Distinguished Governors on State vs Federal Power: A Conversation with Governors Jeb Bush, Jerry Brown and Mitch Daniels

>> Michael J. Boskin: Welcome viewers and listeners to a very special edition of the Tennenbaum Program For Fact-Based Policy at the Hoover Institution's podcast. I'm Michael Boskin, senior fellow at Hoover and professor of economics at Stanford. And last year we hosted a conference on American Federalism Today: The Important Key Cornerstone of America's Constitutional Republic.

A federal system where there are differentiated responsibilities accorded to states and local governments versus the federal government and to the private sector and to the people. A big part of that was three renowned practitioners, as governors, who are in a sense at the linchpin of all of this because they have the federal government with a bigger pocketbook and above.

And they have, obviously, cities and towns and counties below, as well as their own state's responsibilities that they have to deal with. We know the trust in government has been eroding substantially for a very long time, but it's also an interesting and important fact, that trust in state and local government is much, much higher than it is in the federal government.

So, perhaps our distinguished guests can give us some perspective on whether that trust is well placed and what they would suggest to their successors. On how to regain and strengthen that trust, and perhaps to the new administration and Congress in their citizens, how to improve their citizens lives.

So, I'm delighted to introduce three of the nation's most distinguished, innovative, and successful former governors, who have experience and wisdom to share, that is relevant today's important issues. Including by the way, the natural disaster problems that are still going on in North Carolina and certainly are going on the fires in Los Angeles.

Jeb Bush was a two term governor of Florida from 1999 to 2007, when it was a swing state electorally. Jerry Brown was governor of California twice, decades apart, each time for two terms, once while it was a swing state and once when it was a reliably blue state.

He was also mayor of Oakland. Mitch Daniels was governor of Indiana from 2005 to 2013, and then president of Purdue University from 2013 to 2022. So, let me begin with a few questions just in general to the three of you, and feel free to interact, etc. We're trying to be constructive here, but you come from different experiences on the natural disaster front.

Jeb, you had to deal with hurricanes, Mitch with floods and tornadoes, and Jerry, you had wildfires and probably other things as well. So, looking back on your time in office, what were the most and least constructive partnerships with the federal government you experienced? Obviously, FEMA is extremely relevant right now in the current situation.

Jeb, you wanna lead off?

>> Jeb Bush: Sure, I'll start if you like. Michael, thank you for allowing me to partake with literally, legitimately distinguished former governors, I'm just a former governor. We had eight hurricanes and four tropical storms in 14, 15 months, and so, we had to deal with Washington a lot.

And the only problem we had was when, after Katrina, which hit Florida first and then hit Louisiana. Louisiana really, it was a devastating storm for Mississippi and New Orleans, they just were overwhelmed and they didn't really do their job. Washington was blamed. Washington came in and tried to fill the void, and then they felt compelled to do the same in Florida.

And so, the conflict was they were trying to do more than they should, which is to provide logistical support, and obviously, through FEMA reimbursement of both individuals and municipalities cost. They tried to do more, including getting the military involved. And I had to politely push back and say, this is our responsibility, don't assume that we can't do it, provide support for us.

But by and large, we didn't have the kind of problems that you now see, there's a lot more finger pointing now about who's responsible, who's to blame, that starts immediately on social media. Back then, it wasn't the case, thankfully. And so, we had a pretty good relationship.

>> Michael J. Boskin: I'm glad to hear that, you had a little more breathing room without social media bearing down on everyone as it.

>> Jeb Bush: Yeah, I mean today just look at the tragedy in Los Angeles, my gosh, I mean, within an hour almost, there were people blaming this, blaming that without having any facts. And that just makes it harder if you're at the local or state level to deal with this tragedy.

>> Michael J. Boskin: Yeah, no, you've gotta do all the day to day stuff, obviously, and dealing with the current crisis. Mitch, what about tornadoes and floods in Indiana?

>> Mitch Daniels: Michael, your question prompted me suddenly to remember that just about 20 years ago today, right before I was sworn in, I went to one of these sessions.

I guess the Governors Association sponsored it to try to train rookies like me. And sitting at noon, a few of us with former governor Zell Miller, former Democratic governor of Georgia, somebody asked him the obvious question, G, what's the most important thing a new governor should think of?

Everybody expected him to launch in on education or fiscal policy or healthcare. He said natural disasters. He said disaster preparedness. He said it will happen, and if you're not ready, it'll be all people think about, maybe, remember about you. It was great advice and I took it. In fact, I made a point the very first thing I did, maybe even before the inauguration, was to gather the people responsible for response in one room.

And I remember asking them, so, if something goes wrong here, which of you is in charge? Is it the National Guard, the State police, what they called Homeland Security? The health commissioner there, probably eight or nine of them there. And they all said, well, we'd get together and work on

>> Michael J. Boskin: it too.

>> Mitch Daniels: Yeah, yeah, I said, no, I mean, I want one phone number to call. So, we reorganized it all so that we could act in concert where necessary, one could commandeer the resources of another department without a prolonged negotiation. In terms of relationship with the federal government, I can't resist telling you a quick story.

After one of the worst tornadoes, a lot of people lost their lives, very, very devastating over a very large area in southwest Indiana. A few days later, I was told that this hit an area with lots of Amish and Mennonite citizens. And I got down there as fast as a Black Hawk helicopter could fly, and they were already at work cleaning up debris and even starting to repair things.

And I was told that about four days later, some fellow from FEMA was down there doing whatever his job called for. And he sees this in the track of this tornado, where everything. Everything is gone, right down to the blades of grass, there is one house and there's not a shingle missing.

And he says, well, we see a lot of that in my job. Mother Nature, so arbitrary and somehow she leaves this one house unscathed. And the Amish guy standing near him stroked his beard and said, weren't there three days ago. Which, to me, apocryphal or not, and I'm told it's true.

Reflected, I think, the view that most people at the state level have, and I think Jeb expressed it a little bit already. And that is, it's our job and we appreciate all the help you can bring, but we don't need guidance and we don't need to stop and deliberate with you about the right way to do things, as in so many other areas that we may discuss in this conversation.

Let's talk about results, hold us accountable for results and not compliance or agreement to do things your way.

>> Michael J. Boskin: Gary, what about you're dealing with wildfire and other disasters?

>> Jerry Brown: Yeah, my experience with the federal government, in terms of FEMA, the federal emergency management is really good. They were good under Obama, good under Trump.

As a matter of fact, I've served under five presidents, Ford, Carter, Reagan and Obama and Trump. And FEMA is really the organization that works very carefully, it's not an ideological. There's enduring emergencies, people do rise to a higher level of collaboration, so that's good. The only point I'd make is that the federal forest, by the way, the federal government owns half the forest land in California and they don't have the staffing.

They have a huge number of vacancies, they're not competitive to attract people. So they don't have the staffing, that's a big problem. They're not putting the money into protecting the forest. Secondly, the way they interpret environmental rules, Endangered Species Act, they don't do the forest management that is needed.

California is doing a lot of that, not enough, we're learning more all the time. But the federal government has been deficient in terms of managing its forests, but as far as FEMA goes, better. We wanna talk about Education Department, Fish and Wildlife and how they handle water stuff, I got a few objections and problems.

But in terms of FEMA, that's the bright light in state federal cooperation.

>> Jeb Bush: Hey, Jerry, I just noticed that you skipped over the two bushes when you served, was that by design?

>> Michael J. Boskin: Okay, so that's the federal government, you also had to deal with local Officials, cities and counties.

And you also had to deal with your state legislatures. And I know that each relationship, constitutionally and historically between the governor, legislature isn't the same from state to state. But maybe we could just spend a moment on what were some of the difficulties you had in getting some of your ideas across or some of your fiscal issues across, or your reforms, wherever they might be.

How did that go?

>> Jerry Brown: Well, let me jump in there. In terms of legislature, at least in California, there's way too many laws. 1200 a year they pass, it's a real machine. And given the number of lobbyists, hundreds of lobbyists from every interest you can think of, from oil to labor unions to grocery stores to developers, you name it.

They have a very skilled, probably former legislator in Sacramento, the state capitol, and they're pushing for stuff and they get paid by production, by results, and that's called legislation. And the volume of law is incredible. The education code In California has 10,000 separate rules, separate sections. I could go on all sorts of things.

>> Michael J. Boskin: So That's the education.

>> Jerry Brown: The education code is the law affecting all schools in California, that's what it is. And of course, the major point is there's too much law. It's very intrusive and prescriptive and very hard to modify. So that's at the state level. It's also at the federal level, no child left behind, which is a bush idea, I think that was way overdrawn and that was modified later by the every student succeeds.

But that wasn't very good either, then we had race to the top of Obama, and that just compounded the problem as well. So the federal government can help, but like the state legislators, they love to pass detailed prescriptions that then entail compliance and lawsuits and the hiring of administrators of one kind or another to deal with all this legal complexity.

So that would be my main point here, that like in schools, the key is good teachers, well trained, well monitored and well encouraged and well paid, that's what it takes. We have so many rules, state and federal, that the teacher becomes marginalized in the educational enterprise.

>> Michael J. Boskin: Mitch, what about you and your legislature and your local governments and,

>> Mitch Daniels: You could break our eight years into Into two halves, very, very different settings. We captured a friendly two house majority in the first two years, lost one of those houses narrowly for the next four, and then regained it. Big majorities for the last two. So in the first two and the last two, I don't wanna say smooth sailing, but we were able to act and we had a lot of ideas we wanted to act on.

I came to office and only ran for office because our state had been standing still, in fact, slipping backwards, it was broken, state government was dysfunctional and a lot of people were very eager that somebody try to bring big change. So we arrived 20 years ago today literally was Inauguration Day, happy anniversary, right after the speech.

I ended the speech in front of thousands of people, excited people, and said, if you'll now excuse me, I've got to go to work. And among the somewhat symbolic actions, executive orders and things that we did in that first afternoon, I took a stack of bills this big personally to the desk where a clerk logs them in to the house.

And I did the same stunt over at the Senate, and it was sort of a shock and awe session, and in fact, apropos our last question, journalists at the time called it Hurricane Mitch. And we passed a lot of laws, there was a pent up enthusiasm, and I think we had convinced our party we're gonna be the party of change here and we have to deliver.

And there was something similar to that the last two years, in between it took a completely different approach, of course, and we had to try to work things out so that we could keep making progress. But that involved either finding things that our Democratic friends could agree with, Examples were health care or health insurance for the near poor, a state version of what the federal government tried to do a little later, or, I don't know, deregulation of telecom.

Their unions, the communications workers unions actually saw that there would be a lot more investment if that happened. In a couple cases, they didn't wanna help, we cornered them into it. Enormously popular ideas like capping property taxes at a very low level. I didn't always do this, but I can remember having one of those signing ceremonies with the speaker of the House who really didn't like anything we were trying to do, but he couldn't put his members in the position of being against what we were doing on that occasion.

He managed to smile as I handed him the pen, that sort of thing. So really depended on the political situation on the ground. But we felt that we were never gonna let a year go by without doing some big things. There were way too many needed doing.

>> Michael J. Boskin: Yeah, what about you in Florida?

>> Jeb Bush: Well, I had a similar situation as Mitch did. I think when I got elected in 99, it was the first time in Florida's history a Republican governor worked with a Republican legislature. There were many Republican governors and there certainly there never was a Republican controlled legislature until two years before I got in.

So there was high expectations. And in the 98 campaign, I kind of said what I wanted to do in a very detailed way. Seems obsolete these days. Campaigns are not run on detailed plans anymore. But I was nerdy enough to do a detailed plan across the, you know, spectrum of policy.

And the legislature was supportive of the first two years in a way that we developed a really good relationship. I learned how to deal with the legislature. As I went along, I got smarter. But the first two years, thankfully, they kind of let the rookie governor have what he wanted and it set in place eight years of pretty significant reforms.

And I'd say the one thing that we accomplished that doesn't get much attention was we strengthened the executive. The legislature agreed to it, which was very kind of them. Judicial appointments basically were, the governor controls the judiciary now in terms of the appointments, we shrunk the number of elected officials from seven to four statewide elected officials.

The governor took on more responsibilities as it relates to environmental policy, really across the board the legislature gave me the chance to strengthen the executive. We reformed career civil service protections to the point where we tried to replicate what exists in the private sector, portability for pensions, as well as being able to fire people at will, basically for incompetence.

Which Washington probably could, maybe doge should focus on that or anything else to improve productivity in the workforce. So we had a chance to, because of the good relationship I have with the legislature, to become an Article 2 state, if you will, which is helpful. And at the local level, I mean, the truth be told, I'm sure that local mayors and county commissioners felt the same way that I felt about Washington.

I think that's the constant tension is that they think there's too many preemptive efforts by the state legislature and the governor, too many mandates. And they might have been right, I don't know. I had a different view when we were the recipient of the mandate mandates that I did when, I guess when we were given them.

But that natural tension is part of our democracy, and it helps create a little bit of tension that makes better policy over the long haul.

>> Michael J. Boskin: Yeah, let me stick with you as I turn to some specific things the three of you accomplished during your tenure. Education, particularly K-12 education, also higher education, is one of the most important responsibilities of state and local governments in combination.

If we look at the broad outline of where the funding comes from in the United States, obviously it's not the same in every state, and your three states are somewhat different. But it's about 45% from the state, state coffers, 45% from local, around 10% from the federal government.

So there's a big partnership going on in various ways. And there have been legal issues about who gets to have what and whether you can lose local property taxes. That was a big issue in California and some other states. But your education reforms, I think, justifiably been lauded as a national model and were adopted in many other places.

I remember Joel Klein, when he was commissioner in New York City, said that he was trying to model his reforms and what you had done in Florida. Maybe you could explain briefly what you tried to do and how you're able to get that through both the legislature and bureaucracy to actually generate results, as Mitch was saying, because those results on test scores, especially for minority students, for example, look really good.

So let's start with one of your signature achievements. And what was it? How you achieved it?

>> Jeb Bush: Well, I'd say just to start with, it wasn't a check the box kind of thing. It was a comprehensive suite of reforms and the success at the beginning allowed for more reforms going forward.

And to this day Florida continues to move in that direction. So we created the first state that graded schools A-F based on learning gains and based on how, how students did to the standard. We eliminated social promotion in third grade and created a pre-K to 3 strategy so that more and more kids were grade level readers by the end of third grade.

We had the largest program for the College Board. We expanded the number of AP classes taken particularly for low income kids, exponentially greater than most states. And now other states have modeled some of their efforts there because it's the best indicator of how you can get lower income kids into college.

We did a ton of stuff and it started with a really cooperative legislature. And know I was praying the rosary when the first test scores came out because the only way for meaningful reform to sustain itself is to have meaningful results that people understand. And we had rising student achievements.

So we went on the NAEP test, the nation's so-called nation's report card. We were 29th out of 31 in 1997 on the fourth grade reading test. And in 2003, I think, 2002 maybe we were fourth. I think, yeah, 4th out of 50 states. Right after No Child Left Behind required every state to take the test.

And low income kids in Florida are in the top three or four every year from there on out. Kids with learning disabilities, top four or five, Hispanic kids, they're just, it's always top ten. So these reforms have helped particularly with lower income and kids of color. And it's thanks to the Florida legislatures after I've been long gone and governor support of this stuff, Florida continues to lead the way.

So I think the lesson is that if you're governor and you have a chance and I know Governor Brown did the same and certainly Mitch did. Seize the moment, fill the space and then make sure that the people that oppose it, maybe in some cases you're asking them to implement it, you've just gotta bang heads.

You can't let people at the local level, we have 67 school districts, they hated these ideas to begin with. You have to just hold them to account and work really, have to be all in over the long haul. You just can't pass a law and say you've done it.

>> Michael J. Boskin: Well, you're raising two really important generic issues. One having long term impact because as a governor you had to deal with all the day to day issues which are voluminous. You had to deal with these natural disasters we spoke about earlier. And you also are trying to institute some longer run reforms.

And so there's also this long standing view, I think it traces to Mr. Justice Brandeis, that the state should be laboratories of democracy. That innovations that work in one state can be emulated by others and things that don't work can be eliminated or avoided by other states. So I think that's an important theme and I think on the education front there have been a lot of efforts.

Governor Brown, maybe we'll turn to you, I know you had some education reforms and then I have another question about dealing with the fiscal volatility California experience. But maybe you could chime in a bit here about what you try to do in education.

>> Jerry Brown: Mike, the very significant was the local funding control formula which eliminated state mandated programs like 40 of them.

I think there was 50, 55, we got that down quite a lot. And that came by the way, from a guy that I first met when I met you, Mike Curse, way back in 1974 and he became the chair chairman of the State Board of Education for all 16 years that I was governor.

So anyway, the local control funding formula gave local discretion and I emphasize the term subsidiarity. The closer to the problem, the best solution will be found. Now that that has demonstrated through research improvement with lower income kids, particularly real improvement.

>> Mitch Daniels: By the way.

>> Jerry Brown: What's that? Subsidiary is a papal term which I used.

I did get it from the Catholic Church, said the family is the first institution, then you get to the state and all that. So anyway, still a good idea. The people who have the biggest stake and the most immediate reach. But I will wanna say two things about this local control funding formula.

Number one, the gap is still rather great. Latinos and Blacks are like 22, 25% on grade level, Whites and Asians, Caucasians and Asians are probably almost 60%. So a gap is still there even though the lower income kids have significantly improved. But as it happens, the more advantaged kids are improving as well at about the same rate, that's the first problem.

Second, that's a more generic thing. Secondly, that the elimination of so called mandates didn't totally survive, because every year the same interest groups wanna get back these programs that fund specific activities. So the original purity, if you will, of subsidiarity is being eroded by the same old interest group.

So it's a bit about whack a mole and it's government is not just mechanics. Government is human beings, and human beings wanna do things the way they wanna do do it. And the more powerful get done what they wanna get done.

>> Michael J. Boskin: I couldn't agree more, from my own personal experience in the federal government, I sometimes said I spent half my day wielding a machete trying to knock down some of this stuff.

It's not an easy thing to do, but they're all the interest groups and they're not going away. Mitch, what about you on education? And then we can turn to some more specific things that you and Jerry were known for.

>> Mitch Daniels: Well, pretty simple in our case. We went to school on Jeb Bush, so to speak.

And when we got our chance, we were in a state heavily dominated until we got there by the same unions that have done so much to damage the public education system in this country over the last half century. But we broke through and over time, first bit by bit, and then in that last two years I talked about, we captured big majorities, in fact a super majority in each house and ran the table.

So by that time we had found ways to do the very same things that came out of the playbook of governors like Governor Brown and Governor Bush. In the last two years we were able to push a little further forward than some had. We passed universal voucher program, took all the wraps off charter schools.

Maybe one of the more interesting things about our system in Indiana, we backed in frankly to a total public school choice. And so now far more students take advantage of the opportunity to move across public school lines actually than go to a charter school or use a voucher at a non government school.

We got there because we took over public funding of education, operational funding at the state level as a means of lowering property taxes, which it did dramatically, and then we put a cap on those. So in our state, unlike most, property taxes only go now to capital projects and I guess maybe transportation and capital projects have to be passed through a referendum.

So in the process of doing that, we took out the last reason that a school could deny a student who would like to transfer in from another public district. And so it had the very effect that it has had elsewhere. And it was predicted for that is greater competition, not only of the public system with its charter and private competitors, but with its own traditional public school competitors.

>> Michael J. Boskin: Governor Brown, you already alluded to the fact that the federal government imposes lots of rules and restrictions and made some remarks about no child left fine. Anybody wanna weigh in any additional issues with the federal government's role in K-12 education and how it helps or hurts or supplements or conflicts with what you're trying to do as governor and.

And with the localities following.

>> Jerry Brown: Well, let me add a point. I started two charter schools in Oakland are still going. The one I'm now currently chairman of the Oakland Military Institute. It's a military framework type of school, 6th grade through 12. I started in 2001, and I still keep it going.

And I can tell you the regulations, the intrusion, we're spending too much money on compliance, not enough on improving teacher quality, skill and performance. And I have to say that I didn't like that. Bush's no Child Left Behind, I didn't like Obama's Race to the Top. I didn't like the every school succeeds because they're too intrusive into the local level.

Even the state government can't really affect what goes on in the classroom. When you shut that door, it's the teacher and the kids. And the most important thing is the quality of that teacher and how you get the best teaching more of the time. So a lot of these rules, the legislation is frustrated, they want to do something, but all they can do is pass a rule.

And I like what Montaigne said about law, if you got to have it, it should be infrequent. And law should be very abstract, not concrete, specific, and very do this precisely, don't do that, because you can't govern from a state capital or from Washington when it comes to a kid learning math or English or science, that's got to be very local, very human.

>> Michael J. Boskin: Yeah, Mitch, you want to weigh in?

>> Mitch Daniels: I'd say that in the ideal situation, whatever money is spent in Washington or appropriated in Washington, there should be freedom for states that wanna try something different to do it with federal money. So if the federal government spends, call it $30 billion on 12 to 15 different early childhood literacy, early childhood programs, why not block grant all of that and then hold the states to account with meaningful outcomes.

The main outcome for that would be are kids, particularly low income kids, are they kindergartner ready? Are they ready to begin the journey of learning? There's there, there's ways to assess this in a non intrusive way. And Florida would do it significantly better than the bureaucratic, mandated, heavily regulated programs that come in that are not the major part of our early childhood literacy efforts.

By the way, the state and local government spend more, but the rules in Washington make it harder to achieve the objective. They, they need to let go and focus on outcomes being the primary driver. You could do the same with title one, you could do the same with the IDEA money, the money that goes for kids with learning disabilities.

States are better positioned to create policies and local school districts or schools are better situated in improving student outcomes, which ultimately is the only thing that matters. But Washington hadn't been much, much giving up power these days over the last generation of time in D.C. and maybe this is the chance to begin to do that.

California would have very different approaches than Florida, I think the Florida approach probably is a better one. But the best way to measure that is by outcomes and let the best ideas work and then those ideas become models for other states and other municipalities to emulate, that's how it should work.

We've lost that laboratory of democracy kind of approach, bottom up approach in our political system, and we need to restore it.

>> Jerry Brown: Mike, let me just inject one point, very hard for the politics to accept diversity, for example. Florida has one approach, California has another. Having those two different approaches coexist becomes difficult.

The ideology becomes strong and uniformity is a real pressure as I've seen it.

>> Michael J. Boskin: Absolutely, the federal government likes to impose it, and I remember many people have complained over the decades, especially about unfunded mandates. Mitch, you wanna weigh in on that and we'll move on to some other.

>> Mitch Daniels: No, I can't say it a whole lot better, the federal distrust of states runs back, I don't know, at least to Wilson, if not before. And there was a reason to distrust states in a long ago racist past and so forth, but not these days, especially not when demonstrably states deliver services more effectively.

That's why those polls you cited are always so lopsided and people expressing greater confidence in government, the closer to home it gets.

>> Michael J. Boskin: We all seem to agree that there's ample opportunity for the incoming administration. Maybe Doge will see this as an important opportunity, they have it at times they think responsibility should be returned to state and local government.

But how that's done, if it's done how it's done, if it's streamlining regulations and rules rather than just deciding they're gonna impose more or shift responsibilities without their cognizant funding, I assume there'll be some sort of necessary.

>> Jeb Bush: Hey, Michael, here's a place to start. It shouldn't take 10 years to get a permit to build a refinery or if we're going to electrify the economy, to be able to have a rare earth refining process or build anything, for crying out loud, to get a bridge built.

I mean, we've so clogged this down and Washington's is the primary reason for this and they ought to let it go. We can build a bridge pretty good in Florida and I know they can do it in California, we don't need all the stupid rules that basically create a series of lawsuits before you can start at enormous cost.

Just look at the semiconductor plant being built in Arizona, it's apparently double the cost than the same plant, actually, it's not the same plant because the technology is higher in Taiwan. I mean, if this is a national priority, maybe we should make it a priority and learn how to build quicker at a lower cost and trust the people ultimately responsible for it to do the job.

>> Mitch Daniels: Michael, let me document what Jeb just said. Years ago, because of an unusual transaction, we were sitting on billions of dollars Indiana, all to be committed to infrastructure, road building, bridge repair, all those sorts of things. It was our money we had secured it through a lease of an existing toll road and as more or less a laboratory test, I said to our folks, I say, go build something.

Most projects, there's a federal share, which then brings the federal rule book into play. I said, just go build something just with our money, don't even tell them we're doing it. I just wanna see how it works, what they built was miles and miles of trails which is supposed to be part of your federal highway expenditure.

And they build them at one third the cost and half the time, if that tells you anything.

>> Jeb Bush: It tells me something.

>> Michael J. Boskin: Yeah, we see now, I think we see now, we've seen in the past, I know that previous governors of California, probably including you, Jerry, have waived some contracting rules and various rules and regulations.

Governor Newsom mentioned yesterday that he was in the process of doing some of that with California's Environmental Quality act and the Coastal Commission. We have to balance the environment and these important issues as well but But I think many people believe the pendulum has swung too far and it's become too ossified and it needs cleaning up for sure.

Governor Brown, you governed California twice, and both times you came in in difficult economic times. And you governed California through some troughs in revenue and some years when revenue grew much more rapidly. How did you deal with this volatility, and how did you deal with the legislature through lean times, when you're gonna have to cut and not expand various things?

 

And maybe, especially something I certainly appreciated you're doing was resisting the temptation to overspend when revenue started flowing in at a high rate. I know the second time around especially, you had a legislature, I think it would be fair to say, was somewhat to your left on fiscal and other issues.

And you had to operate as something of a break on some of their spending desires. So, how did you navigate that, and any lessons for the federal government, which sometimes goes through similar things? And Mitch and Jeb, weigh in about any fiscal ups and downs you guys had to deal with?

>> Jerry Brown: Well, first thing I did was I vetoed the entire budget, which had never been done before. And that sent some shock waves, particularly since there was a rule that said if they don't have the budget, they don't get paid. And that was the big, super motivator to get a real budget.

That's one. Secondly, I would note that between the first and second time I was governor, there are 8,000 more rules. The third thing I'd note is that the budget went up about 9 or 10, times from 22 billion to over 200 billion. So it got a lot. Now, California relies over half the income tax of very wealthy people.

You literally can identify a few thousand people that pay for half the budget. So if they ever move out of California, it's in big trouble. Now, how do we manage all that? Very difficult. You either have too much money or way too little. So how we manage too little, which is easier, you cut.

And I cut a lot of things and I impose pension. I got a pension reform bill that would never happen except for the fiscal crisis. Arnold Schwarzenegger left a $27-billion deficit. Kind of indicate how things got worse, when I left, I left a little one and a half billion dollar budget deficit, and then Arnold left 27.

Anyway, we cut, we use that. We cut our pensions back by a third. And that's, I think that's significant. But I also got voted the people to increase taxes and that gave us some money, but we did cut a lot, and it was real. And the thing that people don't understand is government does a lot of good stuff.

If you wanna cut it, you gotta cut good. And what I like to say is, too many goods make a bad. They're all good, but how many goods can you have? If you look forward, there's unlimited misery and need that government, if you want to, could come in and spend a lot of money on.

So you're always holding back some idea, a proposal to spend on something that is actually okay, but government can't do all that. It's gotta be done in some other way, why? How did I handle that? Well, my own instinct was not to spend a lot. My parents were born, got married in the Depression.

I grew up, born in 1938, it was a lot, World War II, we had rationing. It was a much more limited kind of experience. We didn't have credit cards. My instinct is to be suspicious of spending, and sometimes that's wrong. I admitted some things I should have done.

But in general, you have to have an appetite to curb spending, and that takes a particular kind of sensibility, and it's hard. So other than that, I'd say, California has a very crazy financing system and you get huge deficit. You got to cut, cut, cut, cut, and then pretty soon, four or five years, you have more darn money you know what to do with.

And then you spend it, and then you don't have any more. So we're gonna see that at this round, another couple of years gonna see that very problem writ very large.

>> Mitch Daniels: Michael, far from the first time, I find myself thinking how much America could have used a Democratic president like Jerry Brown, someone from his party, speaking the language he just spoke.

Would have, and still would be enormously valuable to, if we're gonna get some forward motion on these actions. Let me just mention two things at the state level that bear on this, and one of them is suddenly, current. For many, many years, I thought I was the only person around who thought impoundment would be it was a good idea and should be restored to our presidents.

And it's being discussed right now, sometimes as though it's some sort of radical notion. No presidents had this authority until 1974, and the Watergate reforms took it away, but we had it at the state level. But Jeb and Jerry may have, I don't know. In other words, the ability of the governor to withhold spending just because the legislature voted for it didn't mean it had to be spent.

Maybe the job had already been done, there was money left over, maybe it wasn't working, didn't matter. We asserted at least that we had it. It was ambiguous, to be honest, under Indiana law, but we were not challenged. And we cut hundreds of millions of dollars by essentially executive action.

Let me tell you the political dynamic that I saw, it was ideal from a legislator's standpoint. They could raise Cain about what I was doing, and tell the client groups and the interest groups that they shared their distress. Meanwhile, the blame, if there was any, came to me and not to them.

So we used it very aggressively for eight years, and it was a major reason that we made the change we did, from literal bankruptcy to one of the few AAA credit ratings among the 50 states. The second thing, and your question remind me of this, how do you avoid overspending when times are good?

And so I ran the second time, among the other ideas I ran on the idea of an automatic taxpayer refund. Which says simply that, when the state's books were balanced and reserves were beyond a certain point, x percent of those 12, we settled on of next year's budget.

A savings account that everyone could agree was ample. Anything above that had to go back to the taxpayers automatically. I know when I pitched the idea I said, better the money stays in your pocket than burns a hole in the pocket of government, which is what it tends to do.

And that's happened now several times in Indiana. So, Indiana has a balanced budget, has a lot of money in reserve, but not too much, because that Becomes a temptation to legislators and governors alike. One last little detail, I found in government there's a simplicity premium. If you really want something to work, sometimes the second or third best policy answer, if it's simple to implement and for people to understand is better.

So in that case, I told everybody, per capita, the money will mean a little more to the low-income person, that's a good thing. But very, very simple, everybody gets the same refund check, and that's the way it works.

>> Michael J. Boskin: If you wanna quickly comment, we're getting going and I promised I was gonna give you.

>> Jeb Bush: Yeah, I wish I ware in government when Mitch did that, it was a brilliant idea. I would have stole it from him, that's for sure. We created limitations on overall spending by putting caps on non-recurring revenues being spent on recurring obligations. Put it in the constitution, which, as long as there's no cheating, is a huge constraint that deals with the volatility of revenue.

And then we had reserving requirements that were, I think we had 25, when I left, 25% of the general revenue was reserved for a rainy day. And the rainy day happened with the great financial crisis and there was no raising of taxes. And we did all this without an income tax.

And as was the case in Indiana, Florida went from AA to AAA bond rating. I used to go up to New York and say, look, you don't have to have a excuse me for living tax, a tax of everything that walks and breathes to be able to have a revenue stream that is worthy of AAA rating.

And they finally got convinced of it, that a dynamic economy and a growing economy is probably a better way of creating fiscal restraint than otherwise. And I just give credit to a successive governor, Governor Scott, who during his tenure, eight years, cut the debt in half, nominal debt in half.

Florida has the lowest debt per capita, I think, of any state in the country now. I couldn't claim that when I was governor, but you got to give credit where credit's due. It's a smart thing to do cuz the bonding capacity now for the state is ginormous, if it ever is needed to build infrastructure again.

>> Michael J. Boskin: Let's turn to infrastructure real briefly then I wanna save a few minutes at the end for a quick lightning round of questions, which I think everyone will enjoy. In turning to infrastructure, we had this huge infrastructure bill, more or less double the run rate of previous infrastructure bills. $1.2 trillion that's been sent out rather slowly, but a large slug of it of course goes to states, and through states, the local governments and the like. And so how that's spent, if we can do that as wisely as possible, the Trump administration may make some modifications, change some things around.

It came with a lot of regulations and rules about things, about how the money had to be spent. But Mitch, you were lauded, deservedly so, for some of your privatization initiatives. Maybe you could quickly tell us, for a minute or two, just tell us about that and how you got that part.

>> Mitch Daniels: Well, first of all, I think we covered pretty well what they should do about the infrastructure money, which is set the rule book aside and keep track of who does the best job with it. It'd be the best way to encourage its efficient use. Prioritization, generally, pretty simple concept to me.

We were simply looking for the best way, get the job done the best at the lowest price. So often that is through the traditional agencies of government, and where it is, we added money, like child protection. But there's so many things. Back when there was such a thing, I used to talk about the Yellow Pages presumption.

If it's in the yellow pages, somebody's doing it all day, every day to make a living, maybe they can do it better than we can, putting up a building, filling it up with government employees. So we were very selective about it and we weren't ideological, and we always tried to help, by the way, help the incumbent government employees put up a competing bid of their own.

Usually, what they wanted to do is get rid of middle management. And they were right. And some of my best occasions, when we went and gave an award and more money to government employees who had organized and made a winning bid, but the fruit hangs very low. There were so many things that can be done more effectively, at a lower price by the private sector.

And we did it, as I say, selectively and surgically. But where it works, it works very, very well. I hadn't been on the job very, very long when the bright young man who came in to clean up our prison system called me and said, did you know you're paying, I think it was 72 cents a meal for food?

And I said, well, no, is that a lot? He said, well, where I came from it was 39 cents, and I think the food was better. You mind if I compete this out? And we did, he brought it in for less than 39 cents. And the nutritional requirements that went with it meant that people were eating better.

So, I could give you lots of examples, but it's not a matter of ideology, it's purely practical. How can government deliver its services more effectively? And when it does, that leads to that greater public confidence that you mentioned. And if there's anything we could use more of in this country right now, it's greater confidence in our institutions, starting with the public ones.

>> Michael J. Boskin: Well, I'm into that. And let's hope that DOGE and the incoming administration, working with Congress, hopefully there'll be some bipartisan desire to make the federal government more efficient. And let's hope that part of that is trimming some of the rules and requirements that states and localities have to follow to enable them to become more efficient.

I want to do a quick lightning round of a few simple questions. They're sort of yes, no, at most one sentence answer, a sentence answer. I do not mean to insult your intelligence with this, but we're almost out of time. So just some apparently is very popular on social media.

So, a real quick lightning round. What's more important, reducing regulations or improving their implementation?

>> Jeb Bush: Reduce.

>> Jerry Brown: Both.

>> Michael J. Boskin: Both, reducing.

>> Mitch Daniels: Reducing regulation, you can't abuse a regulation that's not on the books anymore.

>> Jeb Bush: Exactly.

>> Michael J. Boskin: Gary, what about you?

>> Jerry Brown: Yeah, both, you got to reduce and you got a lot of regulation of dominant should be gotten rid of, but you can also manage better.

And so, I suppose you'd call that improving. Well, maybe that's an oxymoron for some people.

>> Michael J. Boskin: Who is more influential on state policy because their lobbying power, business groups or public sector unions?

>> Jeb Bush: In Florida, business groups.

>> Mitch Daniels: Depends on the state, but across the country, I would say the unions have had more effect.

>> Jerry Brown: Second time around, unions are much more powerful, particularly public sector, much more powerful. But the private sector can be very powerful too, oil companies, banks, insurance companies, particularly developers, who Who are very adept at influencing government. So it's unions have become much stronger, even though they've become more diminished in the population.

But other interest groups are powerful. Government is very much a part of a vast array of pressures represented by interest groups and they're lobbyists and the money and the campaign contributions. So we're talking billions. A presidential campaign, I remember 1976, Jimmy Carter lived on matching funds. We're talking about a couple of million, now we're talking over 10 billion or something number like that.

So yeah, it's becoming more difficult to manage and I would say that may be one of the reasons why Trump did win. He only won by 1.5%. But there's an effort there that wants bigger changes than we've seen before.

>> Michael J. Boskin: Term limits become common. Some argue that they can get rid of some unocified structures and people being entrenched.

Other that you lose expertise, some institutional memory and ability to shape legislation. Do term limits help or hurt legislative effectiveness, including dealing with the governor?

>> Jeb Bush: If you believe in limited government, term limits are wonderful.

>> Mitch Daniels: I haven't lived with them, so except in my own case, but non legislative term limits.

So I can't say for sure. I will observe that in many places, specifically the US Congress, without term limits, we've had a heck of a lot of turnover and so it may be happening through natural forces.

>> Jerry Brown: I would say you have to make a choice between ignorance and arrogance. If you have strong turmoils, yeah, people don't know what the hell they're doing. If you have unlimited tenure in office, you have people who get very arrogant and act like they own the place.

>> Michael J. Boskin: What's the best description, the better description of the relationship between the federal government and the states?

Partnership or adversarial?

>> Mitch Daniels: Adversarial.

>> Jeb Bush: Yeah, I agree.

>> Jerry Brown: I don't know if it's adversary, it's both. I mean it's adversarial in some ways cuz different entities have different goals. But there's a lot of partnership can be. But it's a pretty complex smothering embrace in many cases.

>> Mitch Daniels: You should have included a third option, Michael, which is dependency.

>> Michael J. Boskin: Absolutely. Well, there's dependency and there's codependency as well. Well, I can't thank Jeb, Jerry and Mitch enough for sharing their wisdom and experience with us today. That's a lot to digest and a lot of useful information and perspective for their successors. And I think for the incoming administration and Congress and Doge in particular, since we spent so much time on prescriptive and overbearing regulation.

That can be done to sort of free up innovation at the state and local level and to make the government more efficient at all three levels. So thank you very much. You can find more about the Tennenbaum Program For Fact-Based Policy at hoover.org where we post informative essays, books and podcasts about important public policy issues.

If there are any topics you wish we had covered and didn't have time to today, please let us know and we'll see if we can deal with them in a future podcast. Once again, Jeb, Jerry, Mitch, thank you so much and take care.

>> Jeb Bush: Thanks Michael.