CA Governor Candidate Steve Hilton on Why California is Destroying Itself & How a Republican Can Win

0:00 All right, everybody.

0:00 Welcome back to the All-In Interview Show.

0:03 We're very lucky today to have a candidate for the governor

0:08 of California who is extremely unique in a number of ways.

0:11 First of all, he's a Republican.

0:13 And second, he's a Brit.

0:16 Welcome to the program, Steve Hilton.

0:19 You've decided to increase the degree of difficulty in two ways,

0:24 but you're polling fantastic.

0:26 You've got five or six people in the polls.

0:28 So, he's leading the field.

0:30 You're uh leading the field.

0:31 Obviously, it's going to get narrowed a bit when

0:33 the Democrats shiv a couple more people and get them out

0:37 of the race and then pick their eventual winner in their cobble

0:40 um whenever that happens when Nancy Pelosi picks who's running.

0:43 But, uh Steve, maybe you could start by Sorry guys, I got jokes.

0:49 But, Steve, maybe you could introduce yourself

0:51 a bit and tell us why you're running.

0:53 Well, hang on.

0:53 Can I just say just after that great intro where you

0:55 just tried to kill my chances in just a couple of words.

0:58 Thanks a lot, Jason.

0:59 Really appreciate it.

1:01 Let me actually tee this up.

1:02 I've known Steve since 2012 2013 when he

1:05 and his wife Rachel Wetstone moved to Silicon Valley.

1:09 Rachel worked at Facebook initially and then she worked with you Jason

1:12 at Uber and then has had a great run and then Steve similarly.

1:15 And you said it in a funny way, but ultimately this is an incredible land

1:20 of immigrants and Steve has a really compelling story.

1:23 So before we jump into the questions, I know your background, Steve,

1:27 but I do think it's important go back to your parents,

1:32 your mom, how you grew up,

1:35 and just set the stage for how you made it out from the way you started

1:40 because I think that's important and then how

1:42 you got to the United States and why.

1:45 Thank you.

1:45 Thank you.

1:45 I appreciate that.

1:46 And you're right.

1:46 We've known each other a long time now.

1:48 And it's a great joy to be here.

1:50 By the way, just want to say it's a great joy to be

1:52 on a show where I don't have to wear the the suit and shirt.

1:55 And you know, that's one of the one of the things

1:57 about running for governor that um I'm I'm loving most of it,

2:01 but dressing up is not the favorite part for me.

2:04 So, it's great to be with you.

2:05 I thought for this show, you know, we got to get it right.

2:08 I think that the back the more I think about my background,

2:11 the more I think it is really important um in in terms

2:15 of how I see things and what I want to get done.

2:17 Um my parents are Hungarian.

2:19 They were refugees from communism and I grew

2:22 up in in England in a town called Brighton

2:24 on the south coast and you know we just had

2:26 a regular workingass um immigrant aspirational family story I guess.

2:33 You know it was my my parents actually split up when I was young.

2:36 My stepfather's also a Hungarian.

2:38 He had an amazing story.

2:39 He was um a refugee as well, but literally ran across the border.

2:43 He grew up in a small village on the west side of Hungary.

2:46 And in 1956 when you had the Soviet invasion, he tells this amazing story.

2:50 They heard on the radio, "The Russians are coming." And he

2:53 and his brother and some friends from his school,

2:55 he was 14 years old, like one year younger than my youngest son right now.

2:59 Um and they just ran.

3:01 They literally ran for they said, "Right,

3:03 the we want our freedom." and they ran to the border,

3:06 barbed wire fences, minefields got shot at by the guards.

3:09 All that half of them were killed and he ended up

3:12 in a refugee camp in Austria and from then to England.

3:15 So all of that I guess just gives you that sense

3:18 of real appreciation for actual for freedom for freedom and opportunity.

3:23 And I grew up in England, worked very hard, ended up at Oxford University,

3:27 but my first job was project manager for a construction company.

3:32 I just wanted to earn money.

3:34 I just wanted to, you know, get out.

3:36 I think that's exactly the right phrase

3:38 that you used and um that's been the story.

3:42 You know, after Oxford,

3:43 I went to work for a little bit of the Conservative Party in England.

3:46 Then I worked all I worked for an big ad agency, worked all around the world,

3:51 started my own business,

3:53 couple of um offshoots of that, including a couple of restaurants.

3:56 then went back into politics when my friend David Cameron,

3:59 who I'd met many years before,

4:01 um had gone into politics, got elected to parliament.

4:05 I helped run his campaign for the leadership of the British Conservative Party,

4:09 won that election and then wor with him to get

4:12 the Conservatives elected when he became prime minister in 2010.

4:16 Uh joined him in 10 Downing Street.

4:18 I was senior adviser to the prime minister.

4:20 Most of my job was really focused on trying to implement our uh reform program.

4:25 And then in 2012, that's when we met.

4:27 We moved here because Rachel, actually before Facebook, she was at Google.

4:30 Um, and she had this big global job at Google.

4:33 She was running um comms and public policy for Google worldwide.

4:36 I had my job in number 10.

4:37 It was actually when our second son was born.

4:40 Um, it just there was a lot, you know,

4:42 the travel for her and the time difference.

4:44 So that's why we moved here.

4:46 And I don't know, should I stop there or do you want me to keep

4:49 Well, you're also notably you became naturalized.

4:51 You're a citizen of the United States now.

4:53 So you have dual citizenship.

4:54 less people are confused by the accent.

4:57 You're running for governor and you're a citizen of

4:59 Let's talk about your political setup.

5:02 So, being a child of Hungarian immigrants raising communism,

5:06 you're going to hear a certain version of what the role of the state

5:11 is versus what the role of the family or the individual is.

5:14 Then, growing up in the UK,

5:16 I'm sure your attitudes either get cemented or change.

5:21 Give us the setup.

5:22 What is the political evolution of Steve Hilton?

5:24 what did he believe and then what does

5:26 he believe now and what has shaped these beliefs.

5:29 It's really I think it goes back to just around the when I first

5:34 really started thinking about it all it was just as Margaret Thatcher was coming

5:39 to power and you'd had the 70s in England were a disaster and a decade

5:45 that was just the the economy was

5:48 completely stagnant and slurotic unions ran everything.

5:52 Um there was this period called the winter of discontent in 1979

5:57 when you had massive strikes um famously you know the dead

6:02 went unburied and trash was piled up in the street just

6:05 real collapse of everything and that's what thatcher came in to fix

6:11 and I really did identify with that as well

6:13 as with the very clear stand against communism and so really she was

6:19 funny enough when I was thinking about the the video that I

6:22 made to to launch my campaign about a year ago now.

6:26 We ended up putting that in there and I thought,

6:28 well, actually that was the thing that got me going.

6:30 I was totally inspired by her, but also the focus

6:33 that she had on business and enterprise and hard work.

6:38 And remember my stepfather, I mean, they weren't at all political, by the way.

6:42 It wasn't like some household where we talked about politics.

6:44 It really wasn't.

6:45 But he had this thing that stuck in my mind when

6:48 he talked about the like in in England you've got the Conservative

6:51 Party equivalent of the Republicans and for the Democrats it's

6:54 the Labor Party and I remember he just used to say Mrs.

6:59 Thatcher's for the workers and labor are

7:02 for the layabouts and I just this phrase stuck

7:05 in my mind about the importance of work

7:08 and hustle and I think about that all the time.

7:11 Where do you think California is if you contrast?

7:14 Well, this is the this is the point I was

7:16 just about to get to is we really are there.

7:18 There are so many things I see in California

7:21 today that are exactly like the UK in the 70s.

7:26 You've got the massive dominance of the unions in policym.

7:31 You've got a slurotic economy.

7:33 You've got massively high taxation.

7:35 I mean it was higher then the at one point I think the top

7:38 rate when you add in the wealth taxes in the UK was literally 98%.

7:43 Um but you had that confiscatory taxation and top rate of 60% and so on.

7:48 So very very similar and actually funny enough um someone Mike Moritz

7:53 actually sent me a report that um someone had done about the UK

7:58 today and and again there's just these eerie parallels with just how

8:03 how impossible it is to do anything in the UK to build anything.

8:09 the overregulation.

8:10 When I read this report, it just is exactly like California today.

8:14 By the way, one thing, Jason, just to be clear,

8:16 I am a proud American now, but I'm not I actually renounced my UK citizenship.

8:22 I did that because

8:23 I just wanted to be clear that I'm just to borrow the title of the show,

8:27 you be all in.

8:28 All in.

8:28 Literally, I re I think it's really important everyone knows that and I am.

8:32 And you have some to get into some maybe some policy.

8:34 Thanks for the background there.

8:36 You have some unique uh policy positions.

8:39 Taxes, I think, is the most unique and dare I say pretty populist.

8:44 You want to have no state tax in California for people with under $100,000

8:50 in income and then a flat tax for everybody over 100K of but 7.5%.

8:57 How is that possible?

8:59 And is that something you've studied?

9:02 And where did this come from?

9:03 the tax plan that um that I put out there,

9:07 that was the first day of my campaign.

9:08 I think of it as proworker and prog growth.

9:10 And I think we need both of those things because if

9:13 you look at what's going on in California today, just big picture.

9:17 Obviously, you can look at the data that's a real economic disaster.

9:21 I'm not sure people appreciate just how bad things are because hiding

9:24 behind that data point of having the fourth largest economy in the world,

9:28 which is true, and obviously I'm proud of that.

9:30 I want California to be big and successful and growing.

9:34 But that fourth biggest economy data point underneath

9:38 that you've got this with the state with the highest

9:40 unemployment rate in the country and the highest

9:43 poverty rate in the country tied with Louisiana.

9:46 There's a United Way report just the other about about a year ago.

9:50 They do it every two years.

9:51 sort of an assessment of of of of living conditions in California.

9:56 And they found that over a third

9:57 of Californians cannot afford to meet basic needs.

10:01 And so the starting point for my tax plan is what

10:04 can we do quickly to help people who are really struggling.

10:08 Um if you think about it, the working poor who aren't particularly um

10:13 being taken care of by the welfare system.

10:15 They're working incredibly hard,

10:17 but they're they're being squeezed by all these costs.

10:20 We have the highest gas prices in the country

10:23 as you know the highest electric bills everywhere except for Hawaii.

10:27 Um housing costs the highest in the country

10:31 insurance all these costs are so high.

10:32 So what can you do to help working people quickly

10:36 and so the starting point was and what's affordable the $100,000 mark.

10:42 I remember when when we I I was just playing around with numbers

10:44 actually I did it with um some economists from the Hoover Institution where I

10:48 was a fellow the first couple of years that we moved to I

10:50 taught at Stanford um including in the public

10:54 policy department also the D school

10:55 at Stanford but I was also a fellow at the at Hoover and so

10:58 we did the math on the tax plan there just just about a year

11:01 ago and so the that first part first 100 grand taxfree actually in many

11:07 counties in California today the def

11:10 the official definition for low income is 100,000.

11:14 Um, which so that number may sound very

11:16 high to people in other parts of the country.

11:18 It's actually the definition in in a lot of counties of low income.

11:21 So you've got people earning 70 grand, 80 grand, 90 grand in California.

11:26 They are paying 9.3% state income tax.

11:29 That rate is higher than the top rate in most states in America.

11:34 So to me that's ridiculous when you've also got all

11:37 these other taxes that those exact people are paying sales tax,

11:41 property tax, gas tax, all of those are the highest in the country.

11:45 So cutting taxes this significantly means you have to then also cut spending.

11:52 Yes.

11:52 But can I just do the other part of it?

11:54 I just did the other part which is the 7.5% flat tax.

11:58 I just thought, you know,

11:59 when you look at the the the the facts about economic performance,

12:04 the fact that, you know, for example,

12:05 Chief Executive Magazine ranks us and has done for the last

12:08 10 years or so the 50th out of 50 for business climate.

12:12 A big driver of that is tax.

12:13 And I'm sure we'll get into the the insane

12:16 proposed billionaires tax and you know,

12:18 all these things that are driving wealth creation out

12:20 of our state and business investment out of our state.

12:23 So it's not enough just to take care of or give some

12:26 relief to people who are on the lower end of the scale.

12:29 You've got to actually have a pro-investment, progrowth tax framework.

12:33 And so apart from anything else, the complexity is ridiculous of our tax system.

12:37 These endless different rates is ridiculously complicated.

12:41 Um and that itself is a cost.

12:43 The bureaucracy and hassle associated with that.

12:45 That's why I think a flat tax makes sense.

12:47 Remember this is in you know in the context of federal taxes,

12:51 all these other taxes.

12:52 It's not the only component, but the cost is the to get to that cost,

12:57 you've got to reduce spending exactly as you say.

13:00 And basically the the the cost of that in total

13:03 is about an 18.5% reduction in revenue,

13:06 which takes us back it takes us down about 60 billion,

13:10 something like that, which is not even going back

13:12 to what the budget was just before the pandemic.

13:15 They've actually d if you look at the budget of the state of California,

13:18 it's nearly doubled in the last 10 years.

13:21 is in the last 5 years it's gone up something like 75%.

13:24 And so this is just bringing the budget back to achieve that entire tax

13:29 cut would bring the budget back just

13:31 to where it was roughly before the pandemic.

13:33 Let me just summarize.

13:34 So if you make between 0 and $100,000 a year

13:38 as a California resident under your plan, no tax, no state income tax.

13:43 No state income tax.

13:44 If you make $100,000 in a dollar and above, you pay 7.5% flat tax.

13:53 Yes, that's the concept.

13:55 Okay.

13:55 How many Californians does that impact?

13:59 So, what percentage of the population now get that affordance if you were to

14:04 million the tax numbers usually only households and so it's

14:07 about 7 million households would benefit from from the under 100,000.

14:13 Do you know how many that is as a percentage?

14:15 Well, working house, we got 40 million people.

14:16 I think that's about um probably just over a third, something like that.

14:20 Okay.

14:20 So, a third of homes now essentially go to zero tax.

14:24 State income tax.

14:25 Yeah, there's all these other taxes that now the push back would be if we then

14:30 take it dollar for dollar from the operating budget, programs will suffer.

14:35 And to to your point,

14:36 your comment is I'm putting words in your mouth, but you filled them in.

14:41 Well, not really because we're just going to go back to 2019

14:44 2020 budgets and the difference was we spent a dollar in 2020,

14:48 we now spend $2 and nothing has changed.

14:50 So, yeah, go from $2 back to $150 and everything should be fine is your point.

14:55 Yes.

14:55 And I'd actually go further than that.

14:57 So, first of all, what we've seen

14:58 happen to the budget is basically the expansion

15:02 that we saw in in the in the pandemic

15:05 and afterwards is gone baked into the baseline,

15:07 which is totally unsustainable.

15:09 And so we got to get back to even even without tax cuts,

15:12 I would argue you've got to get back

15:13 to a more reasonable growth in spending because we go bankrupt.

15:17 Um, as we're seeing with these deficits that that we're getting even when

15:20 in times when we're not in recession and taking money out of the reserves,

15:23 out of the rainy day fund to plug the gaps,

15:26 which is what they're doing, totally irresponsible fiscally.

15:28 But actually, it's more than that.

15:30 Even if you just if if you don't change anything in the composition

15:34 of the spending and just get back to where we were,

15:37 that gives you scope for a major reduction in tax.

15:40 But the other part of it is what we're

15:42 discovering in terms of where the money is actually going.

15:47 And so obviously the whole fraud story has

15:50 exploded as a national political and economic story

15:53 um ever since Nick Shirley's first investigation in Minnesota

15:56 just around the time of Thanksgiving last year.

15:59 Well, we've been making our own um contribution to that.

16:02 So, a few months ago, I set up our I literally called

16:05 it Cal Do California Department of Government Efficiency.

16:09 I know that's a controversial brand, but you know,

16:12 then the idea of it efficient government

16:15 is something I think everyone would support.

16:17 So, I thought why not use that because everyone knows what it is.

16:20 So we've been just looking at the published data on spending to find

16:25 examples and to make an estimate of the total amount of of fraud,

16:30 waste and abuse in the system.

16:32 And we've now published four separate fraud reports out of Cal Doge.

16:37 When I say we, by the way,

16:38 it's I mean this is a longer story we can get into, but one of the ways I

16:42 think I'm running this campaign differently is that I'm

16:44 actually putting together a team uh before the election

16:48 of the of in terms of others who will

16:50 run with me for statewide office because you've got

16:53 some very important positions alongside the governor that are

16:56 going to be crucial in putting us back on track.

16:58 In this instance, the state controller is very important because

17:02 the state controller is an elected position has the legal power

17:06 to audit any organization receiving state money and to stop

17:10 the flow of money if there's any um suspicion of improper spending.

17:14 So, there's a guy running with me called Herb Morgan and we've

17:18 been doing this work together and we've published four reports now,

17:23 three of them on individual examples of fraud.

17:25 We can get into that in a second if you

17:27 want to know some of the examples are really shocking.

17:30 And then the fourth one was an estimate

17:32 of the total and we just went through published data

17:35 from the state auditor from Medicaid error rates and so

17:39 on to make an estimate of the total amount of fraud.

17:42 What did you find?

17:45 Give us a couple of examples.

17:46 Here's some specific examples.

17:47 The second fraud report um with it's a classic $1 billion

17:54 over the last 10 years 100 million every year since 2015.

17:58 This is from the climate change mitigation fund

18:02 which is part of the cap and trade system.

18:04 This is actually gas taxes and search charges on electric bills and so on.

18:09 100 million a year was allocated to be spent on climate change mitigation.

18:16 In this case, it was solar panels for lowincome apartment buildings.

18:20 So, we actually tracked that money and um with an AI partner that can

18:25 get all the reports and of that 1 billion total in 10 years,

18:30 the actual amount spent on the purported

18:34 benefit here solar panel installation was 72 million.

18:38 928 million actually went to nonprofits doing

18:43 all all the usual Democrat associated frankly,

18:48 voter registration, um environmental justice campaigns, all that kind of stuff.

18:53 The actual thing was mostly spent on that.

18:56 That's $1 billion.

18:58 The the first one was the cannabis tax, Proposition 64, legalizing cannabis.

19:02 There's a tax associated with that supposed

19:05 to be spent on um substance abuse prevention.

19:08 We found $350 million that was supposed

19:11 to be spent on substance abuse prevention.

19:13 Again, going to this network of nonprofits,

19:16 over 500 of them and small individual grants.

19:18 When you look at what each of those organizations does,

19:21 it's all the usual stuff, voter registration, activism.

19:25 So the the third one was project home key that we we looked into which

19:30 was the homelessness thing that they set up after the pandemic which was buying

19:34 up property for homeless people um

19:37 and sometimes can building new property for homeless

19:39 people or converting hotels 3.8 8 billion that was on that one that we found.

19:45 I mean there others have found other amounts um most

19:48 of which went into the pockets of developers without any um real

19:53 the California budget if I'm not mistaken 350 odd billion

19:58 350 billion 349 this year.

20:00 Yeah.

20:01 What percentage of it in your best estimation with you

20:03 and your team do you think is inefficient fraudulent wasted?

20:07 Well, our number over the last five years total our estimate was 425 billion.

20:12 So averaged over the years it's about 80 billion a year.

20:15 So that's so it's around, you know, 20% or so.

20:19 That's unbelievable.

20:20 Yeah.

20:20 And now just to bring some reality to the situation,

20:24 you would have to get through the legislature,

20:27 which is both controlled by Democrats.

20:30 You can't unilaterally as the governor just say, "Hey,

20:34 we're cutting these services." And we had

20:36 a governor Schwarzenegger who tried this very thing.

20:40 He had to move to the center.

20:42 You of course I believe in California have a line item veto.

20:45 So you have some balance there.

20:47 But this is fantastic for people to maybe get a reprieve from taxes.

20:54 You're going to get a major fight with Democrats to cut any spending.

20:59 What's your plan there if you were to win?

21:02 So Jason, I a couple of things.

21:03 You're right about that.

21:05 Um, and I'm very thoughtful about the realities

21:08 of these things and I always make clear that I think certainly on the tax plan

21:13 that taxes definitely you can't do that without the legislature.

21:18 I think that actually we'll get a we

21:20 there's a possibility of a consensus around some

21:22 of these items where we can actually work

21:24 together with the legislature to make it happen.

21:27 One indicator of that is actually one

21:29 of my Democrat opponents in the governor's race, Katie Porter.

21:33 Um, actually, you know,

21:34 we were doing a debate the other week in Fresno and she just said,

21:39 we were talking about affordability or whatever it was and she said,

21:41 "Well, I'm I'm I've decided I'm stealing Steve Hilton's tax plan.

21:44 I agree with him.

21:45 First 100 grand tax-free,

21:46 and I think we should take good ideas where we find them." So,

21:49 this is an interesting example that I think that part of it

21:53 I think we may be able to actually persuade the legislature to do.

21:57 And then I noticed she yelled at you and said,

21:58 "Get the hell out of her shot." her video except a stronger word than eight.

22:03 Exactly.

22:04 Than hell.

22:04 Um so the the attitude that I've got

22:08 on that whole question of the legislature is that when

22:12 I'm elected that's and I'm sure your eyebrows

22:15 are raised and saying what are you talking about?

22:17 It's impossible for Republicans to win and we'll get into that.

22:20 But I'm I'm doing this on the basis that I

22:22 will and I'm preparing to actually start implementing the big

22:26 changes we need to make um in a thoughtful manner

22:29 on day one because otherwise what's the point of doing this?

22:32 Steve, do you think that there's legislative

22:34 agreement or momentum to give you the win?

22:38 Even though to your point,

22:40 I think it's quite significant that the Democrats

22:42 would signal that it's a legitimate policy proposal,

22:45 but do you think that if you win,

22:48 people would see the forest from the trees and realize how important

22:51 it would be to take salaries under 100,000 to no state income tax?

22:55 Look, the we have I've seen the, you know,

22:58 the Democrat arguments now up front many many times.

23:02 We've done a lot of events together,

23:04 some of the televised debates, many more that aren't televised.

23:07 We're literally all saying the same thing in all

23:10 the in terms of the diagnosis of the problem.

23:14 It's incredibly expensive to live here.

23:16 People can't, you know, people are really struggling.

23:18 The business climate is a disaster.

23:20 We're massively overregulated.

23:22 We can't build anything.

23:23 everything takes too long, everything's too complicated.

23:26 You know, there's a there's a real consensus

23:28 about diagnosing the problem among all the candidates.

23:32 And so I think that that doesn't mean that we agree,

23:36 of course, on the solutions.

23:37 I would argue that the Democrats all, you know,

23:40 in some version of more of the same actually,

23:43 despite what they say about the problems, but I think that um there are certain

23:48 things where we will be able to get agreement.

23:50 I also think that when you have a situation where

23:53 you have the first Republican governor elected for 20 years,

23:57 that really will change the dynamic in Sacramento,

24:00 I think it'll it actually may,

24:02 you know, loosen things loosen things up a little bit because I think that there

24:07 are people there in the legislature who

24:10 really understand that things have gone too far.

24:12 Some of them have said it to me personally, Democrats there,

24:15 but they feel constrained by the current political situation,

24:18 the machine being in control.

24:20 They can't really move and and I think that'll shake things up a little bit.

24:23 That's one point.

24:25 Secondly, you know, I really do have

24:27 experience working across party lines like this.

24:30 I think that I'll be able to bring some of that into play.

24:33 I mentioned earlier I worked in in 10 Downing Street,

24:36 senior adviser to the prime minister.

24:37 He was a conservative prime minister, but it was a coalition government.

24:40 Um, and I literally shared an office in 10 Downing Street

24:43 with my opposite number from another party and we would, you know,

24:47 hash things out and argue and, you know,

24:49 we were part of the team that negotiated

24:51 a coalition agreement and then tried to implement it.

24:55 And I think that those skills of actually

24:59 putting something together where you don't agree about everything,

25:02 but you can make some things happen.

25:04 I think it'll be useful in this situation.

25:06 And I think we can I mean, look, everyone agrees.

25:09 we call going like this in California.

25:11 And it's not farical to think a Republican can't win here.

25:14 Pete Wilson did two terms.

25:16 Schwarzenegger did two terms.

25:17 That's 16, I guess, of the last 36 years.

25:20 It is completely conceivable that a Republican could win.

25:24 And you and Katie Porter have the same plan.

25:26 I think Chad Biano has the same plan, which is under 100,000.

25:30 All of you agree no taxes.

25:31 That you're all attacking affordability.

25:34 They don't believe in cutting services though.

25:36 They want to increase taxes on businesses, if I'm correct.

25:40 And so, why is that plan not as good as yours, I guess, is the question.

25:45 Which one do you think would be more more appealing to the voters?

25:49 Would the voters I think they'll all agree.

25:51 Paying less taxes, fantastic.

25:52 Makes you more competitive with Florida and Texas.

25:56 But if they had their brothers,

25:57 they're probably going to want to see Google and Apple

25:59 pay more in taxes and not lose their services.

26:02 Yeah.

26:02 But we're losing jobs.

26:03 And I think that that's the consequence of of of squeezing

26:09 um businesses and high earners more and more.

26:11 And you're seeing it right now.

26:13 You're seeing the business exodus.

26:15 Um if the billionaire tax proposal goes through,

26:18 I mean that absolutely puts, you know, I think that's a just complete disaster

26:23 for for the tech ecosystem and what we've built in Silicon

26:26 Valley over the years and all the job

26:28 creation and and wealth creation that comes with that.

26:32 um you're seeing I mean I just it's not just everywhere you

26:35 go in the state there are so many conversations you sit down

26:37 with business people you know we we are we are on the brink

26:40 of leaving I don't think people realize quite quite how near

26:43 the cliff edge we are um and if and it's I give

26:48 you another example we are I was just in Pomona the other

26:51 day down in Southern California fantastic company sheet metal um it's an HVAC

26:56 duct manufacturing it's exactly the kind of thing you'd want here they're

26:59 union jobs actually it's a great um you know manufacturing facility they are

27:05 making the these HVAC systems the air

27:08 conditioning incredibly important as as you

27:10 know for uh TSMC and these semiconductor factories and all these the high-end

27:16 manufacturing that's happening in other states in and these these facilities

27:20 now massive amounts of investment in the AI economy and and tech

27:25 more broadly but none of it's happening in California I mean

27:27 we just published our policy report on that today how we can

27:30 get some of that that full stack of those jobs in California.

27:33 But that company l they said to me since the the facilities

27:36 are all now being built in other pl in other states.

27:40 We're on the brink of moving our facility to be

27:43 closer because what's the point of making this stuff in California.

27:46 It's not going to be used because nothing's

27:48 happening nothing's going to be happening in California.

27:51 So you have to stop this squeeze on business.

27:53 You really do.

27:54 Let me ask about the broader cost of living for a second.

27:59 Probably the most impactful cost to people's

28:03 lived experience is the cost of housing.

28:08 Yeah.

28:07 Double click into that for a second.

28:09 For the 40 million residents of California, what is going on?

28:14 Why are rents so high?

28:16 Why are homes so expensive?

28:20 And what can actually be done to make the cost of living and rent cheaper?

28:28 So the thing this particular issue I think almost captures better than

28:33 anything else the underlying structural reasons

28:37 why everything is so difficult in California

28:39 and so expensive because you got these three structural forces that I

28:44 think underpin the problem and show why a Democrat can't fix it.

28:51 And the three things are union power, litigation and climate dogma.

28:57 and they all come together in the housing story.

29:01 The first part of the story is that we're just not building enough homes

29:05 for the number of jobs that we're creating and the size of our population.

29:09 It's a classic supply and demand situation.

29:12 Now, within that, there are certain, you know, wrinkles.

29:15 You could point out that because of rent control,

29:18 which has got completely out of control, there are a lot of empty properties

29:22 in California that could be used to house people,

29:26 but they're not because landlords don't want to don't want to do it

29:30 because the the rights have gone have swung so far in favor of tenants.

29:35 But I don't think that's the major driver.

29:37 The major driver is the fact that we

29:38 just haven't built enough housing of different kinds.

29:42 And if you go through the reasons for that and why it's so expensive,

29:46 it brings into play these three factors.

29:48 First of all, it just costs more to build anything in California.

29:52 The same exact floor plan, house,

29:54 apartment building, industrial building, whatever it is,

29:56 cost cost two or three times more to build

29:59 in other in in California than in neighboring states.

30:02 The first reason is the building codes,

30:04 the actual requirements for construction which is way more ownorous

30:08 driven by climate dogma that actually doesn't really provide much specific.

30:12 What does that mean climate dogma?

30:14 Well, you have to install here we are

30:16 because like Nevada's hot and droughtridden and Arizona has issues.

30:20 So what is it that we say that those states don't say?

30:24 So when you build apartments or when you when

30:27 you build parking you have to put in EV

30:31 charging um and the scale of what's required

30:36 for the EV charging just makes it more expensive.

30:39 You have to you know like you do

30:40 a parking structure they have to reinforce the floors.

30:43 The bays have to be wider just it adds

30:45 you can have you you have fewer bays per structure.

30:49 Um there's the specific cost associated with that.

30:53 um solar panels, we talked about that earlier in terms

30:56 of low-inccome apartments that the that taxes are paying for.

30:59 Um developers have to pay for that as well.

31:02 Um insulation, um energy efficiency, all these things are good.

31:06 And I think that's pretty much the story of California,

31:08 which is things that start with good intentions actually

31:11 end up being taken to an extreme where it

31:14 just makes it too expensive to build at a rate

31:18 that people can afford to buy the properties.

31:20 And the other two are really that SQA where anybody can sue on behalf

31:24 exactly the private right of action under SQA.

31:26 So that and and but let's unpack that because that brings together

31:29 the three things climate um litigation and unions because see the California

31:34 environmental quality act itself is is a nightmare in terms

31:38 of this the amount of regulation you have to comply with the private right

31:41 of action means anyone can sue 70% of SQA lawsuits are used

31:46 to block housing most of those lawsuits are filed by unions they're

31:52 used as leverage to negotiate pro what they call project labor agreement

31:55 ments where you have an agreement for the site and usually they

31:59 have one or one of both one or two of these components

32:03 both of which sound great skilled and trained workforce which means union

32:08 only so it's a closed shop and prevailing wage again sounds very

32:12 good but it's two or three times market rate wages so both

32:16 of those things inflate the cost often I've spoken to many developers

32:19 there aren't enough union workers in in the area to actually do

32:25 the job so They have to sometimes fly them in from other

32:27 states to do the job and the cost of travel and accommodation.

32:31 It's just this is the key.

32:33 There's no equivalent to SQA in Texas uh where

32:36 I now reside uh after 20 years in California.

32:39 The other thing is the fees.

32:40 It's 30,000 per door in fees to the government.

32:44 Exactly.

32:44 Yeah.

32:44 To to build a door in California.

32:46 It's under a thousand in Texas.

32:48 And in California has three times the new units per capita than California.

32:54 So every year we produce three times as many new homes per capita.

32:57 Just a simple question though guys, put this into chat GPT or whatever.

33:02 California's mandate with SQA is to protect the air,

33:06 protect the water, protect the land by some measures.

33:12 Texas doesn't have it.

33:13 Is it the case that Texas's air is worse,

33:16 the water is worse, and the land is worse?

33:18 No, definitely not.

33:22 Yeah.

33:21 So is is it roughly the same?

33:22 meaning the particulate count, the pollen count,

33:26 is the air quality the same because if it is then what is

33:29 SQA doing other than just slowing down and retarding the progress of housing?

33:35 Why hasn't that study?

33:36 Because I think again all of this guys comes back

33:38 to when the data is presented in a way that's factual,

33:43 there's very little room for people on both

33:47 sides to argue it because they're all relatively smart.

33:50 It's when it's presented either in a partisan way or by somebody who

33:55 reeks of partisanship that I think

33:57 people attack the messenger versus the message.

34:00 So I'm just trying to understand

34:02 why hasn't the California government confronted this?

34:05 It has the highest rents in America.

34:07 It has the highest poverty rate in America and it also has

34:10 the highest regulation that has the lowest and the slowest unit housing growth.

34:16 Steve, I guess what I'm asking you is

34:18 how does that not get to the legislators more?

34:21 Okay.

34:22 Well, I'll tell you it's I'm afraid the answer is the corruption

34:26 within the system and the interest groups that have taken over the system.

34:30 I'll tell you a story which is my first I

34:32 I know a lot about housing policy because the first area

34:36 of policy I studied when I decided that I wanted

34:39 to get into the whole world of policy and politics in California.

34:42 I actually tried to get a ballot initiative qualified

34:45 for the ballot that would have two elements to it.

34:48 One is what Jason just mentioned capping impact fees which

34:52 are now up to about 20% of the cost of housing.

34:55 Um I wanted to do a statewide cap of 3% um of construction

35:01 cost and the second component was eliminating

35:03 the private right of action under secret.

35:05 I didn't succeed in getting it on the ballot.

35:07 Didn't raise enough money in time.

35:09 So then I tried to pursue it through the legislature said well

35:13 let's see if we can make some something happen in the legislature.

35:15 So I went to Sacramento I took

35:17 meetings with legislators started to engage with Sacramento.

35:21 There was one meeting I had with the legislator

35:23 who was described to him is good on housing.

35:26 This is a person you need to talk to and we had a great meeting.

35:30 They said this would be transformational.

35:33 I said great let's work on it together bipartisan.

35:35 You're Democrat.

35:36 I'm a Republican.

35:36 That'd be great.

35:37 People like that.

35:38 Oh, I couldn't support you publicly.

35:40 Why not?

35:41 Well, the unions would hate it.

35:43 Why?

35:44 Because if you take away the private right of action,

35:46 you take away the union's leverage.

35:48 And I said, "Yeah, but you just told me

35:51 it would be transformational." We were sitting in an office.

35:54 You could see the state capital down below, high up.

35:56 They just waved their arm around like this and said,

35:58 "Yeah, the unions run this place." And that's the real reason.

36:02 If you look at for example Newsome touted these two bills

36:05 last year AB130 AB131 that were going to solve the housing crisis.

36:10 He said this is the moment where we are embracing abundance and all

36:14 the rest of it big squa exemptions for certain types of housing.

36:18 But if you look at the fine print tucked away in it,

36:22 you only get the exemptions if you have these project

36:25 labor agreements and union union closed shop and prevailing wage.

36:29 So you're just writing back in exactly the things

36:33 that Sequ is causing the cost increases from.

36:35 So because the UN and what let's follow all the way through.

36:39 If you look at Gavin Newsome's political donations over the 16 years

36:44 he's been running statewide just

36:45 as a proxy for Democrat politicians by category.

36:49 The number one category government unions,

36:52 number two trial lawyers, number three non-government unions.

36:55 So these are the that's why nothing changes because the the interests

37:00 that benefit from this system are

37:02 funding the politicians that make the decisions.

37:05 Yeah.

37:05 And Chamat to your other question of like is

37:07 the environment better since 1970 when this regulation came into pass.

37:13 California still has the worst air quality in the country

37:16 largely because of the addiction to cars and traffic.

37:20 And then Texas as a comparison just has industrial waste problems because

37:24 we have a lot of chemicals here or chemical processing done here.

37:28 So we have a car loving culture in California to your point Jason.

37:32 It's part of our cultural fabric driving down Highway 1.

37:35 It's just a very iconic thing that's embedded in this state.

37:38 Steve, I have two questions.

37:39 What has all of the incremental

37:41 regulations done with respect to climate quality,

37:47 whether it's EV mandates or the ice engine requirements?

37:51 And then separately, just as a more general way to explain it,

37:54 why is gas in California 7 8 gallon and why is it $3 everywhere else?

37:59 Why is ours more than 2x that it costs everywhere else,

38:04 including other states that are also quite expensive to live in?

38:08 Well, also that they don't that we we have the highest gas in the country,

38:12 including Hawaii in the middle of the Pacific Ocean,

38:14 even though we have abundant oil reserves here.

38:16 So, we have way higher gas prices than states that don't have oil reserves.

38:20 We actually have very significant oil reserves in California.

38:23 Um the the fundamental reason that gas prices are

38:26 so high is because again in the name of climate,

38:29 but without actually in this case, it's counterproductive to climate.

38:34 um instead of using the production that we have here in California,

38:38 I've been to the oil fields in Kern County mainly near Bakersfield.

38:42 Um we are now importing nearly 80% of the oil that we use over the period

38:47 of the since really this all started in 2006

38:51 with the passage of the global warming solutions act.

38:53 That was the sort of foundational climate legislation in California.

38:57 Over that period, our use of fossil fuels has declined by not that much.

39:02 And the proportion of our energy that's coming

39:03 from fossil fuels is is about 80% still.

39:07 The rest of the country it's about 81%.

39:09 So it's barely any different.

39:10 But the difference is we used to produce most of what we use in state.

39:15 Now we are importing nearly 80%.

39:18 And that has driven up course you have to ship it from halfway around the world.

39:23 Our number one provider is Iraq right now.

39:25 That's the number one source of oil.

39:28 Sorry, sorry.

39:30 The state of California itself,

39:33 we are the wholly dependent on Iraqi oil to sustain our economy.

39:40 Not wholly, it's it's the number one provider.

39:42 Yes.

39:43 So if you look at the sources of oil,

39:46 number one, Iraq, number two, I think it's Ecuador and Brazil.

39:50 But the the the broader point on that is because the we

39:56 used to have a let's just go back a few steps.

39:59 We had a really strong energy industry

40:01 and infrastructure in California where we produced

40:04 most of the oil and gas that we use and we had refineries about

40:07 40 of them um around the state mostly in the Bay Area down near

40:11 LA that refined and turned it into products that we use gasoline and so on.

40:15 Um now we're down to seven refineries.

40:18 One of the main reasons for that is that we're

40:19 not producing what we what we what we could be refining.

40:24 we're shipping it in instead because there are no

40:27 pipelines of of there are no oil pipelines into California.

40:31 Whatever we don't if we don't use our own, we have to bring it in by tanker.

40:35 Um because of this and because of the the the fact

40:39 that the refineries were built to to refine California crude,

40:44 which is known as heavy crude.

40:46 Um there different types around the world.

40:48 You got to have a good match.

40:50 Iraq provides Iraqi oil is a good match.

40:53 The other place whose oil is a good match for our refineries is South America.

40:58 And so as a result of Democrat climate policy,

41:02 we are now expanding oil drilling in the Amazon rainforest

41:07 in order to provide the right kind of oil for California's refineries.

41:12 I mean, it's just so utterly insane and incoherent.

41:15 And of course in the process we're

41:16 spewing out carbon emissions because the tankers run

41:20 on what's called bunker fuel which is

41:22 the most polluting form of transportation there is.

41:25 And just to make the whole insane scheme

41:27 work carb the California Air Resources Board which

41:30 is obsessed with having all other businesses account

41:34 for their carbon emissions right down the supply chain.

41:36 Miraculously the carbon emissions for the oil imports are only

41:40 counted from when they're 12 miles off the coast of California.

41:44 It's just so crazy.

41:45 Yeah.

41:46 Change the finish line.

41:47 Yeah.

41:48 The taxes add like a dollar a gallon and then there's this carb standard.

41:52 It's about 60.

41:53 Yeah.

41:53 It's just It's more like 61 I thought or 65.

41:55 I can't remember exactly.

41:56 It's just going up again.

41:57 Yeah.

41:58 Yeah.

41:58 Most of the most of the in most of the $2

42:01 premium as it were for California is regulatory, not taxes.

42:04 Yes.

42:04 And most of the oil that's been pulled out of the ground in California,

42:08 we got the easy stuff out.

42:10 what's left is generally dirtier or thicker process.

42:13 No, it's not right.

42:14 I've had a lots of conversation with the industry

42:16 on this and the the the problem is that you've got fields that could

42:22 be producing but and actually it's a good example of what you

42:25 can do as governor without the legislature because the way that they've

42:30 been shutting down production is not legislatively is through an agency

42:34 of the state government called Calgen

42:35 the California Department of Geologic and Energy

42:37 Management and it's simply a question of refusing to issue permits

42:41 for the various stages of production

42:43 including including maintaining existing wells or expanding.

42:46 There's a process called sidetracking where you can take

42:49 a well that's doing five barrels a day and increase it

42:51 to 100 whatever um and then drilling new wells

42:55 in existing fields and they're denying permits for all of that.

42:59 Actually, you can pretty much turn that around

43:02 overnight by appointing people who are pro-

43:04 energy who will issue permits because I

43:07 think there's a simple common sense rule here,

43:09 which is as long as we're using oil and gas in California,

43:12 let's use our oil and gas rather than importing it.

43:15 But the my conversations with the industry is that I said, "Look,

43:18 what could what could we do if we had a kind of green

43:21 light from a governor that and and a regulatory framework that just says,

43:27 "Let's do what we can.

43:29 Let's produce what we can." The estimate that I've got from them

43:32 is that we can double production every two years in California.

43:35 If we're already one of the big gas burning states

43:39 with the worst air or previously my state, you know,

43:42 then you're gonna get into the circular conversation with the public

43:45 of do we want the air quality to decrease?

43:48 And most people would say the EV credits were actually

43:50 a good thing because we had 20 years of smog going down.

43:54 Even though we're still worse, it's gotten a lot better.

43:57 So that smog is not to do with carbon,

43:59 but that there's a real mis mis misunderstand.

44:02 So the completely agree on air quality and and one of the major

44:06 advances that has been made is on picking the LA basin is on smog.

44:10 Obviously I wasn't here then but people say

44:12 you know it's really bad and now it's not.

44:14 You have clean skies and you can see Mount Baldi or whatever.

44:17 You know it's like a really different world

44:20 but that's nothing to do with carbon emissions.

44:22 Um and so and that that's to do with actually the the main

44:26 driver of this of the air

44:28 quality improvements in California actually car technology.

44:33 Um and if you look at EVs I mean

44:35 EV penetration even with all the subsidies and so on.

44:38 It's incredibly low in California.

44:40 So you can't you can't um point it's about four or 5% something like that tiny.

44:45 So actually the improvements in air quality,

44:49 dramatic improvements that you saw in LA were nothing to do with EVs.

44:53 Steve, I want to switch topics to education.

44:55 This is a thing that we on the pod talk about a lot.

44:59 We're all the byproduct of a pretty fantastic education system,

45:03 affordable education, frankly, at every level.

45:05 We had options to pay for it.

45:08 We all had access to things like AP to really distinguish ourselves.

45:12 Even Jason.

45:13 Yeah.

45:13 Um, that's true.

45:16 What's happening in the California education system?

45:19 Why are we stripping away things like AP?

45:22 And how do we tie compensation to outcomes?

45:26 Because I think, yeah, a lot of us would want to pay teachers triple,

45:30 but we'd want to tie it to something that says,

45:32 "Wow, the test scores are going up.

45:34 Our kids can read.

45:35 Our kids can write.

45:35 Our kids can compete on the global stage."

45:38 And it just feels like we are moving backwards.

45:41 We really are.

45:42 And it's just I mean the numbers are horrific.

45:44 I mean, you've got we first of all,

45:46 we we spend nearly the most of any state per student right now in this year.

45:51 It's about 27,000 just it's more than just

45:53 over 27,000 per student per year in California.

45:57 If you take the average out the money and we get some

46:00 of the worst results in the country le I think the number

46:02 for you know 40 it's 47% that meet basic standards in English

46:07 and reading so less than half meet basic standards for math it's 35%.

46:13 So twothirds do not meet the standards.

46:15 It's just an insane level of failure considering we spend nearly the most.

46:20 And I think again you've got to look at this in a practical way.

46:24 There's a long-term structural reform that I think we

46:27 need because the the driver of this is really

46:30 the grip on the government school monopoly of the teacher

46:33 unions who increasingly have been driven by ideological factors.

46:38 You saw that for example in the pandemic when you saw

46:41 the you know the longest and most destructive school closures in the country

46:46 and I was always struck by LA the teacher union in LA

46:51 when they put out their demands for reopening schools it was just

46:55 a list of polit was a wealth tax Medicare for all something

46:59 about Palestine you know it's just

47:01 they've completely become an organized political

47:05 interest group that's about their members

47:08 and broader political goals rather than

47:10 anything to do with the interests of students and kids in school.

47:14 So I think that the fact that you got this monopoly

47:17 is of of the public tool system controlled by the unions.

47:21 They of course in turn control the politicians as I mentioned earlier the number

47:25 one donor to democrat politicians

47:27 of these government unions including the teacher unions.

47:30 And so you got to break that grip.

47:31 So I think that long-term the answer is to move in the direction

47:34 of school choice which I've always been a strong advocate of.

47:37 You're seeing that school choice revolution across the country now.

47:40 many states moving very rapidly in the direction with really good results.

47:44 It's not a panacea.

47:46 Um but I think that that is the long-term structural change you need,

47:50 but that takes a long time and it's going

47:52 to be very very hard to get that moving

47:54 in California given the fact that the teacher unions basically

47:58 control the legislature through the Democrat politicians they put there.

48:01 So there are some practical things that we've

48:03 got to do immediately to improve these basic standards.

48:07 And here we got to look at what works elsewhere.

48:10 And you see a lot of lot of attention now on Mississippi.

48:14 Rightly so, because for onethird of their spend per student than California,

48:19 their results are spectacularly better.

48:22 And it's really happened in the last 10 years.

48:24 And there's some simple practical things that they do.

48:26 Number one is how you teach kids to read.

48:29 There's a technique of to of reading instruction.

48:33 I mean, this was a debate I remember having

48:35 back in the day in England in the '9s,

48:37 and it's pretty much settled then, which is there's a technique called phonics.

48:41 It's a way to teach kids to read,

48:43 and it's totally clearly established as the most effective.

48:46 It's barely used in California schools at all.

48:49 It's like in a very small proportion of schools of public schools.

48:52 So, that's something that the governor can drive forward through

48:56 the state board of education where you appoint all the members.

48:59 Secondly, in Mississippi, they introduce something very common sense, which is,

49:04 as everyone in education says, up to about third grade, you're learning to read.

49:09 And then from fourth grade, you're reading to learn.

49:11 And if you can't read, you can't learn.

49:14 And so there's widespread consensus that reading by third grade,

49:18 by the end of third grade, is incredibly important benchmark.

49:20 In Mississippi, if you don't read by, you not don't

49:23 pass the basic reading test by end of third grade.

49:26 They give you a bit of help over the summer and if you still don't make it,

49:29 you repeat the year.

49:30 They don't let you go forward.

49:32 That single change has transformed their results.

49:35 And then your point about accountability also happens there where they give

49:40 and and this is something else that we could implement here which

49:42 is taking the publicly available test scores and data but really assigning

49:47 it in a very visible way to individual teachers and individual schools.

49:52 And that's one of the proposals I've got in my campaign,

49:55 which is a grade for every school and a grade for every

49:59 teacher so we can reward the good ones and remove the bad ones.

50:03 Two more topics that Californians are very passionate

50:06 about and have a lot of opinions about.

50:08 I think one is pretty challenging and the other one seems

50:12 pretty easy and other states have handled it where it's easier.

50:16 Crime and then homelessness.

50:18 uh crime obviously as a society we've seen violent crime go down

50:22 over the long arc of our lifetimes in the last 40 or 50

50:25 years but California still 30% more violent than the rest of the country

50:30 so we definitely have a violence problem specific to California and if you

50:34 live in the major cities San Francisco Los Angeles they let people

50:38 out for petty crimes under $850 there seems to and we see going

50:42 to a drugstore everything's locked up so there is a feeling and a lot

50:47 of debates over the numbers that there's a lot more property crime.

50:50 Some people claim people don't report it anymore.

50:53 That was my lived experience in California.

50:57 What is your take on crime and then we'll go to homelessness?

51:00 Yeah, I mean it's just it's this classic thing in California

51:04 where they seem to be brilliant at passing laws, right?

51:08 Every year more and more laws,

51:09 more and more bloat and bureaucracy, more on nanny state nonsense.

51:13 Last session, for example, they passed, this is one session, 1,118 bills.

51:21 One that that's the number of bills that the legislature passed.

51:24 I we did an thing outside the state capital.

51:27 I mean, I'm not very tall.

51:29 We printed them all out.

51:30 It's like double my height.

51:32 I mean, just ridiculous.

51:33 The point I'm making is really good at passing laws,

51:37 but not very good at enforcing them.

51:39 there's just something missing in terms of the app

51:42 of the willingness to just enforce the law.

51:45 That's going to be one of the main points I make in terms of homelessness.

51:48 But when you get to crime, there's just this attitude.

51:51 I mean, there's something off about how the left has has has seen this issue.

51:57 And just when you think it's, you know,

52:00 the worst excesses of defund the police and all that have receded,

52:05 you've now got them popping up.

52:06 What is it this new thing?

52:07 microl looting, right?

52:09 Oh, microl looting.

52:10 Isn't the New York Times and Slack podcast are going on about, oh,

52:14 it's fine cuz it's just social justice and we we're

52:16 allowed to kind of basically steal things cuz it's okay.

52:18 It's just unbelievable subversion of basic um values and morality.

52:24 Just unbelievable on crime.

52:26 It's very decentralized in terms I mean there's

52:28 some state things that need to be d remember

52:30 the law that you're talking about that legalized theft

52:33 up to $950 a day that has that part

52:36 has been overturned that was Prop 47 which was

52:40 a few years ago has been overturned by Prop

52:42 36 which was overwhelmingly passed in 2024 by about

52:45 70% but of course it's not being properly implemented.

52:48 Gavin Newsome was against it and so were most Democrats in the state.

52:53 the people passed it anyway, but now there's real resistance to enforcing it,

52:57 which is ridiculous in terms of the overall picture though,

53:02 it is very localized.

53:03 You know, you've got local police forces and sheriff's department and so on.

53:08 So, my focus has been well, what can you do as governor?

53:11 And the one of the biggest drivers I think that's that's caused

53:14 the problem is is really started with Jerry Brown before Gavin Newsome.

53:18 Gavin Newsome's accelerated it, which is the prison closure program.

53:22 They've they've they've they've basically al also this is classic California.

53:26 They've reduced the number of prison places by half.

53:30 Guess what happened to the budget?

53:32 It doubled.

53:34 Not quite not quite that bad, but like it's a classic.

53:37 They double they cut the numbers in half.

53:39 Double the budget.

53:39 But the point, the serious point is that you've had tens of thousands of really

53:43 dangerous violent criminals either released directly

53:46 into the community or more or or more,

53:49 you know, um destructively for this for the system

53:52 transferred to county jails which are now completely overcrowded.

53:56 Um and therefore at the local level,

54:00 the whole system is aware that you've had all these transfers from state prison.

54:05 the system is full and so there's no capacity and that really undermines

54:11 the kind of accountability that judges and prosecutors

54:14 would want to seek at the local

54:15 level because they know the jails are full and so that in turns

54:18 undermines law enforcement because they say what's the point I mean I hear

54:22 this term all the time from law enforcement around the state I'm traveling

54:25 the state the whole time they talk about catch and release as the basic

54:29 operating rule for local for the kinds of crimes you're talking about you

54:33 catch them they just release nothing happens

54:35 And so that that undermines law enforcement.

54:38 They think, why bother if we're just going to bring

54:40 these people in and nothing's going to happen to them.

54:42 And that in turn undermines public confidence

54:44 because everyone sees that and then they,

54:47 as you just said, don't bother reporting it.

54:49 So a simple thing we can do that is completely within

54:52 the governor's control is stop and reverse the prison closure program,

54:55 which is what I've committed to doing

54:57 is to increase prison capacity in California.

55:01 That means that you can relieve the pressure on county jails,

55:04 but also that means that you can use the prisons for what they should be doing.

55:07 Not just bringing accountability.

55:09 You commit a crime, you should be punished, but also rehabilitation.

55:12 We've got one with not the worst,

55:14 but one of the worst recidivism rates in the whole country.

55:18 And if you had if you if we did one

55:20 of the best one of the best states is Virginia,

55:23 they're they're less than half what we have.

55:25 that would massively reduce crime if you could just get,

55:27 you know, there's that, you got to take seriously the rehabilitation part.

55:31 I mean, a huge proportion of prisoners in these jails, they can't read properly.

55:34 Many have dyslexia.

55:35 You know, you you've got to have a really serious view on it.

55:38 And they just don't.

55:39 They have an ideological view.

55:41 I think that is the problem with so many of these issues.

55:44 It's ideology.

55:44 In this case, it's decarceration.

55:47 Can't have people in prison.

55:48 Prison is racist.

55:49 Criminal justice reform.

55:51 All this ideology instead of just practical things to keep people safe.

55:55 Newsome shut down four or five of the California state prisons.

55:58 You're absolutely correct.

55:59 Uh, according to my notes, and then it peaked in 2006.

56:03 California had 165,000 people in state prisons.

56:05 Now 93,000 people.

56:07 So, it is definitely a trend.

56:10 Uh, and I think a lot of folks who are living here or who

56:12 were living in California where I used to live are not in favor of that.

56:16 Uh, looking at homelessness, is it intractable in California?

56:21 One thing I'll just point out if people are interested

56:23 in digging in further to some of the things I've been saying.

56:26 There's a couple of places you can go for real

56:29 depth on this, which is the last three years,

56:32 um, I've been traveling the state and kind

56:34 of learning about this stuff and developing solutions.

56:36 And I had a policy organization for that called Golden Toto together.

56:40 goldento together.com and you can find policy reports on many of these areas

56:44 we've discussed and more including

56:47 one on homelessness called ending homelessness.

56:49 And actually my real partner in developing that was someone

56:51 called Michelle Ste who's done a lot of work on this.

56:54 She actually run um homeless shelters and and really

56:59 at the at the kind of street level of this for many many years.

57:02 also someone called Tom Wolf who's given me a lot of great advice.

57:05 He's in San Francisco,

57:06 a recovering addict um a recovered addict who's who's just fantastic.

57:11 He's very vocal on Twitter and uh very common sense approach.

57:14 Yeah.

57:15 Yeah.

57:15 Exactly.

57:15 Okay.

57:15 So, it's very simply I'll try and sort of capture it simply.

57:18 It's a it's three points.

57:20 Number one, it actually already is illegal to live

57:22 on and the homeless encampments already are illegal.

57:25 They've always been illegal.

57:27 Um it's another example of where we just got to enforce the law.

57:30 Um for years local politicians in California hid behind a court ruling that is

57:36 called the Boise ruling from many years

57:38 ago which stated it's the ninth circuit ruling

57:40 applies to the western states which is that the the statement there was you

57:45 can you can't remove people from the street

57:48 unless you have sufficient shelter available locally.

57:52 And they used this to say we can't

57:53 remove people because we don't have enough shelter.

57:56 It didn't define what shelter was.

57:58 They defined it as these permanent

58:00 supportive housing units costing $900,000 a door,

58:04 but it could have been, you know, a camp with CS.

58:08 You know, there's no reason.

58:10 But even that excuse has been lifted because there's a Supreme

58:13 Court case called Grants Pass versus Oregon in 2024 overturned that.

58:18 So there's no excuse.

58:20 you you these people running local governments

58:23 what they they they have the power

58:25 and the legal authority to remove every single

58:27 homeless encounter and they should and my argument

58:30 is I'll give that once I'm elected I'll give them a certain amount of time

58:33 and if they haven't done it then

58:34 I'll use state law enforcement resources to take

58:37 people off the streets and then you get to point two and three of the plan

58:40 which is what do you you got to give people help in a compassionate

58:43 way help them get their lives back on track so over 80% of people who

58:47 are homeless have drug or alcohol problems

58:50 s addiction or me severe mental health problems.

58:52 So you got to deal with that.

58:53 So the second part is drug and alcohol recovery.

58:56 Got to you got to get people into recovery.

58:58 That used to be the rule in California, rehab or jail.

59:01 And we got to get back to that.

59:03 It can't be an option.

59:04 You got plenty of service providers who can do it.

59:06 You got to require it.

59:08 I mean last year even the de going back to our point about

59:11 the legislature even the democrat legislature

59:14 passed a bill called the sober housing act which would have taken a certain

59:18 proportion of homeless spending and allocated

59:20 it to uh shelter where you had a requirement was sobbriety vetoed that bill.

59:26 It's unbelievable.

59:28 So we got to have it 100% um sober

59:31 requirement for any kind of state services on homelessness.

59:34 The third part is mental health where

59:37 honestly going back to the jails conversation,

59:39 you talk to sheriffs around the state, they the number varies,

59:43 but they say 50 I've heard as high as 70%

59:47 of the people in their jails have severe mental health problems.

59:51 That's where we are actually treating people with mental health problems.

59:54 Either they're on the street or they're in jail is totally barbaric.

59:58 And one of the reasons is that we

1:00:00 when you're talking about the homeless population, obviously low-income people.

1:00:04 So it's very much entwined when you talk about mental health care with Medicaid,

1:00:08 with the federal system.

1:00:09 And there's a rule in Medicaid that was set up right

1:00:12 at the beginning when it was founded in the mid60s called the IMD rule,

1:00:16 institutions of mental disease.

1:00:18 And this was a time when they didn't want large mental asylums and whatever.

1:00:22 The idea was you have small facilities in the community.

1:00:25 So the rule is there is no Medicaid reimbursement to the states

1:00:29 for any mental health care provided in a facility with more than 16 beds.

1:00:34 It's a 16 bed rule.

1:00:36 Of course, that makes the whole thing incredibly uneconomic and inefficient.

1:00:40 Imagine if hospitals could only be 16 beds.

1:00:43 How inefficient that would be.

1:00:44 The first Trump administration created a waiver,

1:00:47 the IMD waiver that states could apply for so you could get,

1:00:51 you know, get around the rule.

1:00:52 California.

1:00:53 A lot of other states have have taken that up.

1:00:55 California hasn't.

1:00:57 There's plenty of money in the system.

1:00:58 Like we've been saying, the budgets have are there.

1:01:01 They've just been diverted into the wrong places.

1:01:03 So, the third part of the plan is to take

1:01:05 the money that's currently going into the homeless industrial complex,

1:01:08 these ridiculous apartment units for people who should

1:01:12 be either getting mental health care or recovery treatment.

1:01:15 Take that money and put it into modern largescale mental health facilities.

1:01:19 And then we can treat people.

1:01:21 That's broad work.

1:01:22 That's a great place for you to put a big

1:01:23 magnifying glass because that's where there's massive amounts of corruption.

1:01:27 People cannot believe how much we spend in this or we spend in California on

1:01:33 homeless and if you pay for something you will get

1:01:35 more of it and they're getting a lot more of it.

1:01:37 Yeah.

1:01:38 Steve, as we wrap up, give us the quarterback view of your path to victory.

1:01:42 Walk us through the sequence of events,

1:01:45 the key moments leading up to the primary

1:01:47 vote and then from primary to election day.

1:01:49 what has to happen for you to get to Sacramento?

1:01:52 So, we have the top two system.

1:01:54 Um, for those who I mean,

1:01:57 another crazy California thing where you end up with two

1:02:00 candidates going through to the general election regardless of party.

1:02:04 The idea of this was to have more moderate politics.

1:02:07 Ever ever since it was introduced,

1:02:09 the state's gone further and further to the left.

1:02:11 Um, and so you've got various scenarios that are possible.

1:02:15 Right now, I'm leading in all of the polls.

1:02:18 Um, on the Republican side, there's one other candidate.

1:02:21 I I think with the president with President Trump's endorsement of my campaign,

1:02:25 I think we can expect um I'm pretty confident

1:02:28 that we can make it into the top two.

1:02:30 It's not certain.

1:02:31 We we're we've got to, you know, fight very hard over the next month or so.

1:02:35 The ballots go out next week, early May.

1:02:38 Um, but I think that we're going to have

1:02:41 a a top two with myself and one other Democrat.

1:02:44 And right now it looks as if it's going to be one of Tommy Styer,

1:02:49 Katie Porter, or Javier Basera.

1:02:52 And all of those three represent either no change from what we have

1:02:57 now or a move even further to the left in the wrong direction.

1:03:01 So I think broadly the argument is going to be very straightforward,

1:03:05 which is are you happy with the way things are going in California?

1:03:09 Do you want more of it?

1:03:10 And if you do, you vote Democrat or do you think we need a change?

1:03:14 So that's it's a classic, you know, change versus more of the same election.

1:03:18 Getting into the the numbers, it's I know a lot of people look at California

1:03:23 and say it's impossible for a Republican to win.

1:03:25 And Jason was pointing out we've had Republicans in the past,

1:03:28 but that was, you know, a long time ago.

1:03:30 And you could say special circumstances cuz Arnold Schwarzenegger

1:03:34 was elected in a recall election and so on.

1:03:37 And he was a celebrity who was highly and loved in Los Angeles, half the state.

1:03:42 Exactly.

1:03:42 All of those things are true.

1:03:43 But and so I've always said from the beginning

1:03:45 of this that it's not going to be easy to win.

1:03:47 It's going to be very difficult because of the structural factors in California.

1:03:51 But it's not impossible.

1:03:52 And given the seriousness of our predicament and how much I think

1:03:56 the whole country depends on a a successful growing thriving leading California,

1:04:02 then we should go for it because getting things back

1:04:05 in a common sense direction is just a really important thing.

1:04:08 I always say California means to America what America means to the world.

1:04:12 And so this matters.

1:04:14 If you look at the numbers on the on the some people look at the voter

1:04:18 registration numbers and they say Democrats outnumber

1:04:21 Republicans 2 to1 and that is true,

1:04:24 but when you look at actual voting, the gap is a little bit closer.

1:04:28 Over the last 20 years where you haven't had Republicans elected,

1:04:31 the the the pretty much the average Republican vote has been just over 40%.

1:04:36 So it's been like a 6040 split.

1:04:38 Obviously, that's not close,

1:04:40 but the gap is perhaps not as wide as some people might think.

1:04:43 But then you look at a couple of factors

1:04:45 that I really think are different this year.

1:04:48 First of all, there's a dissatisfaction with the way

1:04:52 things are going that wasn't there before.

1:04:53 If you look at that basic number, is the state on the right track, wrong track?

1:04:58 In the even four years ago in the last governor's race,

1:05:01 the wrong track number was kind of mid to high 40s.

1:05:05 Now it's mid to high 50s.

1:05:07 So there's a majority for change in California, just put it that way,

1:05:11 which is a good environment to be going into as a candidate representing change.

1:05:16 The second point is if you look at the actual votes you're going to need to win,

1:05:21 this is a midterm election 2026.

1:05:24 If you try and get some kind of sense of how

1:05:27 many votes will be cast in the midterm election this year,

1:05:31 take the average of the last two, 2018 2022,

1:05:34 you get a total of 11.7 million total votes as an estimate.

1:05:39 So to win, you're going to need just over half of that.

1:05:41 Call it 5.9 million.

1:05:43 Now, when people say there aren't enough Republicans in California to win,

1:05:46 in the in 2024 in the presidential race, President Trump in California,

1:05:51 without even campaigning here or spending money on ads or anything,

1:05:55 wasn't a targeted state, got 6.1 million votes.

1:05:59 In other words, there's more than enough

1:06:02 people who just voted Republican for President Trump.

1:06:04 Now, of course, you're not going to get 100%

1:06:07 of a presidential year turnout in a midterm election,

1:06:11 but the reason I make that point is that the votes are there actually,

1:06:15 even with just Republicans.

1:06:17 Now, I don't think we're going to get there just with Republican votes,

1:06:21 but that's the starting point is a strong campaign to turn out Republican votes.

1:06:26 And a big driver for that this year that again is a unique feature this year

1:06:30 is the fact that in November we're going to have voter ID on the ballot.

1:06:34 that just qualified for the ballot.

1:06:36 Um, and Republicans particularly are enthusiastic about voter ID.

1:06:40 I'm going to help us get a big turnout.

1:06:42 And then in terms of the coalition for victory,

1:06:45 I think that you've got a real opportunity

1:06:47 to put together the kind of multi-racial workingclass

1:06:51 coalition that President Trump put together because it's

1:06:55 as going right back to where we started.

1:06:57 It's workingclass people who are really really struggling

1:07:01 and being hammered the most by these policies.

1:07:03 They get to vote directly for no taxes.

1:07:05 No state income taxes.

1:07:07 Exactly.

1:07:07 Because that's my tax plan.

1:07:08 I I just put this out there just the other day,

1:07:10 which is no and and no tax on tips.

1:07:13 That's the other part.

1:07:13 I mean, which has been implemented at the federal level,

1:07:16 but California won't do it at the state level.

1:07:18 Just my whole plan is geared toward $3 gas.

1:07:21 I call it Californable.

1:07:23 $3 gas.

1:07:24 Cut your electric bills in half.

1:07:26 Your first 100 grand taxfree.

1:07:28 A home you can afford to buy.

1:07:30 really simple, practical,

1:07:32 common sense things that particularly help the people who've

1:07:36 been hurt the most over the last few years.

1:07:39 And I think that's how we pull this off.

1:07:41 Steve, on behalf of all,

1:07:42 I just want to say thank you for being so incredibly candid and open with us.

1:07:46 We're wishing you the best of luck.

1:07:48 Thank you for joining us.

1:07:50 And just from my seat, if if you want moving back.

1:07:55 No, I mean if you want it just I left for a reason

1:07:58 and part of it was the dysfunction of the state and if

1:08:01 you want things to continue I think you know having an unbalanced

1:08:06 government that's all in one party is a way to do that.

1:08:08 You got to try to find some balance here and I think why not give it a shot?

1:08:12 If you're in California, you have nothing to lose.

1:08:15 The state is in a massively dysfunctional situation.

1:08:19 So, I wish you great luck, Steve Hilton.

1:08:21 Thank you, guys.

1:08:22 Great to be with you.

1:08:23 All right.

1:08:23 Cheers.

1:08:23 Now, I'm going all in.