. I love the idea of doing a 2025 version of Levittown, which was very efficiently built because it was almost a pseudo mass production.

It's like, okay, we've got these cookie cutter houses we're gonna start building. Okay, we'll build a bunch of foundations now, we'll frame them, etc. But while there are legitimate environmental concerns, there's also a very politically powerful environmental lobby that views building on virgin land as crossing the line that they drew in the sand.

They simply do not want more building on land that has been built on before. So I see that as the major problem. The governor and the state legislature could deal with that very effectively by implementing substantial reforms than California Environmental Quality Act. I hope every year that they do that.

I'll continue to hope for that for 2025.

>> Bill Whalen: I think one other thing, Lee, if you're going to build a Levitt town, if you're going to try to do vast housing projects, you have to also have to address the issue of work and where people are going to be working vis a vis where they're living, which ties into the issue of infrastructure in California.

And I wanna go back for a second back to our conversation about things the legislature should be thinking about in a special session and its relationship with Washington. Getting into fights with the Trump administration is great for political ambition. It is very tempting if you want to run for president or if you want to run for governor of California.

But unfortunately, when it comes to management of the state and moving the state forward, you have to have an adult conversation with the powers that be. Now, granted, this is two way street. The Trump administration, the president and people around the president can be very juvenile when they talk about California, and I'll grant you that.

But on an issue like infrastructure, if the Trump administration wants to kill high speed rail, Leah, Jonathan, I think California has to counter and say, fine, if you don't want to build high speed rail, help us manage a population of nearly 39 million people. So let's talk about roads, let's talk about maybe lighter rails.

Let's talk about how to move people around, which then leave a tie into the issue, I think, of where you're gonna find available affordable housing in California.

>> Lee Ohanian: Yeah, yeah. I mean, the Valley would be a great place to expand housing. Land is very affordable. And Bill, I love your idea that.

And in fact, even if you didn't have Trump in the White House, my opinion is that investments in infrastructure, you know, with smaller lines that connect areas such as Stockton to Silicon Valley, Stockton to the Bay Area, where a large number of people live in Stockton, work in those, you know, work in those communities because of the high paying jobs.

I think that would probably move the needle more than worrying about California's high speed rail from Bakersfield and Merced, which is what we're doing right now at a budget of about $35 billion in which may not be ready for another 10 years.

>> Bill Whalen: Yeah, a piece of advice for any individual thinking about running for Governor 2026, go back and look at Pat Brown's master plan for education back in the 1960s.

We continue to have a master plan for education now for higher ed. I would suggest if you're running for office in 2026, you should think about a master plan for infrastructure, master plan for housing and other various thorny problems in Sacramento and at least, you know, have a plan for how to address these things.

It seems we do this in such slapdash fashion in California.

>> Lee Ohanian: Yeah, a lot of dollars are spent and it's very difficult to see where they go. And you know, just, just to close on this point about housing, another huge problem within California is homelessness. So we're up to about a hundred 180,000 plus homeless people within the state.  

If you put them all together, you'd have a size of the capital of Oregon, Salem, and $24 billion over the last five years was spent on homelessness. The state auditor conducted a study of homelessness spending and when the report came out, it was a bit of an eye opener because the auditor was in their own way, really quite critical of the state.

They indicated that normal accounting practices hadn't put in place. You simply did not know where the dollars went. You could not construct metrics to figure out what spending was successful and what spending wasn't so successful. And to just reconnect to this point about housing, we are now spending upwards of at the million-dollar level to build new housing for the homeless.  

So a million dollars per apartment unit. And when you think about how we could be levering investments when we could be creating housing, essentially single family manufactured homes, based on my calculations, at $250,000, that'll house three or four people versus a single apartment unit. $1 million, you know, again, Bill, you go back to the point about what do we really need to figure out in terms of a plan?    

Note: Calculation for $250,000 single family homes is as follows: consider a 1,100 square foot manufactured single-family home built at $87 per square foot (see same source as above for cost per square foot of manufactured housing). This amounts to a $96,000 land value per acre in Central Valley (in Stockton, the value is about $200,000 per acre).

At about 7 manufactured homes placed per acre, which works about to about $29,000 per home for the land, this equates to about $125,000 in total cost for the home and the pro-rated land value.  That leaves about $125,000 for other costs per unit. Utilities hookups perhaps amount to as much as $35,000 and site development perhaps as much as $11,000 per space. 

The residual amount (approximately $79,000 per unit) is for other costs, such as planning and permitting.   

Well, the plan should be we're not gonna spend a million dollars per apartment unit. So let's figure out why we are, and let's figure out a way to reduce that enormously. It should be reduced enormously. And we could do so much more if we could build much more, much more efficiently.

>> Bill Whalen: Yeah, the other thing I wanna get your thoughts on, Lee, is just the ongoing fascination with fast food in California. And as I always tell you when we tweet back and forth, just which continues to come back like a bad meal, the minimum wage controversy. It just seems that hardly a month goes by with some study showing job loss in California over this.

The governor's office gets very defensive over this measure. Why this particular matter, Lee? Is it just because it's complicated for the governor to try to explain? Is it because ultimately, it's a bad law, or maybe it has something to do with the nature of fast food with itself and just how that's kind of intertwined in our society?

>> Lee Ohanian: Well, yes, it's interesting, Bill. And then in the, I don't recall the proposition number. You might, but was it 18? Was that the minimum wage proposition? So proposition was minimum wage. And California's voted down for the first time, they voted minimum wage increase. So this really put the spotlight on fast food, minimum wages, because with fast food, the minimum wage is $20 per hour.

For almost every other industry in California, $16 per hour. So, you have an unlevel playing field that puts fast food at a disadvantage. And not to go in the weeds too much, but I think the first reasonably good data on whether on the impact of the $20 minimum hour wage came out just either earlier this week or last week.  

And it does show job loss in fast food since September of 2023, which is when the governor signed the bill. Data that was being looked at before that was based on a survey of businesses that don't always respond to the survey. So, for a variety of reasons, that data may not be nearly as accurate.

Accurate as the, as the census data that came out. Now, the census data will be revised over time, so we'll get a better look as we go forward. But thus far it is looking like it is looking like there has been job loss in the industry since the governor signed the bill.

And before COVID bill, job growth in the fast-food industry was remarkably rapid. I think about, if my memory serves me, growth in fast food jobs was about twice as fast as growth in all the other jobs in the state. And that was roughly between 2010 up to 2020.

Note: 50% fast food job growth during the 10-year period is twice that of overall nonfarm jobs growth of 24% 

So about that 10 year period. It was a rapidly expanding industry. We're not seeing that now.

>> Bill Whalen: Yeah, it's funny, I don't know if you guys watched Donald Trump in Paris when he went to the reopening of Notre Dame, but he was sitting one seat away from first Lady Jill Biden.

So of course, the Internet's been going crazy with memes of the two of them talking. And of my favorite ones shows Trump whispering into her ear. And what he says is he goes, and then after I worked my shift at McDonald's, I got a garbage truck. He's hearkening back to when that day in Pennsylvania when he showed up at the drive thru at McDonald's and served out French fries.

I was fascinated with how fast food played a role in that presidential election, both his ability to seize on the issue and Kamala Harris never quite really explaining whether she did or didn't work at a McDonald's in Oakland. And I mention this because, again, if Gavin Newsom's looking to run for president in 2028, you can get crippled very fast running for president.

People develop a very bad narrative view. And one of him is gonna be that the guy does not like fast food and the guy likes the French laundry. So I just wonder if somewhere in the recesses of his mind or his people around him, they know that ultimately the guy who raises the minimum wage in California for fast food makes fast food more expensive and cost people fast food jobs, that that is a liability down the road.

So maybe that's why this issue has continued.

>> Jonathan Movroydis: Bill, to the original question, what have you learned this past year? And maybe you could also provide some winners and losers in California.

>> Bill Whalen: Let's go to winners and losers a moment. What I looked at politically was not much changed in California in this regard.

If you look at the election returns, Kamala Harris came in at about 58.8%, I think, or thereabouts, a little low for a presidential candidate. She should have been up four points higher. But this is a reflection of her just being a weak candidate. Democrats lost a few seats in legislature, but they still have supermajorities.

Democrats actually picked up, I think, three House seats in California, which is one reason why the Republicans have a skin of your teeth existence. I think they have 220 seats in the House, two more than the majority. But if you look past that, I look more at the relationship that the governor has with Democratic lawmakers, mayors in particular.

I mentioned this friction he has with Matt Mahan, the mayor, San Jose, which I think is complicated on several levels. First of all, a mayor maybe a punk in the governor's eyes, defying him on issues, questioning his judgment on issues. Secondly, Mahan seems to be ambitious himself. Maybe he wants to run in 2026.

And he has kind of a hip look to him, which maybe kind of makes him a next generation, Gavin Newsom. So I noticed the friction there. But then I also noticed that Newsom did not get involved in the San Francisco mayor's race. A city that he was once the mayor he did not endorse London breed the incumbent.

But mayor, he did not endorse Daniel Lurie, the private sector fellow who ultimately won. A real departure from San Francisco politics because usually they hire from within. They pick a machine politician, but no, they're going to the bonafide outsider, see what happens there. He did not weigh in on the recall across the bay in Oakland, where the mayor got recalled and so did the county DA as well.

So you saw this kind of division between Newsom and on top of that, as Lee knows, with homelessness, when it came time for cities to came up with their own homeless plans, Newsom was very critical of what they did and basically sort of kicking them back and saying try harder.

So this friction that exists between the governor and the mayors, I think represents a larger problem, Lee, which is just Sacramento, not necessarily be in touch, was going out on the cities. And we certainly saw that manifested in Proposition 36, which breed ended up supporting. Why she saw the train coming down the tracks, a train was coming right at her.

And so she had to get tough on crime very much in a hurry. So this might won't be one thing to look at 2025 coming ahead just to see if Sacramento is a little, dare I say, more responsive to what's going on outside the bubble.

>> Lee Ohanian: Yeah, Bill, yeah, I agree with that.

There's a substantial and growing disconnect between Sacramento and many counties and cities and there's enormous difference across counties and cities in terms of the kind of financial pressures they are feeling in terms of the economic prosperity they are having. Recently, Newsom and Bonta filed a lawsuit against the city of Norwalk, which is probably 20 miles outside Los Angeles, but, much smaller city, relatively less prosperous than LA, one that's really struggling with homeless issues.

And their city council said, you know what? We're throwing up our hands. We're not gonna build more supportive housing. It is so expensive trying to manage this. Our businesses are struggling with this. Our neighborhoods are struggling with this. So that really highlights just the fraction between cities and Sacramento.

And, Bill, I was interested in your remarks about Newsom staying out of city politics. I'm wondering just how much of the fact that Oakland, which, I mean, God bless them, but that is just, if it's not the most troubled city in America, it's certainly one of the most troubled cities in America.

I know he was quite critical about Oakland in terms of some other governance issues. He also had to send in.

>> Bill Whalen: He sent in the California Highway Patrol at one point to help get crime under control. So it's not like he's tone deaf to what's going on.

>> Lee Ohanian: Yeah, and I'm just wondering whether in the back of his mind or in the front of his mind, he thought the Oakland mayor, I can't remember how to pronounce her name, but, that she should be recalled.

It's not obvious that who steps in will be able to do better job. But, that's the city that is just a huge outlier in terms of California, one that just needs an enormous help. And Bill, in terms of San Francisco, I'm just curious. I believe all the Mariel candidates, at least the ones that had any type of chance, they were all Democrats.

>> Bill Whalen: Yep.

>> Lee Ohanian: Does that make it tricky for him to pick sides?

>> Bill Whalen: No, because he engaged in a congressional race here in Silicon Valley, which pitted, because of our open primary system, two Democrats made the general election, and he endorsed one of the two. Again, a curious move because, and I wrote about this in California mind, he chose the guy who was trailing badly in the race, who ultimately lost by a handful, but in part.

Now, one of his former aides was running the campaign, but also he had issues with the other fellow running, who was a former mayor who again defied him on Proposition 36. So he did kind of get personal in that one. But he stayed out of these city races.

And I think it just might be simple that, governors are supposed to have clout. Their endorsements are supposed to matter. And maybe since he's been through a few ballot measures lately where his involvement was not necessarily beneficial to the cause. Remember, he barely survives the Homeless bond earlier this year, Prop 1A, despite being the very public face of that.

Maybe he came to the conclusion that it's best I stay out, because if London Breed loses, if the recall goes through in Oakland and I'm on the wrong side of it, it'll just maybe look weak.

>> Lee Ohanian: Yeah that's very interesting. Prop 1A, I believe in, in a poll had, was winning 2 to 1, perhaps just two months before the vote.

And what, what was, what was the, what was the final tally? Was it 51, 49, 50 and 50?

>> Bill Whalen: And no, it's much, much closer than that. Remember, it was just skin of your teeth and if you also remember, Lee, this got this complicated life in Sacramento. Newsom was going to do a state of the state address right after the primary in March and he kept pushing it back because it took time, results for that and that he had to kind of internally scramble and figure out now what is my message since I almost got my head handed to me.

So again, I think maybe he was just a little shy about getting involved. Maybe just because, been tougher to be on the ballot lately.

>> Lee Ohanian: Yep.

>> Jonathan Movroydis: Gentlemen, we're coming off a tumultuous election season for the state. Just wanted to ask you both who are the winners and losers of 2024, given the election season, everything that's gone on this year.

Bill?

>> Bill Whalen: Let's Lee go first.

>> Jonathan Movroydis: Okay.

>> Lee Ohanian: Well, you know, it's interesting, I think winners would include voters who are moderate or conservative because a number of ballot measures went their way, including Prop 36, which redoes some of the 10-year-old law that made theft below, I believe, I believe the limit was 975.

That was a misdemeanor. Retail theft is up in California and Prop 36 makes some of those smaller thefts felonies. It addresses drug use I think in a productive way. If an individual linked to get drug treatment, that felony is dropped and that pass was 70%. So that was, so that's one data point about that would be in favor for those voters.

Another was rent control went down, I think was 60 to 40. So that was one that was pushed very aggressively by the progressives. Minimum wage went down, proposition, I believe it was Proposition 5. This was a very important one. This would have lowered the super majority standard for local bonds to finance infrastructure and affordable housing.

That would have essentially undone some of the protection for Prop 13. So this in my view is a really important one that went down. So I think voters were winners. I'm also going to call Gavin Newsom a winner, potentially a big winner because Trump is in office for four years.

If Newsom has national political ambitions, those would come up in 2028. That would give him some time to distance himself from the governorship in California where an awful lot of the country is just not going to see eye to eye with him or with a lot of California.

So I think the outcome for him is really quite a good one. In terms of losers, I think it's going to be the California taxpayer because the Legislative Analyst office came out and they're looking at potentially another budget deficit for the following fiscal year. The forecast is relatively small, I don't recall the exact number, but the state just has a huge spending problem that's too high.

They have a huge revenue problem that continues to be much too dependent on, on capital gains, essentially, which are very, very volatile and which create these kinds of boom bust cycles in state finances. We've never fixed that. It's been around in political years forever so California is going to continue to face a lot of fiscal stress and it's going to end up falling on the taxpayer.

So sad to say, my loser is the California taxpayer.

>> Bill Whalen: Okay, I would go with the winner, a variation of Prop 36, Lee and I would pick Nathan Hockman, who is the new district attorney in Los Angeles for several reasons. First of all, his opponents ran a very predictable playbook against him.

They said, look, the guy used to be Republican, now he's an independent, so you can't trust him as far as you can throw him. But he got easily sent into office, so that didn't work. Secondly, if you looked at his inaugural, who attended it? Arnold Schwarzenegger, which was very impressive to get Arnold to show up because he's a busy man.

It was a very Arnold moment. Interview asked him what he thought about Nathan Hawkman, I'm going to do a very bad Arnold invitation. He goes, I think he's an eagle. He goes, because eagles fly high. And then George Gascon, he's a turkey, turkeys fly low. It's just kind of very Arnold way of summing up things but Hockman has come into office with a very simple promise.

You commit a crime, you're going to get prosecuted you're not going to get slapped on the hand. You're actually going to do time. And people in Los Angeles seem to want that. I don't want to get over my skis here and put him into higher office. But being an independent and also being a guy coming in and cleaning up a problem, that puts him on a path to things higher than Los Angeles if he does a good job.

So I'd make him my winner. The loser I'd have would be California Democrats, but a very particular subset of California Democrats. Not Kamal Harris, not Gavin Newsom, but those Democrats who thought they were going to make out like Bandits with Kamala Harris in the White House. So this would be every lawmaker who thought that he or she was going to get an appointment to Washington.

This would also be every donor who thought that he or she who helped create a million dollar war chest for her which somehow magically she ran through. And then some would think they would get an appointment or be on first name basis with the future president. They are all SOL out of luck at this moment.

So they're the losers and I have a tweener, Lee, and that's going to be Gavin Newsom. He is in a interesting position for 2028 right now, but he had kind of a rough 2024 because he never materialized as the white knight. He was going to rescue the party and he still has a lot explaining to do as to why he would stand up time and again for Joe Biden and say what great condition he was in.

His favorite term for Biden was he delivered a masterclass tonight. He said that after that, a disaster of a debate. So he has, as Ricky Ricardo said, he has a little splaining to do on Joe Biden, so I give him the tweeter.

>> Jonathan Movroydis: Gentlemen, I'm more or less in line with you on your losers.

And Bill, your, your tweener, I have an out of the box winner which somewhat explains my background working at the Nixon foundation before coming to Hoover. And that's the legacy of California's native son, Richard Nixon. Given that Trump was able to survive two impeachments in a series of criminal indictments, some of which seem politically motivated, Richard Nixon, if Watergate took place today, might have been able to survive politically and do what Trump essentially wants to do in his second term.

Nixon wrote in his memoirs that he had three main objectives for a second term. One, reform the budget and terminate wasteful programs. That sounds a lot like what Trump wants Elon Musk and Vivek Ramaswamy to do at Doge. Number two, a massive reorganization of the federal bureaucracy. That sounds like Project 25 or something like it.

Something interesting about this is that Nixon wanted to tap Hoover's very own George Schultz as head of all of economic affairs with the Treasury, Commerce and some of the other departments reporting under Schultz. And number three, revitalizing the GOP along new majority lines. It sounds like Trump making new inroads with voters that hadn't voted Republican in the past.

What's say you gentlemen, Bill?

>> Bill Whalen: Yeah, this is interesting. Nixon in 1968 brings in disaffected white Democratic voters. Archie Bunkers, we might call them, Nixon in 1972 does quite handsomely with youth voters. He understands it now that the youth vote has been raised lower to 18-year-olds. If you look at this Nixon 68 poster behind me, by the way, that's one of the many sides up there, let 18-year-olds vote.

He did very well in with them in that election. And also like Trump, Nixon at the end of the day is not very easy to peg in terms of his ideology and his beliefs. One thing that people find frustrating, Trump supporters find frustrating about him is just when they think they have him pegged, he comes out and says or does something that doesn't necessarily fit their narrative.

You know, he's not necessarily an opponent of big government at the end of the day, even though he has the Doge initiative. And Nixon also had striations, people who think he's an arch-conservative. The man created the Environmental Protection Agency. And so again, just kind of a hard politician to put into a box.

The one big difference, though, who was shrewder than Richard Nixon on foreign policy? And we're in a very complicated world right now, and 2025 is gonna be a huge test of Donald Trump's foreign policy acumen.

>> Lee Ohanian: Those interesting ideas about being difficult to pigeonhole Nixon, absolutely. In terms of economics, I think one of his worst decisions was setting up wage and price controls, which failed predictably, in my opinion, based on kind of standard economic reasoning.

You interfere in a market, you set a price that's too low, you're gonna have shortages, you're gonna have lines. As we know, we saw gasoline, gasoline lines around that time, and I believe, if I recall correctly, I believe Schultz may have either resigned or threatened to resign around that time when Nixon put in place price controls.

George, being a University of Chicago economist, price and wage controls are about the last thing that he was gonna tolerate. He was remarkably gifted, brilliant, may have been close to genius in terms of IQ. Not that long ago, I was looking at some YouTube videos of the Nixon Kennedy debates in the 1960 presidential election.

And it is just remarkable to watch those and to look at the level of discussion and the ideas that are being discussed. And I think the respect that both had for each other and such a high-level discussion at a time that's over 60 years ago, when the average American had much less education than they do now.

It's remarkable. I mean, I recommend that to anyone. You can find those on YouTube. But I agree, Nixon on foreign Policy was a master. We need people with those kinds of skills now.

>> Bill Whalen: Yeah, it's interesting, Nixon and Kennedy were both congressional class in 1946, as was Gerald Ford.

It's a rare class that has three presidents. But Kennedy respected Nixon very much in part of Nixon's background, his upbringing, as compared to Kennedy. No silver spoon there. And also, Nixon was what, four years younger than Jack Kennedy, but by the time they're running for president, 1960, Jack Kennedy is a former congressman, now a senator.

Nixon is a former congressman, former senator, now vice president. So Nixon was kind of ahead of him. But, Jonathan, one thing I'm curious about, maybe you might have some thoughts on this. If Kamala Harris could somehow talk to Richard Nixon right now and ask him for his thoughts on her running for governor, 2026, what do you think he would tell her?

Because remember, 1962, that is Nixon's route to rehabilitation. He's going to run for governor.

>> Jonathan Movroydis: That's right, yeah. I don't think Richard Nixon was very invested in that race. From the people I've heard talk about it, my guess is that maybe he would tell her to take a break from politics, travel around the world, build up her policy chops, you know, comment on the big issues of the day.

Sort of like what he did in New York in the mid, in the mid-1960s and that sort of that, that era really gave him the time, given the ability to relax, reflect and position himself for the campaign in 1968.

>> Bill Whalen: Yeah, that's well put. And that's one of the very bad parallels of Harris running for governor in 2026.

Like Nixon, she would look at a race that she would think she could win. But I don't think her heart's really into being the governor of California because as we've talked about before, it is a very difficult policy centric job and as opposed to something a little lighter like being the vice president.

And I just don't think she's the right person for it. Gentlemen, final question to round up this, this episode.

>> Jonathan Movroydis: What are some reasons to be optimistic about California in 2024? Lee, why don't we start off with you?

>> Lee Ohanian: Well, I'm always optimistic because, yeah, this is still the best place.

It's the best place to live. There's still remarkable transformational businesses here. There is a ton of economic opportunity. And even with just relatively modest policy reforms in the areas of homelessness and housing regulations and taxes, getting trying to develop a tax base that's not so dependent on capital gains that leads to these boom bust cycles.

California is a great place, and it could be even better. So I'm always optimistic about that. Bill, I think you might be talking more about Daniel Lurie as mayor of San Francisco. And I do think San Franciscans have reasons to be optimistic. I don't know much about Mr. Lurie, but there's been a groundswell of support within the city for much more moderate politics.

Dean Preston was voted out from the Board of Supervisors. Preston, I believe, is a member of the Democratic Socialist Party. He was voted out in favor of a moderate. Erin Peskin is also out, who is also extremely progressive. And when people criticize Breed, London Breed is San Francisco mayor.

One thing to keep in mind is that for most of her mayorship, she was dealing with an extremely progressive Board of Supervisors that made it very difficult to implement anything resembling a common sense policy choice. That Board of Supervisors is very different now. It's no longer has that progressive majority.

So Lurie is going to have, I think, a much better opportunity to create some common sense in San Francisco. So I think California can be optimistic about San Francisco. And I think San Franciscans can be looking forward to a hopefully good 2025.

>> Bill Whalen: Yeah, I agree with you on that.

For years, people like me have been blasting San Francisco and saying they need to do what New York did. You need to bring in Rudy Giuliani, be tough on crime. You need to bring in Michael Bloomberg, a guy who just knows how to manage things, and have a strong executive.

You have to stop picking people from within the system, ultimately just part of the system. So this is really the put up or shut up moment for San Francisco because now they have somebody in office who is not of the system and let's see what he can do.

And if there's reason to be optimistic, it's because the timing is right. I don't know if the city has hit rock bottom or not. I would hate to think that it could go further south. But if ever there are a moment to really be ambitious and be inventive and thinking outside the box, my God, it would be 2025 in San Francisco.

My other choice for optimism is, I am hoping that we get a State of the State address sometime early in 2025. Lee wrote a really good column on this for California. On your mind, Lee, I think Gavin Newsom finally produced a State of the State address. And I think what early July, of this year, and it was really just kind of a warmed over leftovers.

By the time he finally gave it, you just kind of wondered why he even bothered to do it. And he doesn't have to under state law, by the way. But I'm hoping, given if we're supposedly in this moment of crisis with Donald Trump coming into office, if Newsom does have national ambitions, so he has to show that he's in charge of California.

I'm hoping that he does what governors did back in the day, which was give a speech early in January or even early in February, and kind of lay down the marker for his vision of the Golden State. The longer the governor takes with this speech, it just begs the of what vision does he have for the state?

So that's my choice for optimism that he's going to come out early with the state of the state next year.

>> Lee Ohanian: I agree with you. I hope that does happen. I hope he has an ambitious, but realistic agenda that challenges his own party to start making some progress.

We pass about a thousand laws every year. I think there's 2,000 come down the pike, about a thousand get passed and signed into law, and it's 2024. I think back on 2014, roughly 10,000 new laws have hit California since 2014. I kind of think about 2014 and just wonder, well, just how different is my life now in 2024 than it was in 2014 from perspective of all these new laws.

Let's do fewer laws and make them sensible and advance the ball for cost of living, building, housing, homelessness. I hope Newsom challenges his super majority in the legislature to do this. It will be what his last roughly two years in office. There's still time, so I would love to see that happen.

>> Bill Whalen: Yeah, it's funny, by the way, I was looking at Texas the other day just to see how Texas does things differently in California. And one thing I've noticed is limitations on number of bills that lawmakers can enter introduced in a session. And if we're gonna have term limits in Sacramento, maybe we should have legislative limits as well, because does the governor really need to deal with a thousand bills every year?

No, that's just excess. So back in the day when I worked for the Governor, there was one year in 1995, I believe it was, when Republicans had control of the Assembly. And so therefore you just couldn't pass bills willy-nilly. And I think the number of bills that went to governor that year was some somewhere around 450.

So we could get by with less legislation.

>> Jonathan Movroydis: Well, as always, gentlemen, great analysis. Happy holidays and happy new year.

>> Bill Whalen: Same to you. And Jonathan, thank you for moderating this podcast over the course of the year. Speaking as a fellow moderator, it is a thankless job you have to put up with Leah and I, gabbing all the time if anyone to jump in.

So we appreciate your efforts. Well done my friend.

>> Jonathan Movroydis: Thank you. Thank you so much. It's been a pleasure to speak with both of you this past year as well.

>> Lee Ohanian: Thank you, Jonathan. Thank you, Bill. It's always great. It's a lot of fun to do this.

>> Jonathan Movroydis: You've been listening to Matters of Policy and Politics, the Hoover Institution Podcast devoted to governance and balance of power here in America and around the free world.

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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.

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