California Update: (Misguided) Plans, Trains, and Automobiles

>> Jonathan Movroydis: It's Thursday, June 5, 2025, and you are listening to Matters of Policy and Politics, a Hoover Institution podcast devoted to governance and balance of power here in America and around the free world. I am Jonathan Movroydis of 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 youn Mind Web channel. Whelen is joined today by Leo Hanian, Hoover Institution Senior Fellow and Professor of Economics and Director of the Edinger 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 youn Mind. Gentlemen, how are you doing today?

>> Bill Whalen: Good, good.

>> Lee Ohanian: How are you fellows doing?

>> Jonathan Movroydis: Very good.

>> Bill Whalen: It's early June in Northern California. Life is good. It's about 72 degrees here, Lee.

 

It's Santa Barbara weather.

>> Lee Ohanian: Yeah, we're having Bay Area weather. We were overcast about 65 degrees, but I'm not complaining.

>> Jonathan Movroydis: We're having Arizona weather here and it's close to 100 degrees, so.

>> Bill Whalen: Shall we do sports next or get on with the news?

>> Jonathan Movroydis: Yeah. So let's talk about the latest developments in policy and politics in the Golden State.

 

Lee let's start off with your recent column in California on your Mind, which discusses the US. Senate vote to block Governor Newsom's executive order requiring all new vehicles sold in California by 2035 to be zero emission vehicles. You explain why the legislation is misguided in the first place.

 

Quote the key issue with California's aggressive fight against climate change, including the 2035 ZEV mandate, is that it hasn't adequately recognized the trade offs involved with its policy choices. Specifically, any policy choice involves potential costs as well as potential benefits and we obviously need to prioritize those policies for which the expected benefits far outweigh expected costs.

 

But that hasn't always happened with California's climate policies. Ali, what are the expected costs? And second, would California EV sales plateauing? Could the state even have met this mandate?

>> Lee Ohanian: Well, Jonathan, you know this is probably going to be a blessing in disguise for California drivers because demand for EVs may be close to being saturated at this point.

 

Most purchasers of EVs up to this point have been relatively wealthy households. There are households with multiple vehicles, about 90% of those households have a gasoline powered car and it's interesting, in California, the, the average number of miles driven by an EV is only about 28 miles per day.

 

So, so these are, these are vehicles that are bought with substantial tax incentives and tax credits. And they're very much a second car. They're not really a good choice at this point for families that have, that have one, that will have one vehicle who will be using that electric vehicle as a, as a primary car with very long distance driving.

 

So, you know, Jonathan, it really boils down to the issue that there's not just an awful lot of demand out there beyond what's already been purchased. And you see this being discussed by a number of automakers, other experts in the auto industry. And EVs have become very expensive for California because, you know, what we do is we require a certain number of vehicles to be sold in California's EVS.

 

Otherwise we penalize automakers at about $20,000 per vehicle if they don't deliver enough EVS relative to gasoline powered cars. Or they have to buy, they, they have to buy credits from an EV company such as Tesla. But you know, given all this, Jonathan, we've. California has jumped into renewables and reducing carbon emissions, you know, much more so than most other states.

 

And it's very, very expensive. Over 600,000 workers in California are in the clean energy industry. That compares with only about 50,000 workers. So about 1/12 or 1/13 of the number of workers in the oil and gas industry. And despite that lopsided number of workers, only about 28% of California's electricity came from solar and wind power.

 

So you look at that, and it's not a sense of markets being used effectively. Renewables have become very, very expensive. The policies of California have implemented very, very expensive, we have the, I believe the highest gasoline prices in the country at over $5 a gallon is 50% more than the US average.

 

We have the fifth highest natural gas prices. We have the fourth highest electricity prices. And when you think about that, those are very burdensome on, on middle income and low income households. So there's just a lot that we're doing that's not really paying off very much, but that is costing Californians an awful lot.

 

 

>> Bill Whalen: So, Lee, I have two questions for you. First, when the Senate did its vote, Governor Newsom came out very strong against it and said basically they want to turn the clock back on California, back to the 50s, 60s, 70s and the bad old days of bad air in Los Angeles.

 

Interesting message because a lot of Californians don't remember those days. We're talking 50, 60 years ago. So one question, Lee, is really how critical is as to air quality in California but the second is that Newsom at all times equates this mandate to innovation is the word he chooses deliberately.

 

Why do you think he is using the word innovation?

>> Lee Ohanian: Well Bill, he compared it, I believe to the iPhone, Apple's iPhone, just, you know, in, in, you know, just a few miles down the road from where you are. So I think that frames it, you know, very attractively from his purpose to say, well you know, we're doing the Lord's work here.

 

We're, we're innovating. You know the, the obvious, the obvious difference is that the iPhone was developed within the context of for profit markets by a manufacturer who had to figure out what's the demand for the product, what are people willing to pay, how much will it cost them to produce, how will, how much will it cost them to make it better in the future?

 

If you applied the same standards to EVs, we would hardly have any EVs. They're very expensive, they're expensive to repair. They depreciate very, very quickly. There are some EVs that lose half of their value in the first year on average. They lose half of their value within the first three years.

 

And a big, and a big issue with them is that the battery replacements can be very, very expensive. People just don't want them. The, even the profit margins, so we're forcing auto producers to create a certain number of EVs for California and they're not profitable. To put this in context, the aver most Profit margin in US industries is about 34%.

 

The most, the most profitable EV production in the United States is by Tesla at about 7%. So about 1 fifth the profit margin. So there's just nothing from the standpoint of markets that says this is a good thing to be doing. And Bill, you know, it's interesting relative your question about clean air.

 

So back in the 60s and 70s, California just had a horrible smog problem. I remember as a little kid and growing up in LA in the late 60s and. Early 70s, you know, oftentimes we had to go inside and stay there until the stage three smog alert was downgraded to a stage one smog alert.

 

And when you drove, when you drove across the 405 from Los Angeles over into the San Fernando Valley, you couldn't see very far beyond your windshield. And now when I do that driving from ucla, you see the beautiful San Fernando Valley. I mean, we've made enormous progress on smog.

 

But reducing carbon emissions doesn't have any direct benefits for California because these are greenhouse gas emissions, it's CO2, and that's a global phenomenon. California is responsible for less than 1% of global greenhouse gas emissions. So even if we had a magic wand and we could reduce carbon emissions by 50%, it wouldn't even really move the needle.

 

So the Governor's analogy with the iPhone really is, in my opinion, misplaced, placed in. And this kind of goes back to a long standing criticism of governments picking industrial winners. You know, we're just not very good at it. You know, Japan failed at that in the 70s and 80s.

 

You know, we're going to be closing down a 2 plus billion dollar power plant in the Mojave Desert that's only been operating for 11 years. And I think the first three or four of those weren't very effective. That power plant is an enormous solar power plant that was supposed have potentially a 45 year lifespan, is going to effectively being shut down after 11 years, maybe seven good years, because better technologies have emerged.

 

And this is what happens when we allow governments to try to pick industrial winners, losers. There's no reason to believe they're going to be better than the marketplace. And the historical record is that they've been worse than that.

>> Bill Whalen: So you're telling me that the Governor is saying, in essence, I've seen the future and the future is electric vehicles.

 

My question, Lee, is this. There is a country on the other side of the Pacific Rim that is just producing tons and tons of cheap electric vehicles. China. So why isn't Governor Newsom reaching out to China and trying to flood the California market with cheap Chinese cars?

>> Lee Ohanian: My goodness.

 

Yeah, I think, wouldn't that be a, that would be an interesting political situation for him, wouldn't it? Particularly after his visit to China, what was that bill a year or two ago when he claimed that he had these really difficult conversations with Xi and that they were going to be cooperating on carbon emissions and global warming.

 

And, and of course the Chinese record of that was nothing, was nothing at all. Nothing at all like that. And speaking of China, over 50% of their electricity is, is created by burning coal, which is one of the, the most polluting, the most polluting fossil fuels. So I, you know, so I don't think the government, the government really has much, much to stand on here.

 

I mean, we'll see what happens in the, in the courts, but we're nowhere close to being able to get to that 100% ZEV sales target in 10 years. And I mean personally, I don't think we'll get anywhere close to that even if the mandate was restored.

>> Bill Whalen: So Arnold Schwarzenegger had a phrase when he was governor.

 

He'd always talk about things getting, talk about the can getting kicked down the road. That's his catch-all phrase, anytime legislature would just take a pass or delay the inevitable. So do you think they're going to kick down, kick the can down the road here, Lee, and maybe push the mandate back to 2040 or 2045?

 

Because it sure sounds like come 2033 or 2034 the state's not going to be any position to put this into play in 2035.

>> Lee Ohanian: No, no, no, we would need, just to meet the target, I believe for next year we would need to have about one third growth in sales.

 

And I think last year we just had 1% growth. So we're not going to get anywhere close to that. And you know, the governor, the governor, in Arnold's words, kick the can down the road with his housing goals. When he ran for Governor Back in 2018, he made a promise of developing a Marshall Plan for housing and just enormous, an enormous goal of building I believe three, about 500,000 houses per year between 2018 and 2025.

 

And so he pushed the target date back, I think to 2030 and he reduced the number of homes to be built. So there's, he's moving the goalposts as well as kicking the can down the road. So if he does that, and I suspect he will, it won't be anything that he hasn't done before.

 

 

>> Bill Whalen: Now, while we're on the topic of cars and energy, I was just in South Carolina recently where the locals are up in arms, Lee, because the price of gasoline is approaching $3 a gallon. Meanwhile, in California, there's a report out that says the price of gasoline could be $8.5 a come next year.

 

So what are we doing here, Lee?

>> Lee Ohanian: Bill, I think you should have them start paying for your ticket because if they came out to visit you in California, I mean, what would they be saying when they Saw these prices here. Yeah. Bill, there are plans to shut down to two refineries.

 

One is by Valerian, I think. The other one is maybe an old Phillips 66 refinery that could reduce refinery capacity by 20%. California is in a unique position. It's not a particularly good unique position that our fuel blend is different than the rest of the countries. And it's either produced here and if it's not produced here, it comes from either South Korea or New Brunswick, Canada, places that aren't so close it's expensive to bring that fuel here.

 

So if we lost 20% of our refinery capacity, supply would fall substantially potentially. And gasoline is a commodity that consumers aren't very price sensitive to that. So what I mean is that it's not as if they cut their consumption substantially in response to a small increase in the price.

 

Instead, it takes a really big increase in the price to get them to cut their right.

>> Bill Whalen: But it has an ancillary effect in that that's more money out of your pocket. So that's less money you could spend elsewhere in the economy.

>> Lee Ohanian: Yeah, no, that's exactly right.

 

So I mean, I suspect it'll easily go over $7 a gallon if we do lose 20% of, of capacity. Because the, it takes. For every, for every 1% increase in the price of gasoline, consumers, consumers drop their demand by about 1/3 of 1%. So if you do the math, $7 a gallon gas is really pretty.

 

Is pretty, is easy to see.

>> Bill Whalen: Well, I think lawmakers need to be on notice here. Gray Davis got kicked out of office in 2003. Why? Energy crisis in California, rolling blackouts. A state senator was recalled more recently. Why? Because the legislature approved a tax increase in gasoline.

 

People pay attention. Where the precious commodity of gasoline and energy are being messed with.

>> Lee Ohanian: My goodness. Yes. Yeah. Yeah. And Bill, you know, it's interesting. We had not only the US but the world had an energy crisis back before 19 majors in major cities, the horse drawn carriage was the primary mode of transportation.

 

Excuse me. Cities like New York and London were literally being suffocated by horse droppings. Thousands of people were dying every year from manure born bacteria. And in just about a 25 year period, horses were completely replaced. We no longer had the problem of horse manure because the nascent internal combustion engines just come online, and tiny logical innovations made it very, very.

 

Very, very easy to put into a car. And what needs to be acknowledged here, I think by policymakers is that there are trade offs. It's not as if there's a free lunch out there to say, well, you know, we've got this problem with carbon emissions and you know, we're going to do whatever it takes to get rid of those.

 

No, you got to look at the costs and the benefits and we've been subsidizing solar and wind now for the better part of 50 years, going back to the, the energy crises of the early and late 1970s. The advertising campaign was always, gosh, you know what, in another 10 years, solar will be there and we'll be getting so much of our electricity from solar that was repeated every decade, decade after decade after decade.

 

And I think this is another case where governments may have just put all the by putting all of our subsidy eggs into the baskets of solar and wind. I think that was probably a mistake. We might be a lot further ahead with renewables if we'd had more of a level playing field and purs some different alternative energy sources.

 

 

>> Bill Whalen: So the good news for the Godor, if you can call it that, is to the extent that he's hounded by very bad visuals in California right now, I think we'd agree. Lee. The visual that haunts him is what homeless encampments. We're going to get to homelessness in a couple minutes here on this podcast.

 

I would argue that if Gasoline goes over $7, Lee, you're going to see return to that gas station in Menlo park that a few years ago took down the numerical prices and put up instead arb and a leg. And that's going to be your new California meme.

>> Lee Ohanian: Yeah, yeah.

 

I pity, I remember Mr. you remember the old show the A Team. And Mr. T would say, I pity the fool. We're gonna talk about governor gubernatorial issues later, but I pity the governor just gonna have to come in and deal with that.

>> Jonathan Movroydis: Yes, gentlemen, let's talk about the 2026 election politics.

 

This coming January marks the 60th anniversary of the beginning of Ronald Reagan's successful 1966 gubernatorial run. In your column, Bill for California, in your mind this week, you described the lack of Hollywood stars in California politics within the last century. Reagan was part of a long list of celebrities who caught fame in California California politics.

 

There's the actress turned congresswoman Helen Hagen Douglas, who ran unsuccessfully against Richard Nixon for a US Senate seat in 1952. There was the song and dance man George Murphy, who was elected to the US Senate in 1964, serving one term. Don't forget Clint Eastwood, who we're going to talk about later, who served as mayor of Carmel in the 1980s.

 

And then of course the governator action hero Arnold Schwarzenegger, who served two terms as governor between 2003 and 2010 or yesterday. There was a bipartisan gathering of would be gubernatorial candidates that took place in Sacramento. At this forum were former Representative Katie Porter of the Irvine area, Riverside County Sheriff Chad Bianco, former legislative leader Tony Atkins and former Los Angeles Mayor Antonio Viragosa, and current Lieutenant Governor Aleni Kunalakis.

 

Of those two, Bianco and Hilton, conservative commentator Steve Hilton were the only Republicans there. Why the dearth of a listers bill even for the most liberal celebrities? Has California become that unglamorous?

>> Bill Whalen: Well, that's a good question, Jonathan. So keep in mind the primary in California is still two days shy of a year from now.

 

It's first Tuesday in June of 2026, so maybe an a lister jumps in. But I wanted to point out that if you look at Reagan's run and also Schwarzenegger's run for governor, the timing worked out very well for both. Ronald Reagan was past his peak of acting by then.

 

He was doing GE theatre and death rally days and so forth. He was on the downside slop, so Arnold by 2003 was getting along in the tooth for an action hero. His big hits were back in the 90s but still high name recognition. So you have to find somebody who I think Jonathan Lee is not necessarily at the peak of their powers, just willing to kind of walk away.

 

Not too many of those. It might also be a reflection, just that politics is ugly and bruising right now and if you jump in you're going to get attacked thanks to social media. So maybe that kind of explains it as well. Now there is a celebrity who could run for governor.

 

Kamala Harris is at least a political celebrity, if not a Hollywood celebrity, but at least a political one. But you notice Lee and Jonathan that she is not taking part in these candidates forms. There was previous to this event you mentioned in Sacramento which was run by the California Chamber of Commerce.

 

There was a Democratic Party gathering in Los Angeles previous weekend, she did not go in person. She sent in what by the crowd's estimates was a pretty underwhelming video. Just kind of a paint by numbers video, not very passionate, not very exciting, certainly no policy ideas. And so this, this race is kind of waiting for Godot in that regard, it's getting back to Richard Nixon.

 

All roads lead to Nixon. On this podcast, 1962 he runs. He would be the new Nixon in that regard. A former vice president who had lost the previous presidential election having a go at it. But I just, you know, you look at celebrities right now and there's just no A listers out there right now.

 

No perfect fits. The closest thing we have to an A lister who is politically hungry, it would seem, as Matthew McConaughey. All right, all right, all right, but Matthew McConaughey, he wants to run in Texas, not California and Lee, this gets back to your comment about Mr. T and pity the fool.

 

That person's going to come into office in 2027. They're going to have to deal with this mandate we've been talking about. They're going to have to deal with a messy, messy budget, which we will get to I think, in our July podcast. But that is now being talked about as what is called a structural deficit, meaning that the lawmakers have baked in so much money into the, into the, the budget that essentially you're looking at raising taxes or borrowing a ton of money to, to paper year.

 

Add that to the assortment of California headaches, it's not going to be a very fun ride, if you will. So I think for most politicians these days, it's just easier to stay on the sidelines, tweet if you will, bash Donald Trump if you will. But yet another thing to actually want to go to Sacramento and change things.

 

 

>> Lee Ohanian: My goodness, what a thankless job this, this has become. Particularly, you know, with the budget. And as you noted, we have structural deficits now, meaning that, you know, you look out 1, 2, 3 years, it still looks like a budget deficit. And what happened a couple of years ago is that, you know, the governor's office projected revenues that were far too high, I think by about a, somewhere between 160 to 180 billion dollars in revenue over about a four year period.

 

And they, in my opinion, they made a mistake by just simply projecting out from very high capital gains revenues realizations that came in around that time. And, and as we know, when you have high capital gains realizations one year, you tend not to have such high capital realizations the following years.

 

But they projected not only high continuation, high capital gains realizations, but increasing capital gains realization. So I don't think there's really any, you know, empirical basis for that. But that's the, that's the mess we find ourselves in. And we're going to have a mess with energy. We're going to have a mess that continue to mess with housing affordability and with homelessness, there, Bill, is hard for me to look at that job and say, you know, what person in their right mind would want to be trying to do that now?

 

It's interesting, I guess, Bill, this, the six who appeared on the stage, were those the six. Were those the six that are polling the highest right now?

>> Bill Whalen: Yes.

>> Lee Ohanian: Okay, and it's interesting, you said there's no A listers. Katie Porter finished. What? She finished third in the Senate race behind Adam Schiff and Steve Garvey.

 

That doesn't sound very good. You have Tony Atkins, who I think has probably almost no name recognition outside of San Diego. There's Villargosa, although he hasn't been, and he hasn't been on the political stage for a long time. And he ran against, he ran against Susan, what in 22 and really didn't get much traction.

 

 

>> Bill Whalen: You're talking Antoine Virgosa, Lee, you're talking about somebody who at the 2012 convention was desperately trying to angle his way into a treasure, into a transportation secretary job in the Obama administration. That's 13 years ago. So I have a theory that politicians candidates are very much like dairy products.

 

There's a certain expiration date. I don't know if that applies to Antonio or not, but he was a big deal thing. One other thing to point out, by the way, about celebrities running. There's a wonderful book written about Reagan's run for governor. It's called the Right Moment. It's written by Matthew Dallek, who is the son of Robert Dallek, the presidential historian.

 

And it's really a terrific book if you listeners are interested in California politics in this regard. It chronicles how Reagan came into the race, how the state party did not cotton to Reagan at all. They thought that he was an extremist. They just represented the John Birch wing.

 

They had a favorite in George Christopher, who was a former mayor of. Republican mayor of San Francisco. You heard that correctly, folks. Republican mayor of San Francisco. We were talking a long time ago, but Reagan just rolled his way through the primary, won it by a 2:1 margin and then rolled over Pat Brown.

 

It was the right moment because Reagan was talking about society kind of coming apart at the seams, be it campus unrest, be it Vietnam and so forth. And this ties into the recall with Arnold. It was the right moment for Arnold in terms of where California was, but also for Arnold.

 

He only had to run in a 60 day campaign. And I think if you, if you wanted to run Tom Hanks for governor, if you wanted to run some other a lister for governor, you would want to do it in a 60 day campaign. Why? Because the fact is they don't know that much about public policy.

 

The less time they would have to be stretched on the rack and have to explain their positions on things, the worse off for their candidacy. So you just want a two month sprint. So again, but it gets back to this idea, you know, you're going to be the governor of California.

 

Maybe some of these people think they want to be the president or something like that. It's just not a fun job to have right now.

>> Lee Ohanian: No. And, and Bill it's interesting. You saw that lack of knowledge with Steve Garvey when he was running for senator. I mean, he was well spoken, but it just was so obvious that, that he did not have, he did not have a deep understanding of the policy issues.

 

I think he had pretty good instincts for what was wr. He couldn't he couldn't explain anything at a deep level. And Bill when I look at those candidates and you think about Reagan and you think about how charming he could be and you think about him, how engaging he could be he had that, he had that quality just like in my opinion, Bill Clinton has that quality.

 

It's a wonderful quality to have. If you're a politician, you can meet somebody in 15 seconds. Later, the person thinks like, this is my new best friend. It's hard to see that type of charm among the, among those six out there. Katie Porter, Far from it. Steve Hilton, I think has that he's a radio personality, so he has that within, within his skill set.

 

But he's a Republican and he's another guy that I think has pretty good economic instincts. But Bill, you think there's, what do you think the chances are of either Hilton or Bianco appearing on a November, on a November ballot after the after primary?

>> Bill Whalen: It depends. I think first of all, if Kamala is going to run, I talked to smart friends in Sacramento who are convinced she's going to run because why?

 

Because she wants to get the L off her forehead. She is right now a political loser, having lost her last campaign. They think she wants to get a W to erase that. But I don't know. Just you talk about a Pyrrhic victory, though, because you're going to win that campaign but then probably walk away as a poor governor.

 

I mentioned her, though, because it would the easiest strategy for her would be to jump in the race, essentially bigfoot the other Democrats, but then also spend a bunch of money and time really talking up the Republican opponent, which is what Newsom did when he ran for governor.

 

28 his classic, classic campaign tactics in California. So I would argue that with only two Republicans running against a larger field of Democrats, you could get a Republican running for in the November as well. Now, Steve Hilton will tell you that now is the time is the right moment for Republican in California.

 

He has a point in terms of some policy issues, but just the math is just crushing. Our colleague Lan Hee Chen ran for comptroller in 2022 and he pulled off what I call the Chen curve or the Chen line. It's like the Mendoza line in baseball. Hitting 200.

 

Lanhee ran pretty much a flawless campaign. He got endorsed by the Los Angeles Times and he got 44.9% of the vote. He still needed another half a million votes to win. There are just not enough votes out there for Republicans, by the way, one California, I want to add in here before we segue to our next top.

 

When I was in South Carolina, my last night there, I took my sister and brother in law out to dinner and decided it was time to use my California debit card. This I got this from the state I think a year or two ago. This is part of the very bad idea, I think a retrospect, Lee, just handing out money to people.

 

And so this bad boy is supposedly worth 200. So we went out to a nice restaurant, pulled out, said we're going to eat on the state of California tonight. And guess what? It got rejected.

>> Lee Ohanian: Why am I not surprised?

>> Bill Whalen: I don't know if it's a function of using it outside inside the state.

 

But boy, if you want to sum up California's problems in a nutshell, here's $200. By the way, it's not going to work.

>> Jonathan Movroydis: Lee, you recently took part In Santa Barbara's 2025 South County Economic Summit in which you focused on homelessness and housing in California. You proposed three ideas for affordable housing.

 

Number one, reducing building costs, two, facilitating building where land is more affordable and three, leveraging efficiencies of modern technologies and building. Lee are you hopeful that there can be some traction on these and other similar and similar proposals made by others?

>> Lee Ohanian: JONATHAN not particularly because we know what the issues are.

 

It's there to fix. It could be fixed in a nanosecond with a super majority in both the Senate and the Legislative assembly and a governor who could sign off on that immediately. What really has happened in California is where we've really focused our building efforts on again, on what just people don't want and what's expensive.

 

So for example, Scott Wiener, state state legislator, he's perhaps the most, I think by far the most the most devoted to trying to get housing bills passed. And his emphasis, and I think the party's emphasis he' Democrat is to build where land is very, very expensive and to buy high den and to build high density housing that ends up being very, very expensive in terms of construction costs.

 

You take expensive land and expensive building with various types of prevailing wage rules and an awful lot of overhead costs, and pretty soon you've made housing that's supposed to be affordable. Anything but that. So, Senator Wiener. So Senator Weiner, I think, is his efforts are really just the opposite of what my views are.

 

I know developers who tell me that California costs twice or even more than twice as much as other states just for the construction costs. And so when you take that into account, areas such as, well, we're going to build, you know, affordable housing in Santa Monica or Beverly Hills or San Francisco or in Silicon Valley.

 

It's just, it's just simply not possible. Is simply not possible, you end up with housing that can be in excess of a million dollars per apartment unit. So thus anything, anything but affordable. So the simple idea is that you simply can never create affordable housing unless you reduce costs, which means you go to where land is not so nearly as expensive as it is, say in Palo Alto or Santa Monica or San Francisco or Beverly Hills, and you reduce regulation so the building costs aren't so high.

 

You try to use modern efficiencies of manufacturing. We can, we know we can now build quality housing that's built from start to finish in a factory for about a hundred dollars or less a square foot, which is probably a fifth or a sixth of the cost as we're seeing in some affordable housing developments.

 

And if you look at the state, if you look where cities are growing, the fastest growing community in California is a little place called Shafter. And it's not so little. It's growing very, very quickly. It's about, I think, 15 miles outside of Bakersfield. You know, the median home price there is somewhere in the threes.

 

And, you know, so why is that growing? Because it's less expensive. There's no complicated or fancy economics associated with that. But the governor's now in his seventh. He's got one more year to go. He ran in 2018 on tremendously expanding housing and making housing affordable, well, the median single, the median single family home today in California, according to the California Association Realtors, you know, somewhere around $880,000 anywhere near the coast.

 

So, you know, dear, near Stanford, San Francisco, coastal area of Southern California, you know, it's well, well above a million dollars. So, you know, so what we've done is we've just really made California unaffordable for, for most people, we could build homes, I think, for well below $250,000, perhaps close to $200,000.

 

And that would make purchasing home a lot more, a lot more realistic for an enormous number of families. But I just don't see that happening, at least under the current political leadership.

>> Bill Whalen: So, Lee, there was a study put out recently by a Long island based group called Leave the Key.

 

And they looked at census data, they looked at bureau economic analysis data, and here's the conclusion, Lee, this is just going to blow you guys away. They came to the conclusion that would take Cal, it takes the average Californian over 2,639 work days to save for a home deposit.

 

And here's the numbers they're using, Lee, this by the way, is the second worst number. Hawaii is worse, apparently. So there you go. Trouble in paradise. They figured it this way. Residents need 10 years and six months to afford a median home value of $725,000 lease. So we're not even at the $880,000 market, met Golden State average after tax income is $69,140 with monthly expenses as gets cost living in California.

 

He leaves with you with about $1,150 for a home buyer to put down, so.

>> Lee Ohanian: Yeah, yeah, exactly.

>> Jonathan Movroydis: Let me ask you this question though, Lee.

>> Bill Whalen: After World War II, they're very famously was Levittown, Speaking of Long island, what would happen if Mr. Levitt, God rest his soul, came to California in 2026 and wanted to build Levittown in California?

 

 

>> Lee Ohanian: He would probably turn around and go back to Pennsylvania. He would, he would say, hey, let me build where land is not so expensive and I'll put up these cookie cutter beauties and we can save an awful lot of money. And he might stick around for a few months and when he finds out that it'll be perhaps a decade or two for building permits, he will hightail it, he will hightail it away.

 

Bill, we had a, we had an attempt at building a Levittown just outside of Valencia in Southern California, Tejon Ranch, which is several hundred thousand acres. I think, I think it goes back to the time of when Mexico owned that, owned that area and sold it. At some point Cajon Ranch was going to be home to a 60,000 person community.

 

So a small city bigger than the town, you know, not, not gargantuan, but 60,000 people, 20,000 homes. Plans were submitted in 1994. The first homes went on sale in 2021. What is that, 27 years after the plans were first submitted. And because time is money, the, those homes now cost as much as I believe $2.8 million.

 

So you know, we're just, we're just shooting ourselves in the foot here. This could be stopped by the governor and the state legislators immediately. There was just one environmental lawsuit after another. The governor has railed about CEQA. He, he talks glowingly about changes they made to ceqa. This is all, these are all changes that nibble around the edges.

 

CEQA is still, is weaponized to block and delay development, and it is California to lose on that. And I wish, I wish, I wish reporters like Ashley Zavala, who I think is absolutely wonderful, she's up In Sacramento. She's not necessarily the friend of the governor. I hope she gets interested in housing and I hope she asks him, well, why haven't you done, have, why haven't you done more to change CEQA builders say that's what's needed to reduce building costs, so you're in your seventh year, why hasn't it happened yet?

 

I'd love for, I'd love her, another reporter asking that question.

>> Bill Whalen: Ronald Reagan, speaking of Reagan, he brought CEQA into the world. Not, not one of the better Reagan legacy items. And CEQA is that rock in which every governor tends to, to land his ship. But CEQA has to do with construction.

 

The issue here to me is also affordability. And I think the state needs to take a very large look at a lot of sort of competing fact factors here. Where in California can you build a house that people can afford to buy? And let's say $800,000 meant just a random number and if you're going to buy a home for $800,000, where will it be?

 

What kind of job are you going to be able to get? And where are you going to do your job? Can you work at home, maybe that $800,000 job? Can you be close to a large city in a business center at $800,000? Which gets into infrastructure issues, which takes us back to the price of gasoline and so forth.

 

So it's a Gordian knot.

>> Lee Ohanian: It is a Gordy knot, and it's unfortunate that California, you know, so many years ago when we talked about high speed rail and that's another conversation for maybe we'll have in July given what's just happened with the DOT telling California they're, they're planning on rescinding federal funding for California high speed rail.

 

That really should have been prioritized to bring people from the Central Valley, places like Stockton for example, to Silicon Valley, the Bay Area or from the Inland Empire to areas with high paying jobs such as Los Angeles. That just made so much more sense than to say, well, we've got to connect Los Angeles and San Francisco.

 

We didn't need to, there was, there's very affordable flights, no one really wants to know. You know, we don't see people really wanted to take that, take a train from there to, to Los Angeles. And who's not to say that they, that the state wouldn't have messed that up as much as they messed up the existing plans.

 

But, but you're absolutely right. The high paying jobs are in areas where housing is. Extremely expensive and it made an awful lot of sense to be able to bring people from more affordable areas to locations that have the jobs they want. But that's not what happened.

>> Bill Whalen: I wrote not too long ago about high speed rail and I always feel guilty when I do, Lee, because I feel like I could just write about it six months later and just change a few things around and finish that column about two minutes because it's the same old story, but it's interesting.

 

So you mentioned the Trump administration was to pull away, I think, $4 billion in funding for high speed rail. The High Speed Rail Authority quickly said, well, you know, we're in a good place actually, and if we keep going forward, we're going to reach our goal of $20 billion to keep this going.

 

But what they don't mention is, Lee, there is a $100 billion gap and the number keeps growing. So there's just no. And if you go and look at the website for high speed rail in California, there is no promise date for when the thing ever reaches Los Angeles and San Francisco.

 

So it's, it's a folly, plain and simple.

>> Lee Ohanian: No, no, no, yeah, it's absolutely a folly. And Bill, is interesting. I don't know how it ever received the latest funding which was done from the Biden administration because to be competitive and to qualify for that type of federal funding, you need to demonstrate an established source of, of, of remaining funds to cover the costs.

 

And California simply doesn't, doesn't have that. We now are, we now are in the process of building 170 mile, 170 mile system from Bakersfield to Merced. That looks like it's going to cost, you know, years ago was going to cost I think 25 or 28 billion. Then it went up to 33 billion.

 

Now it looks like it could be as much as 38 billion. It was supposed to be ready in 2030. Now it's looking more like 2035. I mean, again, when you talk about kicking, kicking the can down the road, this is a great example of that. And you know, Bill, you know, we, we were living in California when that vote came up the, for the, the ballot initiative that was going to, in which we, you know, we, in which California voters approved nearly $10 billion of seed money.

 

I'd love to go back in time with, you know, Michael J. Fox and his DeLorean and, and tell people, hey, guess what? You're going to have maybe by 2035, maybe high speed rail. We don't know how fast it's going to be, but it'll operate between Bakersfield, Merced and It'll cost about $38 billion.

 

What do you think about that?

>> Bill Whalen: Yeah, it was a down payment of about $10 billion, 38 to $40. About $40 billion is a price tag and it was going to be done by 2020.

>> Jonathan Movroydis: Moving on, a gentleman on the homelessness issue, Governor Newsom's new mantra is, quote, no more excuses.

 

In May he announced a new ordinance calling for cities without delay. Newsom says in part that local authority should be not be duly unlimited from clearing encampments and such policy should prioritize shelter and services. Bill, what do you make of the governor's tough stance and will the mayors listen?

 

 

>> Bill Whalen: I think it's something that plays very well outside of California but does not play very well inside California, at least with those handful of mayors who really hate this kind of messaging. The governor seems to have an iditarod approach to this that essentially I will, you know, whip the, whip the sled dogs ahead of me, tell them mush and they will, they'll move forward.

 

Mayors don't operate that way. Mayors have sensitive operations in their cities. It's just Newsom's just not really approaching this the right way. He needs to be more collaborative with them rather than showing them up. But look, he's simply playing for the cameras and this gets in a lot of 2028 speculation.

 

I suppose too. Sometimes Gavin sounds very progressive, sometimes he sounds not progressive and tough mainly. And Jonathan, this gives him a great example to sound tough. You know, I'm fed up. I'm mad as hell, I'm not gonna take it anymore. No more excuses. Do something. It also is a good way to deflect.

 

You know, it's a theory that sometimes the best, the best defense is good offense. So go on the offensive and tell the mayors to get their act together. And by the way, cover up that your own record as governor on homelessness is pretty awful. And by the way, as mayor of San Francisco, you promise to end it by 2010.

 

 

>> Lee Ohanian: The, I mean the governor's been taking a lot of heat for the homeless problem and, and it's, it's well deserved back. I don't know what was it, Bill, 20, 20 years ago when he was mayor of San Francisco, he promised to end homelessness in San Francisco by, What was it, 2010?

 

 

>> Bill Whalen: By the end of the decade, yeah.

>> Lee Ohanian: Yeah, and then I believe his state of the union in 2020 was devoted entirely.

>> Bill Whalen: To the topic Yep.

>> Lee Ohanian: Yeah. The headline of that was, was homelessness. And homelessness has increased.

>> Bill Whalen: And he periodically goes out and he puts on a t-shirt, a ball cap and jeans, and he helps clear out an encampment under the freeway.

 

So he shows he cares. But the problem doesn't change. It gets back to, I mentioned earlier, this is the ugly California meme that's going to follow him wherever he runs for president. This is what.

>> Lee Ohanian: Yeah, and yes, I think he's trying to offload it onto others, but at the end of the day, homelessness is up 60% since 2015.

 

The legislative, the LAO, the legislative analyst office has looked at hospital admissions of those who are homeless and counts somewhere between 300 to 400,000 unique homeless people over the course of the year. So the 187,000 count we currently have, that comes from just a single night count. So it may be twice as high as that.

 

There was the $24 billion in state funding that, that the state auditor was very critical about. They said there's a number of programs we can't evaluate because the, you know, the state, the state lacks information on costs and outcomes. It hasn't tracked gathering information or evaluated the efforts to prevent or end homelessness.

 

It hasn't aligned its action plan with this goal to collect information, ensure accountability. It was, it was just an overwhelmingly critical report. And when that happened last year, when that, when that report was was issued last year, the governor immediately blamed local, local government. He just said, look, you know, it's not, it's not our fault.

 

It's the fault of counties and cities, you know, but at the end of the day, the buck has got to stop with, as Harry Truman said, the buck stops here. But, you know, Gavin doesn't want the buck to stop there. And it's, it's obvious. Why. Why, why? Because it's just, it's an awful failure.

 

And he's the governor and it really goes to, I think, just a failed vision of what it takes to deal with homelessness. For a long time, the state was implicitly okay with drug abuse and drug use on the streets. So we know that, you know, certain blocks of San Francisco were taken over.

 

And now the governor's saying, well, you know, clear all those out. You know, we're going to, you know, turn the, turn the ship around. And the governor was kind of all about housing first, which said, hey, you know what, build a million dollar apartment unit and, and put this person who has horrible substance abuse issues or terrible mental health issues, put them into that apartment, and then everything will be okay.

 

Well, it didn't work out that way. The state was very slow to recognize just the the very significant numbers of homeless, particularly homeless men. And, you know, the mobile per the mobile homeless person in California is a single male over 45, over 50. And they have severe mental health issues and on average, severe mental health issues and, or substance abuse issues.

 

So that's really what we need to be dealing with. And, and it's, you know, it's difficult for a local politician to be told by the governor, hey, there are these people that are homeless in your city. We're gonna write you a check. It's not gonna Going to be enough to cover everything you need to do, but, but take care of it.

 

It's, well, I don't know, why do you call these people ours? Just because they're sitting here in Long beach or, or Santa, or Santa Ana or, or Orange, you know, why is, why is this our problem? Why can't you come here and we'll figure out how to deal with it?

 

So, Bill, as you mentioned, there's not a sense of a collaboration here. And I kind of have the feeling that the governor, long ago, several years ago, figured this, we're not going to win on this. So I think I'll try to do some other things that maybe will make me politically popular and I'll try to deflect off this off to others.

 

 

>> Bill Whalen: Yeah, I'm starting to think that the easiest job in California 2026 will be debate moderator when the gubernatorial candidates get together. Because every question, Lee will be simply, what are you going to do about. So on this podcast, what are you going to do about homelessness? What are you going to do about the budget?

 

What are you going to do about the ZEV mandate?

>> Lee Ohanian: There's. Yeah, I mean, there's just, there's a never ending laundry list there. They'll have to have a lot of debates because they'll only be able to do a small fraction of them on any one debate. And it'll be like, you know, debate 18.

 

Well, here's the issues we're talking about today here on debate 18.

>> Bill Whalen: But it will be interestingly to see if Kamala does not run, if they go after Newsom at all, if they try to throw him under the bus on a particular topic.

>> Lee Ohanian: Yeah, I just, you know, I wonder, Bill, how much that will do for her.

 

I mean, it's obvious. I, I mean, to me, I think it's obvious she would win the, win the race. But is that really a win for her in California? I mean, she would be overwhelmed by the policy, by the policy issues. I can't imagine her being a successful governor in terms of dealing with the problems we're talking about now because they're going to be that much worse when she would take office.

 

So do you really think it's about, it's about, it's about getting a w.

>> Bill Whalen: I think so. It's, I mean, look, Nix, if Nixon had not run for president 1968, his political career would have been largely defined by that last gubernatorial race in California. We'll have Nixon to kick around.

 

And right now her political career is defined by what? Not, not being the historic vice president she was by running a terrible campaign and losing to Donald J. Trump. So I imagine that maybe I don't know about her worldview by mentioning people around her thinking, you know, she really needs to rehabilitate her image by showing that she can win a race.

 

But again, it's classic period victory. You win the battle, but you're gonna lose the war, I think in terms of having to run California.

>> Jonathan Movroydis: Gentlemen, moving back to our A list conversation, in particular, Clint Eastwood, who I said I'd conclude the show with his birthday just passed last Saturday on May 31st.

 

He is 95 years old. So happy birthday, Clint Eastwood. We also have another birthday coming up. Thomas Sowell will also be 95 years old on June 30th. Gentlemen, would you care to reflect on the impact of both of these California giants on America and the Golden State over the past century or nearly a century?

 

 

>> Bill Whalen: Lee, why don't you take Tom Sowell? Because fellow economist and I believe he also has UCLA DNA, does he not?

>> Lee Ohanian: Yeah, Tom was on the UCLA economics faculty, I mean, long before I was there. But you know, he's a, he's a great, pure economist. The person who was department chair at the time that Tom left for Hoover, he and I, his name was Harold Demset.

 

And he passed away. But when I first went to UCLA a number of years ago, he was still quite active in the department. We would, you know, we would talk a lot. And he told me, you know, one day Hoover was looking for somebody and they called me up and I told Tom, you know, you'd be perfect for this.

 

You'd be a great fit for them. You don't like teaching these undergraduates that aren't really into economics. You hate faculty meetings. So this would be a great, this would be a great job for you. And then, and then Tom went up to, went up to Hoover and Bill, if I can add, I do have one Clint Eastwood story.

 

Back in the day between college years during the summer, I worked in Carmel, just a few doors down from the restaurant he owned, which was the Hogs Breath in. And, and, and so I would sometimes go there for a drink at the, you know, late at night. And Carmel is a, Carmel is a little town that pretty much roll, you know, rolls up the sidewalks around 8:30 or 9.

 

So you'd be around 9:30 or 10 and we'd be having a drink outside at the Hogs Breath and had this huge fireplace. Everyone would gather around because even in the summertime, a Carmel night is Going to be under 60 degrees. And, and he would come, he would come and join us for a drink every once in a while and, and you know, people often talk about Nicholson.

 

No matter, no matter what role Jack Nicholson is in, he's still Jack Nicholson. And it's not that I got to know Clint Eastwood particularly well, but he was a very, he was a very, he was a man of few words. And what I came to know is whatever role Clint Eastwood played, he was, he was still being Clint Eastwood.

 

 

>> Bill Whalen: When I worked in the governor's office in the 1990s, a Republican governor, we had two people who were sort of dedicated lines to celebrities and one was a, an assistant to the chief of staff who was Arnold's go to person. If Arnold Schwarzenegger had a question, had a needed concern, he would call this guy and the guy would pick up.

 

It's like being a 10 million mile member of an airline. And so, you know, Mr. Rohanian, thanks for calling. So that was Arnold, but the other one was Clint Eastwood because he was the mayor of Carmel at the time and he had all kinds of environmental concerns and usually Clint was not in a good mood when he called about something.

 

And so, it was very funny for this fellow, he was the deputy cabinet secretary. It began as the most wonderful thing. Boy, I get to talk to Clint Eastwood. He's in a bad mood. But so Clint gets back to the theory of. Or mysterious wood I should say gets back to our theory about kind of peak in politics because his peak would have been in the 1990s when he ran for mayor of Carmel by the sea.

 

And the right fit for him would have been 1998 in that Governor's race. But we will never know. But interesting guy and the world is politics. Always gifted by his line of dirty Harriet Ronald Reagan stole, which it's course, go ahead, make my day.

>> Lee Ohanian: He was very popular as Carmel mayor because I remember this may have only happened once, but there was a big dispute about a piece of land.

 

On the one hand, many wanted to preserve it as green space. And you know, Carmel is just, you know, it's a jewel and there were developers who wanted to, to create some stuff on there. And so Clint just stepped in and wrote a check and purchased it from the developers and kept his green belt.

 

And everybody was happy, developers were happy, the townspeople were happy. He was in a financial position to be able to do that. But yeah, it would have been interesting to see if Clint as, as governor, particularly compared to some of those in the, in the, in the race today.

 

 

>> Bill Whalen: Well, he could have run if he'd won in 1988. Then maybe there's no recall with Arnold. Who knows?

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

>> Lee Ohanian: Happy summer.

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

 

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

 

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

 

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

>> Speaker 4: This podcast is a production of the Hoover Institution, where we generate and promote ideas advancing freedom. For more information about our work, to hear more of our podcasts, or to view our video content, please visit hoover.org.