February 27, 2025 • 54 mins
Los Angeles confronts the grim reality of a multi-year effort to clean up and rebuild after its devastating wildfires; Governor Gavin Newsom makes a big disaster-relief ask in Washington; and intrigue abounds in next year’s gubernatorial race. Hoover Institution senior fellow Lee Ohanian and distinguished policy fellow Bill Whalen, both contributors to Hoover’s California on Your Mind web channel, join Hoover senior product manager Jonathan Movroydis to reflect on a smarter approach to fire response and prevention and what the future holds for swift reconstruction and affordable property insurance. They also discuss whether former vice president Kamala Harris is a shoo-in if she runs next year to succeed Newsom, plus the contrast between how red and blue states court industries (Tennessee luring In-N-Out investment and Newsom wanting to double Sacramento’s largesse for California’s struggling film industry).
Recorded on February 26, 2025.
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(00:00):
[MUSIC]
>> Jonathan Movroydis (00:04):
It's Wednesday, February 26, 2025, and you are listening
to matters of policy and politics,a Hoover Institution podcast devoted to
governance and the balance of power herein America and around the free world.
I'm Jonathan Movroydis, Senior ProductManager at the Hoover Institution, and
I'm sitting in the chair of Bill Whalen,
the Virginia Hobbs Carpenter DistinguishedPolicy Fellow in Journalism.
So that he can answer questions and
provide commentary about California policyand politics in which he is well versed.
(00:27):
Bill Whalen, in addition to beinga Washington Post columnist,
writes weekly for Hoover's Californiaon youn Mind Web channel.
Whalen is joined today by Lee OhanianHoover Institution Senior Fellow and
Professor of Economics andDirector of the Edinger Family Program in
Macroeconomic Research at the Universityof California, Los Angeles.
Ohanian also writes weekly about thepolicy environment of the Golden State for
California on your Mind.
Good day gentlemen, let's talk aboutthe latest developments in policy and
(00:49):
politics in the Golden State.
Let's start this episode withdiscussing Lee's column last week for
California's on your mind.
Lee, you deal with the Golden State'schallenges with wildfire prevention and
containment.
You provide a startling explanation ofwildfire's impact on carbon emissions.
Quote, there is a veritable laundrylist of expensive programs the state has
implemented to address climatechange the cap and trade program,
(01:11):
the low carbon fuel standard,the zero emission vehicle mandate,
which requires automakers to producea minimum level of zero emission vehicles.
The Renewal portfolio standardsrequires utilities to produce a minimum
percentage of electricity from renewables,electrification for
cargo handling equipment at ports,green building codes and
public transit electrification, includingthe state's high speed rail program.
Yet all the carbon emissionsreductions achieved from these and
(01:34):
other programs between 2003 and
2019 were offset by the carbon emissionsfrom California wildfires in 2020 alone.
You also describe California's longhistory of wildfires, but as you know,
nine of the 10 largest fires in thehistory of the state occurred since 2017.
Lee, why are the impacts of thesefires seemingly worse today?
Is this a matter of bad environmentalconditions or just bad policy?
(01:57):
Is there any hope that the state willadopt common sense solutions for
fire prevention, detection and protection?
>> Lee Ohanian (02:03):
Well, Jonathan, the first order of business for state and
local government is toprotect its citizens.
And wildfires have been a partof California seemingly forever.
So the column you referenced describeshow there were descriptions of Santa Ana
winds, which are the very dry, verystrong winds that come out of the desert
(02:24):
that often create conditions that areconducive for wildfires Their description
of those winds that go back to 1847 thatwere described as hurricane like, and
that was before, obviously beforethe state became part of the Union.
So we've been dealing with this foras long as the state's been in the Union.
And what is very concerning is thatthe priorities are apparently, seemingly,
(02:47):
at least to me, are not beinggiven to wildfire prevention,
prevention and wildfire protection.
But the point about climate change isthat the state's all in on dealing with
climate change and carbon emissions.
And as you noted, we have a long list ofprograms to address carbon emissions.
And yet the carbon emissions fromCalifornia wildfires in the year
(03:13):
2020 alone, just that year,were more than twice as much
as the carbon emission reductionsthat the state achieved
cumulatively between,I believe it was 2003 and 2019.
So when you look at a statistic like that,the state really should look at that and
(03:34):
think, my goodness,everything we've done in a 16
year period has been completely offsetby our wildfires by a factor of two.
And that was just in the year of 2020.
We've had many other severewildfire years, including 2018.
So that really just puts tothe forefront the need to deal
(03:55):
with wildfires in the state.
And what we saw during the LA wildfiresis I think, really unacceptable.
There was inadequate water pressureto fight the Palisades fire,
a 117 million gallon water reservoirin the Pacific Palisades that
(04:16):
was constructed shortly afterthe Bellair fire of 1961.
At that time, the city recognized just howimportant protection and prevention was.
So that reservoir was built after the 1961Bel Air Fire that had been empty for
nearly a year.
And it was empty for nearly a year becauseits cover was waiting to be fixed.
(04:41):
So that really is just playingRussian roulette to let a reservoir
of 117 million gallons sit empty inan area with just enormous fuel for fire.
So there's all sorts of things that canbe done, including the obvious ones,
such as expanding fire investmentsin fire personnel, fire engines.
(05:05):
The columns I wrote over the last monthindicate that the LA Fire Department did
not pre deploy fire equipment fire enginesin the Pacific Palisades before that fire.
And apparently therewere 1,000 firefighters
who could have been called inprior to the fire starting.
So this just really highlightsthe best decisions are not being made.
(05:29):
So when you ask, will common senseprevail, we all certainly hope so.
We lost 29 lives in the LA fire.
In the Eaton fire, ewve lost many morelives than that over the last few
years during wildfires, andit's remarkably sad and remarkably tragic.
(05:51):
And California as potentially the mostinnovative, technologically innovative
state in the country, we really need to bethinking outside the box and doing more.
There's all sorts of developmentsin artificial intelligence and
machine learning that in my opinion,
could be leveraged to identify firesbefore they burn out of control.
(06:14):
For example, the Palosaves firewas called in by residents, right?
If it had been identified earlier, then,
then you can get thesethings under control.
So it's, I think, a very tragic and sadday for us when this happened last month.
>> Bill Whalen (06:28):
So Lee, it seems to me when California reaches a situation like
this, you got one of two roads to take.
One is you can throw a lotof money at the problem.
And we're going to talk abouta lot of money in a minute in
terms of what the Governor wants outof Washington in the way of help for
the recovery for Los Angeles, almost$40 billion in aid they're asking for.
But there's also the question ofmaking government smarter, Lee.
(06:48):
And it seems to me that you can throw allthe money in the world at this situation,
but if you don't make the states smartharder at how it goes about these things,
you're going to be back to square one,as always, when fires break out.
So you've written a lot about this, Lee.
How would you make governmentsmarter in this situation?
>> Lee Ohanian (07:04):
Well, I think at some level we need political leadership that's
going to prioritize what government issupposed to do, which is to protect us.
It's just obvious to me thatthat has not been a priority.
When you look at the LA city budgetin the most recent fiscal year,
I believe approximately 6% ofthe budget was devoted to Fire.
(07:29):
And I went back, went back a couple ofdecades and looked at the budget from
about 20 years ago, and that budget hadover 8% of the budget allocated to Fire.
Now, it turns out those 2 percentagepoints are very important because the LA
city budget is very, very big.
So what that means is that if wehad just maintained the share of
(07:53):
the budget that was allocated to firein 2020, in fiscal year 2024, 25.
As we had 20 years ago,there would have been millions, millions,
tens of millions moredollars available for fire,
which would have meant more firefighters,more equipment.
We wouldn't have had this lack ofpersonnel that, in my opinion,
(08:16):
was a contributing factor tothe fires getting out of control.
So we need to put,safety has to be the number one priority.
And I have concerns about whetherthe current political leadership
in places like Los Angeles justhave the ability to do that.
(08:37):
So, in my opinion, I think the firstsort of business is we need people who
are going to prioritize what people reallyneed here, and that's public safety.
>> Bill Whalen (08:45):
Yeah, so again, we can put a lot of money into fire prevention or
at least fire responses,put more firemen on payrolls,
have better infrastructure and so forth.
But I think we have to addressthe root causes of the fires,
which gets into questionsof land management, leaks.
But one which I'd like to address herebriefly, which is the homeless situation
in Los Angeles, because you havehomeless encampments across Los Angeles,
(09:05):
many of them under freeways.
There was a fire a coupleyears ago in Los Angeles,
probably caused byan encampment under a freeway.
Homeless people go out in the wild aswell, can start fires out there as well.
So this gets the idea though ofmore sensible government and that,
well, you have to address root causes.
And one of the problems here isthe homeless population in Los Angeles,
which is a big part ofMayor Karambass's agenda.
(09:25):
Something she's made a pointwhen she got elected,
she was going to handle the homelessproblem once and for all.
>> Lee Ohanian (09:31):
Yeah, homelessness is an important issue.
What the piece I wrote indicates somestatistics about homelessness, and
the contribution of homelessnessto fires in Los Angeles.
And I believe over 50%of fires in Los Angeles,
I don't recall the exact year,were due to homeless.
(09:52):
And that includes the homelesstapping into electricity lines
which then obviously spark,and cause fires.
And Mayor Bass said she wasgoing to deal with homelessness,
the needle hasn't beenmoved in Los Angeles.
The homeless numbers now,are about the same as they were,
as I recall,around the time she took office.
(10:15):
And moreover, Bill, when you talk aboutkind of throwing money at problems,
California has not been very effective atthe investments we made in homelessness.
Between, I believe was fiscalyear around 2019 to 2000,
that please the 1819 to 23,24 fiscal years,
that five-year period, the statespent 24 billion on homelessness.
(10:38):
Right, 24 billion, and
the number of homeless increasedsubstantially during that period.
The state auditor reviewed some ofthe programs in California regarding
homelessness and issued, I think,what can't be called anything other than
a scathing report indicating that notenough information was being collected.
(10:58):
The accounting was inadequate forthe expenditures, and
California simply isn't in a position tounderstand what programs are working well.
It's hard to know where the money's going.
And the same thing, a similar thinghappened in Los Angeles with I think
over $100 million being that wasn'teven spent on homelessness, that was
(11:20):
allocated in a previous fiscal year forLA city budget, but wasn't even spent.
So, I think the LA political leadership,I think is in over their heads.
I think we've seen that when,sadly, when crises hit,
it really tests the mettle of politicalleaders, can they bring people together?
Can they make decisions on the flythat turn out to be sensible?
(11:44):
I think what we saw here,is political leadership that it's hard for
me to find words for this, that simplyreally didn't have any idea of what to do.
Mayor Bass got off a flight, she had goneto Ghana, she turned around and came back.
I think that's probably a 12,or 13 hour flight.
And when she got off the plane, she wasasked by reporters about what her plan
(12:06):
was and what was going to, you know,how we were going to save Los Angeles.
And I don't believe she uttered one word.
She didn't,>> Bill Whalen: [LAUGH]
She had 10, 12,
14 hours to communicate with her staff,with people in Los Angeles and
there was simply, there was simplyno plan as far as I could tell
from her not answering those questions.
(12:28):
So, Bill?
Yeah, I think we do,we have big budgets in the state,
we have a big budget in Los Angeles.
And you look at what's happening, and it'sjust hard to square that with the public,
the public safety outcomeswe're seeing now.
>> Bill Whalen (12:42):
So, Lee, speaking of leadership, Governor Newsom on Friday sent
a letter to congressionalleadership asking that the fed send
California $39.68 billion in aidto help Los Angeles recover.
I won't go through the entire list ofwhat all 39.68 billion gets you, but
long story short.
It includes about $5.29 billion toprovide low interest loans to businesses,
(13:07):
nonprofit organizations, $4.32 billion forbusiness grants, $2 billion for
low income housing tax credits, andleave $5 billion for debris cleanup.
Now, this is going to be veryinteresting to watch how this moves or
does not move through Washington.
A Republican Congress [LAUGH] AtWashington, which is looking at spending
(13:29):
in general, maybe not at first blushwanting to send $40 billion to California,
but political reality meansit'll send something.
It would seem to be leaded the first,maybe the smart approach for
Congress would be to do this, number one,obviously go through this, this relief
package with a fine tooth comb, andexamine what $39.68 billion comes up to.
(13:51):
I'm always a little leery, by the way,when you get something that comes
in just under something with the zeroon the end, it's kind of like selling
a product to you for $99.99,because why it looks better than $100.
But I think two things, Lee,
they obviously need to go throughthe line items here, but secondly,
they should probably fast trackthe $5 billion for debris cleanup.
Because if you look atLos Angeles right now, Lee,
(14:14):
this seems to be the paramount issue foreverybody wants to clean up.
And here, you have a chokepoint problem in Los Angeles.
It's a combination of two things, one iswhere are you going to park the dirt?
And the other one being how long will ittake to inspect the debris to make sure
that it's clean so you can take it away,asbestos issues and so forth.
So, I don't know, what do you think, Lee,is debris cleanup issue number one here?
>> Lee Ohanian (14:36):
Yeah, 100% estimates are as long as 18 months for
the debris to be cleaned up.
And Bill, ironically,in December of last year, so
about a month before the, beforethe LA fires, Mayor Bass gave a press
conference celebrating all the greeninvestments that Los Angeles had made.
(14:58):
How many workers there were ingreen energy industries, and
the number of EV electric vehicle chargingstations that the city had had put in.
And, you know, just getting back tothe idea about what is the priority,
those should not be the prioritiesahead of fire protection.
And we saw that at some level they were.
When you look at debris cleanup,Bill, ironically,
(15:20):
you know, there's more EVs inLos Angeles than any other city.
Pacific Palisades is an area ofrelatively high household income.
I don't have any numbers on this, but Isuspect proportion of electric vehicles in
Pacific Palisades are probably higherthan most other places in Los Angeles.
And what happens when a Tesla getscaught in an inferno is you've got all
(15:42):
those batteries and those batterieshave a lot of elements that are toxic.
So, ironically, what was supposed tosave the climate, electric vehicles,
is now creating toxic wastethroughout Pacific Palisades.
The EPA has to go in there and yes,where are they going to park that?
(16:03):
Where are they going topark that toxic dirt?
Maybe, somewhere in Nevada, potentially.
But it could, the estimates are 18 months.
When it comes to government work, I rarelysee something being done under a timeline.
So if you go over time, then you'relooking at greater than 18 months.
(16:23):
So yeah, it's priority number one,it's going to take a long time.
And it's interesting, Governor.
Yeah, it's obvious Governor Newsomwould be asking for federal support.
Now, Karen Bass fired the LA fire chiefa couple of days ago, and essentially for,
incompetent performance, including notdeploying more firefighting resources.
(16:47):
So, with that happening, I think Congressis going to say, you want us to pay for
the, the policy mistakes thatare occurring in your state.
That's a little different from saying,you know, the hurricane came into Florida.
Florida did everything they couldto protect their residents and
(17:08):
now we're going to help them out.
That's very different than saying, whoops,
we didn't do the right things to protectthe people who are coming from here.
>> Bill Whalen (17:17):
Yeah, you mentioned 18 months for debris, Lee,
the timeline here fascinates me.
So, Mayor Bass the other day gave atimeline for getting all of this done and
she said anywhere from three to fiveyears, which, you know, five years,
your eyes kind of bug out.
But that's interesting numberwhen you think about it, Lee.
I looked it up,it took about four years and
four months to constructthe Golden Gate Bridge.
(17:39):
So maybe, we can say in modern dayCalifornia, it's parallel to that,
if you will.
But what's going on three years anda few months from now?
The Olympics are coming to Los Angeles,the world is coming to Los Angeles.
So, this is another wrinkleto this conversation.
While a Republican Congress mightreflexively want to make life difficult
for California, here it is, your Olympics.
(18:00):
Unless, some wild eyed Congressman isgoing to come up with some scheme to move
the Olympics to Texas between now and2028.
It is Los Angeles,it is America by default.
And so, it is kind of in your vestedinterest as a member of Congress to want
to get LA cleaned up faster, rather thanlater, because otherwise you're looking at
an eyesore and ultimately kind ofembarrassment for the country.
>> Lee Ohanian (18:19):
Yeah, it reminds me a little bit of San Francisco, I know a year
or so ago when they hosted the>> Bill Whalen: APEC summit when,
Jinping was coming to town.
Yeah, yeah.
And, interestingly, all the homeless were,were shifted to other places,
including down to Silicon Valley.
So Bill, the Palisades are,
they're far enough away from most ofthe Olympic venues that I don't think
(18:44):
a ton of people would be that they'renot going to be front and center.
But yeah,
it does raise the question of whatare you going to do with the Olympics.
And I think [COUGH] No matter how muchmoney you throw at it, you simply,
you know, feasibly, you can't get itback to what it was looking for a very,
very long time.
So, even in the best case scenario, you'restill going to have the Palisades and
(19:08):
the Altadena Pasadena areas.
They're still going to be,have to be cleaned up, and Bill, you know,
I used to live in the Palisades anda number of my friends lost their homes,
a number of others didn't lose theirhomes, but now, really can't live there.
And many of them that who stillhave a home are saying, you know,
there's just an incredibleamount of smoke damage.
(19:30):
My insurance doesn't cover smoke damage.
I'm getting estimates of 50, 60,
$70,000 to clean out smokedamage from my home.
And even if I can move back there,you know, it's going to be five,
perhaps longer years beforeit's a community again.
And they're saying, you know what,I don't really want to go back.
(19:51):
And, of course if they tryto sell their home now,
they'd have to sell atjust an enormous discount.
Yeah, LA is kind of stuck between a rockand a hard place, and yeah, I agree.
I think Congress is going to push hardon Newsom, and at the end of the day,
LA is scheduled to hold the Olympics.
And what I wonder about is in 1984 we hadPeter Ubrath running the Olympics and
(20:15):
they were, I was in university at thattime and, and the city ran beautifully.
In fact, there was less traffic on thefreeways than, than during normal times
because businesses had cooperativelystaggered when they were going to open and
so forth.
So, you need another Peter,you broth to run this, and
(20:35):
you need a lot more people likeyou broth and in city government.
I don't think we have that person now.
I hope they can find that person,him or her.
Right now, I don't see that person.
>> Jonathan Movroydis (20:48):
Gentlemen, in the wake of the fires earlier this year,
there's been nearly a dozen insurancerelated bills proposed in Sacramento,
including legislation that is not soInsurance friendly.
Such as forcing payers to pay homeowners100% coverage, though itemizing losses
allowing fire victims to sue entitiessupposedly complicit in climate change.
This is Senate Bill 222, according tothe California center for Jobs and
(21:12):
the Economy.
This bill would turn climatepolicy into climate litigation.
The center says it would increaseCalifornia residents cost of living on
fuel, electricity and everyday goods.
Quote, gasoline could jump63% to $7.38 per gallon to
diesel 69% to $8.23 per gallon, and
electricity rates could rise up to 55% forindustrial users.
(21:35):
Meanwhile, the state'sinsurance fund is broke and
the private insurance market ismurky in the wake of recent fires.
California's insurance commissioner,
Ricardo Lara denied State Farm Insurance'sinterim rate increases,
which prompted the company toreply in a letter to Lara, quote.
This lack of approval sends a strongmessage to State Farm General about
the support it will receive to collectsufficient premiums in the future to
(21:56):
protect Californians against the risksof loss to their homes, property and
other claims.
State Farm General must seriously considerits options with the California insurance
market going forward, unquote,as State Farm claims.
Lee have Sacramento's decisions weakenthe protection of Californians against
the risk of future property losses?
>> Lee Ohanian (22:14):
Jonathan,
going back to what we've experienced inthe last few years, just remarkably large,
large wildfires destroying a lot ofstructures, killing many, many people.
We have a situation where insurancecompanies are looking at California and,
and they're looking at enormous losses.
And one reason is because we sawduring the LA fires there simply is
(22:37):
inadequate fire protection, andinadequate fire prevention.
Regarding fire preventionthe recently fired LA fire chief,
not so long ago said,I need a budget to have.
I believe she indicated,I don't remember the exact number,
but two crews, let's say two crews forfull-time brush removal and
(23:02):
in brush removal had been beingconducted by volunteer teen crews.
So, when you read something like that youjust ask yourself, well yeah, of course we
need to have brush removed, and of courseit needs to be professionally done and,
and by people who are staffedby the fire department.
So you,
why wasn't that happening in a city witha budget of the size of Los Angeles?
(23:26):
So, if you're an insurance company, you'regoing to look at that and just say hey,
they're not doing, I don't think they'redoing the basics, which means hazard,
fire hazards in California in theirmind suddenly have skyrocketed.
Nobody ever thought we would seethe Palisades become an inferno.
So they're looking, they've got tomake a competitive rate of return, and
(23:47):
they simply can't do that in California.
The way policy has been beingconducted now, without charging
enormous premiums and at the same time,State Farm, Allstate.
Farmers, all of these big companies thathad been offering homeowners policies in
California, they have to subsidize that.
(24:07):
I mean, they have to helpfund California Fairplan,
which is the insurer oflast resort in California.
And the amount they contribute toCalifornia Fair Plan is approximately
proportional to the amount of businessthey write on traditional insurance plans.
So they're looking at California and justsaying this is just gonna be a money pit.
(24:28):
And interestingly, in [COUGH] Justa few days before the Palisades fire,
another wildfire broke out very close tothe site of the second Palisades fire.
No conclusions have been issuedregarding the source of that fire,
what the cause was.
(24:48):
Some believe the,the original fire somehow was rekindled.
But in any case,that fire was contained very quickly.
I believe it was on New Year's Eve,about one week before the inferno.
What we saw about a week lateris a much slower response.
A more limited response in terms of whenwater was dropped on the Palisades fire,
(25:12):
according to one eyewitness.
So if you're an insurance company,you're thinking, I've got to have enormous
premiums to make it, to make it worthmy while to do business in California.
And the state's just gonnahave to realize that.
And either we lose insurance, or
we have to allow them tocharge much higher premiums.
(25:33):
But, the best scenario is we get inwith those insurance companies and say,
you know what?
We're going to do a lot better.
We're going to do a lot better interms of prevention and protection.
So please don't leave our state.
>> Bill Whalen (25:48):
Yeah, let's go back to the notion here of SB2, 2 and
the idea of allowing fire victims to sueentities complicit in climate change.
Complicit gives you an incrediblywide umbrella leaf for
who's related to climate change.
You can say oil companiesyou want to find.
You could say construction companies,you could say manufacturing companies,
(26:09):
retail companies.
Lee, this just sounds like a bonanza fortrial lawyers, plain and simple.
I just wonder,
I wonder how long in California beforewe're going to actually have people going
to law school specializing inlawsuits related to climate change.
How long before you going to see ondaytime television lawyers advertising not
for auto accidents and claims,but climate change as well?
I'm being a little sarcastic here,but, you know, years ago, we had a,
(26:30):
a ballot measure back in the mid-1990s,it was a shareholder lawsuit initiative.
And this is one of the first measuresin California that really got the tech
community up in arms, because why?
This initiative would have allowed LeeOhanian, as a shareholder in the company,
to sue the company in effectif its stock prices went down.
And of course, the tech worldlooked at this as, you know,
tech companies always have,you know, fluctuating stock values.
(26:53):
They thought, God,we can't stay in business.
This happens.
Well, this sounds like a deathblow to insurance as well.
And Lee introduces the new doublewhammy in California, which is, A,
can you afford to buy a house?
And B, if you're so lucky as to afford tobuy a house, can you afford the insurance?
>> Lee Ohanian (27:07):
Yeah, yeah, Bill, exactly.
>> Bill Whalen (27:09):
If you can find it.
>> Lee Ohanian (27:10):
If you can find it.
Yeah.I live just south of Santa Barbara, and
my community was affected by a fireknown as the Thomas fire back in 2018.
It's one of those 10 largestwildfires in California history,
measured as acres burned.
You know, Bill,
interestingly, a lot of people inmy community lost their insurance.
My premium rose by a factor ofthree after the Thomas fire.
(27:36):
And I certainly understand why.
It's because I now live in an area that
insurance companies perhapsthought was much safer.
And there was gonna be much betterprotection than apparently there was.
And Bill, the idea of trying to sue forclimate change, I just,
based on my limited knowledge of the law,
(27:57):
I suspect there'd be a lot ofsummary dismissals about this.
It sounds a lot more like policy than,than a well defined lawsuit.
Do you sue the Exxon Mobil?
Do you sue cement companies?
Producing cement createsan awful lot of carbon emissions.
Which carbon emissions were responsible?
(28:18):
Were they ones that,that happened here in California?
Were they ones that happened to China?
China now is responsible for, I believe,
close to 25% of the world'scarbon emissions.
Yeah, I think this is justbarking up the wrong tree.
When threats become large, governmentinvests to deal with those threats again.
(28:39):
That's just the firstorder of business and
that's not being effectively donein the state, in my opinion.
>> Bill Whalen (28:44):
Well, for an insurer in California, Lee,
it's going to be like the old show let'smake a deal in door number one and
door number two, and door number three.
Door number one is going to be,well, let's settle out of court,
just avoid the hassle of this.
Door number two,we'll fight them in court.
We'll lawyer up and we'll take LeeOhanian, and we'll go up against me and
I'll just bleed Lee Ohanian.
But door number three, we're just notgoing to deal with California altogether.
(29:05):
We're just going to walk.
And this has been the trend you've beenseeing in California for years now.
The insurers are just getting out of here.
>> Lee Ohanian (29:10):
Yeah, insurers are getting out of here.
Energy companies are very concernedabout doing business in California.
Our refinery capacity in Californiahas declined over the decades.
And California uses a particular blendof gasoline that's not used in other
(29:31):
parts of the country due toour low carbon fuel standards.
So policy message is clearto energy companies.
We'll allow you to stay herebecause we sort of need you.
But we're going to tryto squeeze you on this.
And yeah, insurers may just want so again,if they do not get the rate of return
required in terms of the investmentsthat they're for their shareholders and
(29:55):
the people who invest withthose insurance companies,
they're going to go someplace else.
It's just the most basic economics.
And California can complain andtry to tax them and try to sue them,
they're just not gonna be around.
>> Bill Whalen (30:10):
One last question, Lee, and
I know Jonathan wants tosegue to the next topic.
One last question for you.
If you want to drivean automobile in California,
you have to have proof of insurance.
But if you own a home in California,you don't have to have proof of insurance,
you don't have to have tohave insurance at all.
But the problem with that,
if you don't have insurance is whathappens when your house burns down?
You turn to the state forinsurance, perhaps if you want to,
(30:32):
the next time around.
So question, Lee.
Should California require homeownersto have insurance or not?
>> Lee Ohanian (30:38):
Well, my understanding is that homes with a mortgage,
the lender does require somelevel of homeowner's insurance.
I do not know how much that is.
But those who own the home free andclear don't have to have home insurance.
But Bill, you bring up an important pointbecause I don't know the number of people
(30:58):
who own their home free and clear.
But yes, they can come to the state andsay, my goodness, my house burned down.
I have no insurance.
What do I do now?
So that imposes a burdenon state taxpayers.
And again, the issue comes up is, well,
should I be subsidizing someone whodecided to self insure, take that risk.
(31:19):
If you self insure andtake that risk, then,
you shouldn't be coming andasking us to pay for that.
And at some level, it kind of boils downto Congress looking at California and
seeing a city that didn't do the rightthing and they fired their fire chief and
saying, okay, so you want us to pay for amess that maybe could have been prevented.
(31:41):
Realistically.
Could have been prevented.
Because, look, you just fired your firechief saying that a thousand firefighters
could have been on the job here.
Two or three hundred of themcould be in the Palisades.
That wouldn't have happened.
And we wouldn't be havingthis conversation.
>> Bill Whalen (31:55):
It would be, it would be out of character for the legislature to
embrace the marketplace, but it has toembrace the marketplace in this regard.
When you have insurers leaving California,people who want insurance turn to where
they turn to the state fund forinsurance, which has two flaws.
Number one, it covers, I think,up to $3 million for your home.
And in the Palisades, $3 million doesn'tget people very far, some people at least.
(32:15):
But secondly,that fund's running out of money and
there's just not enough money to goaround as people keep flocking into it.
So California is going to haveto find more money for it.
If you look at the state budget right now,
we, we don't have moneyto go around like that.
So again, the states are going to have tofind a way to rejuvenate the marketplace,
plain and simple.
>> Lee Ohanian (32:32):
Yeah. The UCLA Anderson Business School Forecast
project, I believe,estimated somewhere around 150 billion
in property losses for the state,something along those lines.
And one of my columns citesanother estimate of losses,
including economic losses,the loss of life and so forth,
(32:56):
I believe around $250 billion.
Yeah, this is off the charts.
Yeah, again, it's like the the statebudgets was under tremendous pressure
even before, even before January of 2025.
>> Jonathan Movroydis (33:09):
A new poll is showing Kamala Harris as the overwhelming
front runner in the 2026 Californiagubernatorial elections,
with 57% of respondents expressingsupport for her candidacy.
Bill, you write in Californiaon your mind that week,
how formidable would Harris be shouldshe sets her sights on Sacramento?
Look no further than this Emerson Collegepolling slash inside California Politics
(33:31):
and the Hill survey.
Harris checks in with 57% support,as I just mentioned,
six times better than formerCongresswoman Katie Porter with 9%.
The rest of the pack is at 4% apiece,Lieutenant Governor Eleni Kunalakis and
former Los Angeles Mayor Antonio Viragosa.
Meanwhile, 17% ofthe electorate was undecided.
Bill, if she does decide to indeed run forgovernor,
(33:52):
does that mean she would likely haveto skip out on a presidential contest,
being that she was justelected to Sacramento?
You write that there is some precedent.
Please explain.
>> Bill Whalen (34:03):
Well, the president would be somebody who you're familiar with, and
that would be Richard Milhouse Nixon.
Jonathan who of course runs for presidentin 1960, loses, and in 1962 runs for
a governor of California and loses.
But that's not the end of the story forNixon.
As we know, McConnell is in a verydifferent situation in several regards.
Number one, it's an open race in 2026.
Gavin Newsom is term limited.
(34:23):
He can't go again.
So the seat is there for
the taking whereas Nixon in 1962 ranagainst Pat Brown, Jerry Brown's father.
But this field is just wide open inthis regard, 57% is a staggering number.
It suggests that unless she justhas the mother of all collapses.
I hate to match what would happento her to cause her to go down so
far as to not finish first orsecond in the open primary.
(34:45):
She would finish first or second.
If she were to draw a Republican asher opponent, she would win easily.
If she were to draw a fellow Democrat,she'd probably still prevail just based
on, you know, her standing in the party,her own formability in that regard.
But what got me to thinking about thiswas, okay, if she wanted to have both her
cake and eat it too, run for governor,then turn around and run for president.
And here I looked at Jerry Brown,who did this twice, 1976 and 1980.
(35:10):
Brown comes to office in 1975, andhe does run for president, but
he doesn't run Lee and Jonathanuntil March of the following year.
He has waited forthe Democratic field to play out a bit.
Jimmy Carter is now the front runner.
The party is uneasy about Jimmy Carter,people like Hubert Humphrey and
Scoop Jackson and
others are kind of circling aroundat the thinking about getting in.
And Jerry takes the plunge, makes himselfbasically a favorite sun candidate in
(35:32):
California, andruns to several other primaries.
The primary process back then,by the way, was much more backloaded,
much more action in March, April, May andJune than in the current situation.
So Jerry could run now,obviously he didn't get the prize.
The problem for
Kamala is everything's on a faster pacein presidential politics these days.
If, when she ran in 2019,she announced in early January of 2019 and
(35:52):
other Democrats were gettingin at the same time as well.
If she were to do the same in 2027,announcing in 2022 that year that she's
running for president, well, she'staking the oath of office as governor in
the first few days of the month, andthen you're going to tell me two,
three weeks later,she's going to announce for president.
No, that just can't happen.
So the only feasible scenario forher doing this, if she does run and
(36:15):
become governor of California, she wouldhave to wait and let the process play out
like Brown, and she would have tobank on chaos, and she'd have to bank
on some terribly flawed frontrunnerwho the party was freaked out about.
Perhaps she could then run asa favorite daughter candidate, or
whatever the proper terminology would be,given her gender, and play it from there.
(36:35):
But, people like me every four yearswrite about this stuff, and we like
to talk about the open conventions andfavorite sun candidates, blah, blah, blah.
And it never pans out, so the answer toyour question is no, she can't do both,
I don't think.
But the more intriguing question,Lee and Jonathan, is this,
is she the right person for the job?
And here I have two concernsthey're not partisan concerns, but
I think they're legitimateconcerns in this regard.
(36:58):
One, there's nothing to suggest that sheis a wonk, that she really is fueled
by policy, which California governorshave to be because it is a walk job.
You're just dealing with policy 24,7, around the clock.
Secondly, she has a terrible recordin terms of staff retention.
And I worked for Governor Pete Wilsonin the 1990s in California who
(37:18):
benefited from staff loyalty.
He had aides around him who went back withhim for 10, 20, 30 years in politics.
And that creates staff loyalty andultimately presents a better operation.
But I don't know, Lee.
I just look at her running for governor.
She's obviously processinga lot right now.
She just signed a contract withCreative Artists CAA in Los Angeles,
which means she'll be giving speeches,maybe she'll write a book.
(37:41):
But does she really want to bethe governor of California?
>> Lee Ohanian (37:45):
I can't imagine anyone really wanting to be governor of
California, just given the enormousproblems that we face.
And Bill, the poll numbers youcited were very interesting.
I can't help but
just think that those poll numbersare just more about name recognition.
>> Bill Whalen (38:01):
Yeah.
>> Lee Ohanian (38:02):
Than really much else.
I suspect if you, sample, you walk downthe street of any major city in California
outside of Sacramento and you ask,hey, who's the lieutenant governor?
I don't think a whole lot ofpeople would know Eleni Kunalakis.
Bill, interestingly,I checked her website, and
(38:22):
I believe she's received endorsementsfrom Hillary Clinton and
former Senator Barbara Boxer,which I thought was interesting.
There is Tony Atkins, who is inthe state legislature from San Diego.
Again, I don't think anyone outside of SanDiego is going to know who Tony Atkins is.
There's Tony Thurmond,state school superintendent.
(38:45):
Again, I don't think many peopleare going to know who he is.
So you go down that list, andeveryone knows who Kamala is, but
no one knows who the other people are.
They're going to know who Villa Ragosa is,but
I worry that the job is way over the headof your former vice president Harris I
believe is over the head of ThurmondKunalakis has is an interesting story
(39:09):
she was in the you know her family'sin the construction business her dad
is a great rags to riches story thatwe've seen so many times in this state.
But I believe my understanding is thatshe's been away from that since the Obama
administration when he tapped her fora diplomatic position I
believe was in in somewhere inEastern Europe she was ambassador.
>> Bill Whalen (39:32):
To Hungary so
full disclosure her husband Marcos Kakisis a Hoover Institution fellow so
we're we're friends with Marcos.
But you know, Lee this speaks to reallya bunch of people just mentioned they're
running just invisible if not invisiblevery low profile governor's races
especially the lieutenant governor.
If you go back and look at how GavinNewsom went after this job, he announced
almost right after the 2010 elections justgot in first and just established himself
(39:55):
and was very busy as lieutenant governorexcuse me he jumped in after the 12th.
The 2014 elections,I should say, pardon me, but
was also very busy in termsof promoting initiatives and
keeping himself in the news where shewas not used her office that way.
And when you see her at4% in that Emerson poll,
that suggests that she isperhaps not taking her office.
Right.But what stands out, Lee,
(40:16):
is also this USC poll from lastSeptember which looked at the field
without Komla in it, and it hadKatie Porter as the front runner, 14%.
But Porter ran forthe Senate earlier that year.
So again, it's a name recognition thing.
What stands out here, Lee and Jonathan, isalmost 50% of the people in that poll were
undecided, which suggests maybethey're looking for something else.
And if it's not Kamala, I wonder, goingback to a previous governor's race in
(40:40):
2010 when Jerry Brown ran against GavinNewsom, we forget Newsom actually ran for
governor briefly in 2009.
He couldn't get traction, wasn'tgetting anywhere in the poll numbers.
It just wasn't working.
He sensibly dropped out and later jumpedon the lieutenant governor's race.
But when Newsom dropped out of thatrace and it was just Jerry Brown,
very interesting poll came out andit showed that about 60 plus percent of
(41:03):
Democrats polled wereopen to alternatives.
And I wonder if you get into a situationwhere Kamala does not run and
it's all these otherDemocrats you mentioned, Lee,
all very kind of relativelylow profit Democrats.
If there is an opening for somebody tokind of swoop in and do this, someone like
Rick Caruso down in Los Angeles whocould kind of run as a problem solver,
(41:23):
if you will.
Somebody's not part of the system.
But I just wonder if there will be thatvacuum in the 2026 governor's race.
>> Lee Ohanian (41:30):
Yeah, very interesting.
I like the name of Caruso, who, [COUGH] Ibelieve is a more recently born Democrat,
[LAUGH] Which didn't really end uphelping him in the La Mare race.
Bill is interesting.
He has a shopping center.
He's a major real estate developer.
He has a shopping center in Los Angelesin Pacific Palisades that was saved
(41:53):
because he hired private firefighters.
And some of those firefighters, I believe,came from as far away as Arizona.
>> Bill Whalen (42:00):
Yes.
>> Lee Ohanian (42:02):
So you look at that and you just think, so
we can get firefighters from Arizona in,in time to fight the fire, and yet
we have our own guys aren'tthere to fight the fires.
And Bill, I look at the,serious thing about Katie Porter.
She ran for the Senate,she lost essentially to Schiff.
And I recall Schiff, I believe wasreceived much more significant support
(42:26):
from the, from the party as I recall.
>> Bill Whalen (42:28):
Well, this gets into now the politics of Washington.
Schiff carried the water onthe first Trump impeachment.
He was a Pelosi loyalist and so he verysmartly ran about the job by getting
Pelosi and Democratic money behind him.
And Katie Porter rufflesa lot of feathers.
She supposedly doesn't getalong very well with Rob Bonta,
the Attorney General who was thinkingabout running for governor but
then dropped out andsaid he'll run for a second term.
(42:49):
And some people in Sacramento willsay he's doing that because, A,
he thinks Connell's going to run but,B, he doesn't want Porter running for
that job,[LAUGH] If she drops out of the race.
So a lot of kind of funny inner workingswithin the Democratic Party, but you know,
at the end of the day it'sstill a one party state.
You have at least two Republicanslooking at this race.
One is already in the race.
That's Riverside CountySheriff Chad Bianco,
(43:11):
Steve Hilton, the former Fox News host,he is going to jump in.
Presumably he has a book coming outin March and he's going to jump in.
And then there's Rick Crinnellwho is very big in Trump world,
who has said that if Kamala runs,he'll run as well.
Well, now we get into the math problem,gentlemen.
You cannot put threeRepublicans on a match.
You can't put threeRepublicans into a prim.
(43:31):
They'll dilute an alreadyrather thin vote.
It'll just put twoDemocrats in the runoff.
>> Lee Ohanian (43:35):
Yeah, I believe state registration for Republicans is,
I believe it's under 30%.
>> Bill Whalen (43:42):
So it's about 24%.
Basically, it's about 46, 24 in termsof the Democratic Republican state.
So we are, so yeah,we're divided between the two.
So you need one dominant Republican ifthe idea is to get to at least November.
And you're going to say, well,does it really matter in November?
It does.In terms of turnout,
if you don't have a Republican at the topof the ticket, it's dispiriting for
(44:02):
some people.
They just don't want to vote andthat that cost you down ticket.
>> Lee Ohanian (44:06):
Yeah, and Bill,
you make an interesting pointregarding the timing for Harris.
If she was to be governor becausethe way politics runs today,
she would literally have toenter the presidential race.
I think probably the maximum,the maximum delay would be what?
Maybe late spring, early summer of 2027.
>> Bill Whalen (44:27):
I think she plays it this way.
I think she,I think now with her new friends at caa,
you're going to see her start giving somespeeches and she's going to go out and
test the waters a little bit andsee what the reception is.
Mitt Romney went through this,by the way, in 2013, 2014.
He was thinking aboutrunning again in 2016.
And he very smartly ran around the countryand talked to Republicans in various
(44:48):
states and he just got a kind of a badreaction, just Republicans saying, we,
we like you a lot, Mitt, but in otherwords, we're looking for something else.
So maybe she'll play it that way.
She'll go around andtry to kind of test the waters and
see if there's an appetite forher to run presidentially or not.
I mean, she could,if she wants to be national,
she could easily become something likethe president of Common Cause and
(45:09):
reestablish a national presence,if you will.
But again, I just to close out on this,there are good models for
being a governor of California,not so good models.
I'm afraid she's in the camp, not good so
model, given that she's just notintellectually curious by her nature and
just her management skillsare somewhat suspect.
>> Lee Ohanian (45:26):
Right, right.
I mean, your column pointed out justthe enormous amount of staff turnover
that occurred in her office.
And the Democratic Party isan interesting place now.
They're having to go through, you know,
the difficult process of perhapsrediscovering of who they are.
And if their 2028 candidate is going tobe somewhere much closer to the middle.
(45:46):
Someone more likeKentucky Governor Andy Beshear or
Pennsylvania Governor Josh Shapiro or
someone like Maryland Governor Wes,I can't remember his last name.
>> Bill Whalen (45:58):
Wes Moore.
>> Lee Ohanian (45:59):
Yeah, Bill,
I honestly don't know why she wouldwant the job of governor right now.
What, I think her life wouldbe much better if she didn't,
if she didn't have that.
But we'll, it's a concerning time for
me because we need someone who's going tobe able to get common sense things done.
(46:20):
I like the idea of Villaraigosa, but he,he's getting absolutely no traction now.
And he, he didn't in previous,I believe it was in 2018.
He tried right.
>> Bill Whalen (46:32):
Against Newsom in the primary.
>> Lee Ohanian (46:33):
Yeah, didn't get any attraction then.
>> Jonathan Movroydis (46:35):
Gentlemen it was announced earlier this month that
the famed California born chain In N Outwill be closing its Irvine corporate
office and consolidating its west coastoperations back up in LA county and
Baldwin Park.
Meanwhile, the chain is expanding itsoperations eastward in Tennessee with 35
new locations anda regional office just outside Nashville.
Not an economic blockbuster, butthe Tennessee's Economic and
(46:58):
Community Development Department showedwisdom in offering tax credits to set up
shop for In N Out.
Is there a California versionto the story, gentlemen?
Last fall Governor Newsom proposeddoubling tax credits from 333 million to
750 million for the film industryto stay in the Golden State.
Lee, is Newsom a devotee oftrickle down economics and
how else might he be creativewith business incentives?
>> Lee Ohanian (47:20):
There's kind of two ways to grow an economy from policy point
of view.
One is to have a remarkably productive setof fundamentals in the state that make
people want to set up shop and expand and
create new businesses because yourstate is a great place to do business.
California is struggling on that fronta bit in terms of friendliness towards
(47:41):
businesses regarding perceptions by CEOs.
They don't view California asa good place to do business.
The Tax foundation,which is a nonpartisan research institute,
ranks California poorly in terms of taxes.
There's litigation issues and labor issueswithin California that make it a less
complaining place to do business than.
Many other states.
So it takes time to turn that around.
(48:04):
So in the meantime, given the relativelyshort term vision of politicians,
you tried to do other things that make itattractive for business to stay in place.
So we've been losingthe entertainment industry,
the film industry to other states,to other countries.
It looks bad if it happens on your watch.
So the governor understands that and
he's talking about expanding those creditsto try to keep businesses in the state.
(48:28):
And I applaud him for his interest intrying to keep businesses in the state.
On the other hand, the governor's beenin office now for six plus years.
That's a lot of time to try to makechanges in policies where we get taxes,
regulations, reducingthe cost of doing business.
It's unfortunate that wedidn't see that happen more so
(48:49):
under the governor's watch thus far.
>> Bill Whalen (48:51):
No, Lee, what caught my eye with this story was you see this and
you first glance you think, my gosh,in and out's moving to Tennessee.
That's not the case,they're branching out into Tennessee.
But it, but what interests me about this,Lee, is that Tennessee has what it calls
the Department of Economic andCommunity Development.
This is Nevada has hadthese operations for years.
Arizona as well.
They look at other states and they tryto draw business from those states,
(49:14):
get them to invest in their states.
And it seems to be a trendin America right now.
Blue states are playing defense and
red states are playing offense whenit comes to this kind of attraction.
The question then,getting back to California, Lee,
is how could California playoffense in a game like this?
We talk about chunking out money forthe film industry,
have conversations about tax credits for,production infrastructure or
(49:36):
workforce development or things like that.
So I again, just getting back tothe idea of creative government.
I just don't think economically the powersto be in Sacramento are thinking on a high
enough level here.
>> Lee Ohanian (49:47):
No, Bill, they aren't.
And I think their oneproblem is one-party state.
I've spoken to people within the state,
either within the Democratic Party orvery close to the Democratic Party,
Republicans who are working withDemocrats within the state.
And I'm told that there'senough sensible Democrats,
(50:09):
ones who are talking likeyou're talking right now, but
who are reluctant to try to advance thoseideas because they tend to be younger,
they've been in politics for a shorterperiod of time than the leadership and
they don't want to buck the leadership.
And Bill, you're absolutely right.
I think when it comes to thinkingabout the leadership, in my view,
(50:33):
they're very partisan.
In my view, they're not willingto make the kind of investments
that you're thinking about andwhat will continue to happen,
which is more people locatingto places to Florida,
to Texas, to Nevada, to Tennessee.
Nashville is a rapidly growing citybecause at the end of the day it's
(50:57):
easier to make a profit there.
It's easier for people to live in thoseareas on the income that they can earn.
Bill, when you look at kind of livingin California, the average rent,
the median rent right now on a Californiaapartment low is about 2,700
to $2,800 per month for apartmentsthat are on the market presently.
(51:21):
The qualifying income for suchan apartment given the normal 30% standard
of pretax income allocated tohousing is over a $100,000 and
the median household incomein California is under that.
So it's just become a state that's sodifficult, so expensive to live in for
a large number of people andthat spills over to businesses as well.
(51:45):
So, yep, we love in and out.
They're sensibly expanding to the east.
We're going to see,I suspect we'll see that as time goes on.
>> Bill Whalen (51:53):
So this is all food for
thought as the Academy Awardsare coming up this Sunday.
You're gonna, if you watch it on TV,you're gonna maybe notice one thing.
The film industry is changing.
Even watching the Oscars is changing.
I'm not sure whatthe ratings are going to be.
I'm not sure if any of us on thiscall could name three Oscar movies,
much less have seen Oscar nominated film.
So times are changing and again,I just think that, you know,
(52:15):
California is strugglingto keep up with the times,
especially when it comes to tryingto bring business into the state.
And that's all I have tosay about it Jonathan.
>> Lee Ohanian (52:23):
And Bill,
are there going to be anyfistfights this year at the Oscars?
>> Bill Whalen (52:28):
Well, they're gonna be fist fights.
How many red hands are we going to see?
Which are signs ofPalestinian affiliation,
how many anti-Trump tirades or so forth?
Are they gonna go with Bob Dylan or
they gonna go with somethinggoing after the Vatican.
Who knows what direction they go.
But it's just the Oscars are justkind of fast becoming a bygone of a,
(52:48):
of a different era.
And California sadly in its economicapproach is kind of in the same camp.
>> Jonathan Movroydis (52:54):
Well, as always, this has been an hour of interesting and
timely analysis.
Gentlemen, thank you for your time.
>> Lee Ohanian (52:59):
Thank you. >> Bill Whalen
>> Jonathan Movroydis (53:00):
You've been listening to Matters of Policy and
Politics, the Hoover Institutionpodcast devoted governance and
balance of power here in America andaround the free world.
Please don't forget to rate, review and
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(53:22):
And Lee Ohanian is also on X.
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Please visit the Hoover websiteat hoover.org and sign up for
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Also check out California On Your Mind,where Bill Whalen and
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Again, this is Jonathan Movroydis sittingin Bill Whalen's chair this week.
He'll be back for another episodeof Matters of Policy and Politics.
Thank you for listening.
>> Presenter (53:43):
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[MUSIC]
>> Jonathan Movroydis (00:04):
It's Wednesday, February 26, 2025, and you are listening
to matters of policy and politics,a Hoover Institution podcast devoted to
governance and the balance of power herein America and around the free world.
I'm Jonathan Movroydis, Senior ProductManager at the Hoover Institution, and
I'm sitting in the chair of Bill Whalen,
the Virginia Hobbs Carpenter DistinguishedPolicy Fellow in Journalism.
So that he can answer questions and
provide commentary about California policyand politics in which he is well versed.
(00:27):
Bill Whalen, in addition to beinga Washington Post columnist,
writes weekly for Hoover's Californiaon youn Mind Web channel.
Whalen is joined today by Lee OhanianHoover Institution Senior Fellow and
Professor of Economics andDirector of the Edinger Family Program in
Macroeconomic Research at the Universityof California, Los Angeles.
Ohanian also writes weekly about thepolicy environment of the Golden State for
California on your Mind.
Good day gentlemen, let's talk aboutthe latest developments in policy and
(00:49):
politics in the Golden State.
Let's start this episode withdiscussing Lee's column last week for
California's on your mind.
Lee, you deal with the Golden State'schallenges with wildfire prevention and
containment.
You provide a startling explanation ofwildfire's impact on carbon emissions.
Quote, there is a veritable laundrylist of expensive programs the state has
implemented to address climatechange the cap and trade program,
(01:11):
the low carbon fuel standard,the zero emission vehicle mandate,
which requires automakers to producea minimum level of zero emission vehicles.
The Renewal portfolio standardsrequires utilities to produce a minimum
percentage of electricity from renewables,electrification for
cargo handling equipment at ports,green building codes and
public transit electrification, includingthe state's high speed rail program.
Yet all the carbon emissionsreductions achieved from these and
(01:34):
other programs between 2003 and
2019 were offset by the carbon emissionsfrom California wildfires in 2020 alone.
You also describe California's longhistory of wildfires, but as you know,
nine of the 10 largest fires in thehistory of the state occurred since 2017.
Lee, why are the impacts of thesefires seemingly worse today?
Is this a matter of bad environmentalconditions or just bad policy?
(01:57):
Is there any hope that the state willadopt common sense solutions for
fire prevention, detection and protection?
>> Lee Ohanian (02:03):
Well, Jonathan, the first order of business for state and
local government is toprotect its citizens.
And wildfires have been a partof California seemingly forever.
So the column you referenced describeshow there were descriptions of Santa Ana
winds, which are the very dry, verystrong winds that come out of the desert
(02:24):
that often create conditions that areconducive for wildfires Their description
of those winds that go back to 1847 thatwere described as hurricane like, and
that was before, obviously beforethe state became part of the Union.
So we've been dealing with this foras long as the state's been in the Union.
And what is very concerning is thatthe priorities are apparently, seemingly,
(02:47):
at least to me, are not beinggiven to wildfire prevention,
prevention and wildfire protection.
But the point about climate change isthat the state's all in on dealing with
climate change and carbon emissions.
And as you noted, we have a long list ofprograms to address carbon emissions.
And yet the carbon emissions fromCalifornia wildfires in the year
(03:13):
2020 alone, just that year,were more than twice as much
as the carbon emission reductionsthat the state achieved
cumulatively between,I believe it was 2003 and 2019.
So when you look at a statistic like that,the state really should look at that and
(03:34):
think, my goodness,everything we've done in a 16
year period has been completely offsetby our wildfires by a factor of two.
And that was just in the year of 2020.
We've had many other severewildfire years, including 2018.
So that really just puts tothe forefront the need to deal
(03:55):
with wildfires in the state.
And what we saw during the LA wildfiresis I think, really unacceptable.
There was inadequate water pressureto fight the Palisades fire,
a 117 million gallon water reservoirin the Pacific Palisades that
(04:16):
was constructed shortly afterthe Bellair fire of 1961.
At that time, the city recognized just howimportant protection and prevention was.
So that reservoir was built after the 1961Bel Air Fire that had been empty for
nearly a year.
And it was empty for nearly a year becauseits cover was waiting to be fixed.
(04:41):
So that really is just playingRussian roulette to let a reservoir
of 117 million gallons sit empty inan area with just enormous fuel for fire.
So there's all sorts of things that canbe done, including the obvious ones,
such as expanding fire investmentsin fire personnel, fire engines.
(05:05):
The columns I wrote over the last monthindicate that the LA Fire Department did
not pre deploy fire equipment fire enginesin the Pacific Palisades before that fire.
And apparently therewere 1,000 firefighters
who could have been called inprior to the fire starting.
So this just really highlightsthe best decisions are not being made.
(05:29):
So when you ask, will common senseprevail, we all certainly hope so.
We lost 29 lives in the LA fire.
In the Eaton fire, ewve lost many morelives than that over the last few
years during wildfires, andit's remarkably sad and remarkably tragic.
(05:51):
And California as potentially the mostinnovative, technologically innovative
state in the country, we really need to bethinking outside the box and doing more.
There's all sorts of developmentsin artificial intelligence and
machine learning that in my opinion,
could be leveraged to identify firesbefore they burn out of control.
(06:14):
For example, the Palosaves firewas called in by residents, right?
If it had been identified earlier, then,
then you can get thesethings under control.
So it's, I think, a very tragic and sadday for us when this happened last month.
>> Bill Whalen (06:28):
So Lee, it seems to me when California reaches a situation like
this, you got one of two roads to take.
One is you can throw a lotof money at the problem.
And we're going to talk abouta lot of money in a minute in
terms of what the Governor wants outof Washington in the way of help for
the recovery for Los Angeles, almost$40 billion in aid they're asking for.
But there's also the question ofmaking government smarter, Lee.
(06:48):
And it seems to me that you can throw allthe money in the world at this situation,
but if you don't make the states smartharder at how it goes about these things,
you're going to be back to square one,as always, when fires break out.
So you've written a lot about this, Lee.
How would you make governmentsmarter in this situation?
>> Lee Ohanian (07:04):
Well, I think at some level we need political leadership that's
going to prioritize what government issupposed to do, which is to protect us.
It's just obvious to me thatthat has not been a priority.
When you look at the LA city budgetin the most recent fiscal year,
I believe approximately 6% ofthe budget was devoted to Fire.
(07:29):
And I went back, went back a couple ofdecades and looked at the budget from
about 20 years ago, and that budget hadover 8% of the budget allocated to Fire.
Now, it turns out those 2 percentagepoints are very important because the LA
city budget is very, very big.
So what that means is that if wehad just maintained the share of
(07:53):
the budget that was allocated to firein 2020, in fiscal year 2024, 25.
As we had 20 years ago,there would have been millions, millions,
tens of millions moredollars available for fire,
which would have meant more firefighters,more equipment.
We wouldn't have had this lack ofpersonnel that, in my opinion,
(08:16):
was a contributing factor tothe fires getting out of control.
So we need to put,safety has to be the number one priority.
And I have concerns about whetherthe current political leadership
in places like Los Angeles justhave the ability to do that.
(08:37):
So, in my opinion, I think the firstsort of business is we need people who
are going to prioritize what people reallyneed here, and that's public safety.
>> Bill Whalen (08:45):
Yeah, so again, we can put a lot of money into fire prevention or
at least fire responses,put more firemen on payrolls,
have better infrastructure and so forth.
But I think we have to addressthe root causes of the fires,
which gets into questionsof land management, leaks.
But one which I'd like to address herebriefly, which is the homeless situation
in Los Angeles, because you havehomeless encampments across Los Angeles,
(09:05):
many of them under freeways.
There was a fire a coupleyears ago in Los Angeles,
probably caused byan encampment under a freeway.
Homeless people go out in the wild aswell, can start fires out there as well.
So this gets the idea though ofmore sensible government and that,
well, you have to address root causes.
And one of the problems here isthe homeless population in Los Angeles,
which is a big part ofMayor Karambass's agenda.
(09:25):
Something she's made a pointwhen she got elected,
she was going to handle the homelessproblem once and for all.
>> Lee Ohanian (09:31):
Yeah, homelessness is an important issue.
What the piece I wrote indicates somestatistics about homelessness, and
the contribution of homelessnessto fires in Los Angeles.
And I believe over 50%of fires in Los Angeles,
I don't recall the exact year,were due to homeless.
(09:52):
And that includes the homelesstapping into electricity lines
which then obviously spark,and cause fires.
And Mayor Bass said she wasgoing to deal with homelessness,
the needle hasn't beenmoved in Los Angeles.
The homeless numbers now,are about the same as they were,
as I recall,around the time she took office.
(10:15):
And moreover, Bill, when you talk aboutkind of throwing money at problems,
California has not been very effective atthe investments we made in homelessness.
Between, I believe was fiscalyear around 2019 to 2000,
that please the 1819 to 23,24 fiscal years,
that five-year period, the statespent 24 billion on homelessness.
(10:38):
Right, 24 billion, and
the number of homeless increasedsubstantially during that period.
The state auditor reviewed some ofthe programs in California regarding
homelessness and issued, I think,what can't be called anything other than
a scathing report indicating that notenough information was being collected.
(10:58):
The accounting was inadequate forthe expenditures, and
California simply isn't in a position tounderstand what programs are working well.
It's hard to know where the money's going.
And the same thing, a similar thinghappened in Los Angeles with I think
over $100 million being that wasn'teven spent on homelessness, that was
(11:20):
allocated in a previous fiscal year forLA city budget, but wasn't even spent.
So, I think the LA political leadership,I think is in over their heads.
I think we've seen that when,sadly, when crises hit,
it really tests the mettle of politicalleaders, can they bring people together?
Can they make decisions on the flythat turn out to be sensible?
(11:44):
I think what we saw here,is political leadership that it's hard for
me to find words for this, that simplyreally didn't have any idea of what to do.
Mayor Bass got off a flight, she had goneto Ghana, she turned around and came back.
I think that's probably a 12,or 13 hour flight.
And when she got off the plane, she wasasked by reporters about what her plan
(12:06):
was and what was going to, you know,how we were going to save Los Angeles.
And I don't believe she uttered one word.
She didn't,>> Bill Whalen: [LAUGH]
She had 10, 12,
14 hours to communicate with her staff,with people in Los Angeles and
there was simply, there was simplyno plan as far as I could tell
from her not answering those questions.
(12:28):
So, Bill?
Yeah, I think we do,we have big budgets in the state,
we have a big budget in Los Angeles.
And you look at what's happening, and it'sjust hard to square that with the public,
the public safety outcomeswe're seeing now.
>> Bill Whalen (12:42):
So, Lee, speaking of leadership, Governor Newsom on Friday sent
a letter to congressionalleadership asking that the fed send
California $39.68 billion in aidto help Los Angeles recover.
I won't go through the entire list ofwhat all 39.68 billion gets you, but
long story short.
It includes about $5.29 billion toprovide low interest loans to businesses,
(13:07):
nonprofit organizations, $4.32 billion forbusiness grants, $2 billion for
low income housing tax credits, andleave $5 billion for debris cleanup.
Now, this is going to be veryinteresting to watch how this moves or
does not move through Washington.
A Republican Congress [LAUGH] AtWashington, which is looking at spending
(13:29):
in general, maybe not at first blushwanting to send $40 billion to California,
but political reality meansit'll send something.
It would seem to be leaded the first,maybe the smart approach for
Congress would be to do this, number one,obviously go through this, this relief
package with a fine tooth comb, andexamine what $39.68 billion comes up to.
(13:51):
I'm always a little leery, by the way,when you get something that comes
in just under something with the zeroon the end, it's kind of like selling
a product to you for $99.99,because why it looks better than $100.
But I think two things, Lee,
they obviously need to go throughthe line items here, but secondly,
they should probably fast trackthe $5 billion for debris cleanup.
Because if you look atLos Angeles right now, Lee,
(14:14):
this seems to be the paramount issue foreverybody wants to clean up.
And here, you have a chokepoint problem in Los Angeles.
It's a combination of two things, one iswhere are you going to park the dirt?
And the other one being how long will ittake to inspect the debris to make sure
that it's clean so you can take it away,asbestos issues and so forth.
So, I don't know, what do you think, Lee,is debris cleanup issue number one here?
>> Lee Ohanian (14:36):
Yeah, 100% estimates are as long as 18 months for
the debris to be cleaned up.
And Bill, ironically,in December of last year, so
about a month before the, beforethe LA fires, Mayor Bass gave a press
conference celebrating all the greeninvestments that Los Angeles had made.
(14:58):
How many workers there were ingreen energy industries, and
the number of EV electric vehicle chargingstations that the city had had put in.
And, you know, just getting back tothe idea about what is the priority,
those should not be the prioritiesahead of fire protection.
And we saw that at some level they were.
When you look at debris cleanup,Bill, ironically,
(15:20):
you know, there's more EVs inLos Angeles than any other city.
Pacific Palisades is an area ofrelatively high household income.
I don't have any numbers on this, but Isuspect proportion of electric vehicles in
Pacific Palisades are probably higherthan most other places in Los Angeles.
And what happens when a Tesla getscaught in an inferno is you've got all
(15:42):
those batteries and those batterieshave a lot of elements that are toxic.
So, ironically, what was supposed tosave the climate, electric vehicles,
is now creating toxic wastethroughout Pacific Palisades.
The EPA has to go in there and yes,where are they going to park that?
(16:03):
Where are they going topark that toxic dirt?
Maybe, somewhere in Nevada, potentially.
But it could, the estimates are 18 months.
When it comes to government work, I rarelysee something being done under a timeline.
So if you go over time, then you'relooking at greater than 18 months.
(16:23):
So yeah, it's priority number one,it's going to take a long time.
And it's interesting, Governor.
Yeah, it's obvious Governor Newsomwould be asking for federal support.
Now, Karen Bass fired the LA fire chiefa couple of days ago, and essentially for,
incompetent performance, including notdeploying more firefighting resources.
(16:47):
So, with that happening, I think Congressis going to say, you want us to pay for
the, the policy mistakes thatare occurring in your state.
That's a little different from saying,you know, the hurricane came into Florida.
Florida did everything they couldto protect their residents and
(17:08):
now we're going to help them out.
That's very different than saying, whoops,
we didn't do the right things to protectthe people who are coming from here.
>> Bill Whalen (17:17):
Yeah, you mentioned 18 months for debris, Lee,
the timeline here fascinates me.
So, Mayor Bass the other day gave atimeline for getting all of this done and
she said anywhere from three to fiveyears, which, you know, five years,
your eyes kind of bug out.
But that's interesting numberwhen you think about it, Lee.
I looked it up,it took about four years and
four months to constructthe Golden Gate Bridge.
(17:39):
So maybe, we can say in modern dayCalifornia, it's parallel to that,
if you will.
But what's going on three years anda few months from now?
The Olympics are coming to Los Angeles,the world is coming to Los Angeles.
So, this is another wrinkleto this conversation.
While a Republican Congress mightreflexively want to make life difficult
for California, here it is, your Olympics.
(18:00):
Unless, some wild eyed Congressman isgoing to come up with some scheme to move
the Olympics to Texas between now and2028.
It is Los Angeles,it is America by default.
And so, it is kind of in your vestedinterest as a member of Congress to want
to get LA cleaned up faster, rather thanlater, because otherwise you're looking at
an eyesore and ultimately kind ofembarrassment for the country.
>> Lee Ohanian (18:19):
Yeah, it reminds me a little bit of San Francisco, I know a year
or so ago when they hosted the>> Bill Whalen: APEC summit when,
Jinping was coming to town.
Yeah, yeah.
And, interestingly, all the homeless were,were shifted to other places,
including down to Silicon Valley.
So Bill, the Palisades are,
they're far enough away from most ofthe Olympic venues that I don't think
(18:44):
a ton of people would be that they'renot going to be front and center.
But yeah,
it does raise the question of whatare you going to do with the Olympics.
And I think [COUGH] No matter how muchmoney you throw at it, you simply,
you know, feasibly, you can't get itback to what it was looking for a very,
very long time.
So, even in the best case scenario, you'restill going to have the Palisades and
(19:08):
the Altadena Pasadena areas.
They're still going to be,have to be cleaned up, and Bill, you know,
I used to live in the Palisades anda number of my friends lost their homes,
a number of others didn't lose theirhomes, but now, really can't live there.
And many of them that who stillhave a home are saying, you know,
there's just an incredibleamount of smoke damage.
(19:30):
My insurance doesn't cover smoke damage.
I'm getting estimates of 50, 60,
$70,000 to clean out smokedamage from my home.
And even if I can move back there,you know, it's going to be five,
perhaps longer years beforeit's a community again.
And they're saying, you know what,I don't really want to go back.
(19:51):
And, of course if they tryto sell their home now,
they'd have to sell atjust an enormous discount.
Yeah, LA is kind of stuck between a rockand a hard place, and yeah, I agree.
I think Congress is going to push hardon Newsom, and at the end of the day,
LA is scheduled to hold the Olympics.
And what I wonder about is in 1984 we hadPeter Ubrath running the Olympics and
(20:15):
they were, I was in university at thattime and, and the city ran beautifully.
In fact, there was less traffic on thefreeways than, than during normal times
because businesses had cooperativelystaggered when they were going to open and
so forth.
So, you need another Peter,you broth to run this, and
(20:35):
you need a lot more people likeyou broth and in city government.
I don't think we have that person now.
I hope they can find that person,him or her.
Right now, I don't see that person.
>> Jonathan Movroydis (20:48):
Gentlemen, in the wake of the fires earlier this year,
there's been nearly a dozen insurancerelated bills proposed in Sacramento,
including legislation that is not soInsurance friendly.
Such as forcing payers to pay homeowners100% coverage, though itemizing losses
allowing fire victims to sue entitiessupposedly complicit in climate change.
This is Senate Bill 222, according tothe California center for Jobs and
(21:12):
the Economy.
This bill would turn climatepolicy into climate litigation.
The center says it would increaseCalifornia residents cost of living on
fuel, electricity and everyday goods.
Quote, gasoline could jump63% to $7.38 per gallon to
diesel 69% to $8.23 per gallon, and
electricity rates could rise up to 55% forindustrial users.
(21:35):
Meanwhile, the state'sinsurance fund is broke and
the private insurance market ismurky in the wake of recent fires.
California's insurance commissioner,
Ricardo Lara denied State Farm Insurance'sinterim rate increases,
which prompted the company toreply in a letter to Lara, quote.
This lack of approval sends a strongmessage to State Farm General about
the support it will receive to collectsufficient premiums in the future to
(21:56):
protect Californians against the risksof loss to their homes, property and
other claims.
State Farm General must seriously considerits options with the California insurance
market going forward, unquote,as State Farm claims.
Lee have Sacramento's decisions weakenthe protection of Californians against
the risk of future property losses?
>> Lee Ohanian (22:14):
Jonathan,
going back to what we've experienced inthe last few years, just remarkably large,
large wildfires destroying a lot ofstructures, killing many, many people.
We have a situation where insurancecompanies are looking at California and,
and they're looking at enormous losses.
And one reason is because we sawduring the LA fires there simply is
(22:37):
inadequate fire protection, andinadequate fire prevention.
Regarding fire preventionthe recently fired LA fire chief,
not so long ago said,I need a budget to have.
I believe she indicated,I don't remember the exact number,
but two crews, let's say two crews forfull-time brush removal and
(23:02):
in brush removal had been beingconducted by volunteer teen crews.
So, when you read something like that youjust ask yourself, well yeah, of course we
need to have brush removed, and of courseit needs to be professionally done and,
and by people who are staffedby the fire department.
So you,
why wasn't that happening in a city witha budget of the size of Los Angeles?
(23:26):
So, if you're an insurance company, you'regoing to look at that and just say hey,
they're not doing, I don't think they'redoing the basics, which means hazard,
fire hazards in California in theirmind suddenly have skyrocketed.
Nobody ever thought we would seethe Palisades become an inferno.
So they're looking, they've got tomake a competitive rate of return, and
(23:47):
they simply can't do that in California.
The way policy has been beingconducted now, without charging
enormous premiums and at the same time,State Farm, Allstate.
Farmers, all of these big companies thathad been offering homeowners policies in
California, they have to subsidize that.
(24:07):
I mean, they have to helpfund California Fairplan,
which is the insurer oflast resort in California.
And the amount they contribute toCalifornia Fair Plan is approximately
proportional to the amount of businessthey write on traditional insurance plans.
So they're looking at California and justsaying this is just gonna be a money pit.
(24:28):
And interestingly, in [COUGH] Justa few days before the Palisades fire,
another wildfire broke out very close tothe site of the second Palisades fire.
No conclusions have been issuedregarding the source of that fire,
what the cause was.
(24:48):
Some believe the,the original fire somehow was rekindled.
But in any case,that fire was contained very quickly.
I believe it was on New Year's Eve,about one week before the inferno.
What we saw about a week lateris a much slower response.
A more limited response in terms of whenwater was dropped on the Palisades fire,
(25:12):
according to one eyewitness.
So if you're an insurance company,you're thinking, I've got to have enormous
premiums to make it, to make it worthmy while to do business in California.
And the state's just gonnahave to realize that.
And either we lose insurance, or
we have to allow them tocharge much higher premiums.
(25:33):
But, the best scenario is we get inwith those insurance companies and say,
you know what?
We're going to do a lot better.
We're going to do a lot better interms of prevention and protection.
So please don't leave our state.
>> Bill Whalen (25:48):
Yeah, let's go back to the notion here of SB2, 2 and
the idea of allowing fire victims to sueentities complicit in climate change.
Complicit gives you an incrediblywide umbrella leaf for
who's related to climate change.
You can say oil companiesyou want to find.
You could say construction companies,you could say manufacturing companies,
(26:09):
retail companies.
Lee, this just sounds like a bonanza fortrial lawyers, plain and simple.
I just wonder,
I wonder how long in California beforewe're going to actually have people going
to law school specializing inlawsuits related to climate change.
How long before you going to see ondaytime television lawyers advertising not
for auto accidents and claims,but climate change as well?
I'm being a little sarcastic here,but, you know, years ago, we had a,
(26:30):
a ballot measure back in the mid-1990s,it was a shareholder lawsuit initiative.
And this is one of the first measuresin California that really got the tech
community up in arms, because why?
This initiative would have allowed LeeOhanian, as a shareholder in the company,
to sue the company in effectif its stock prices went down.
And of course, the tech worldlooked at this as, you know,
tech companies always have,you know, fluctuating stock values.
(26:53):
They thought, God,we can't stay in business.
This happens.
Well, this sounds like a deathblow to insurance as well.
And Lee introduces the new doublewhammy in California, which is, A,
can you afford to buy a house?
And B, if you're so lucky as to afford tobuy a house, can you afford the insurance?
>> Lee Ohanian (27:07):
Yeah, yeah, Bill, exactly.
>> Bill Whalen (27:09):
If you can find it.
>> Lee Ohanian (27:10):
If you can find it.
Yeah.I live just south of Santa Barbara, and
my community was affected by a fireknown as the Thomas fire back in 2018.
It's one of those 10 largestwildfires in California history,
measured as acres burned.
You know, Bill,
interestingly, a lot of people inmy community lost their insurance.
My premium rose by a factor ofthree after the Thomas fire.
(27:36):
And I certainly understand why.
It's because I now live in an area that
insurance companies perhapsthought was much safer.
And there was gonna be much betterprotection than apparently there was.
And Bill, the idea of trying to sue forclimate change, I just,
based on my limited knowledge of the law,
(27:57):
I suspect there'd be a lot ofsummary dismissals about this.
It sounds a lot more like policy than,than a well defined lawsuit.
Do you sue the Exxon Mobil?
Do you sue cement companies?
Producing cement createsan awful lot of carbon emissions.
Which carbon emissions were responsible?
(28:18):
Were they ones that,that happened here in California?
Were they ones that happened to China?
China now is responsible for, I believe,
close to 25% of the world'scarbon emissions.
Yeah, I think this is justbarking up the wrong tree.
When threats become large, governmentinvests to deal with those threats again.
(28:39):
That's just the firstorder of business and
that's not being effectively donein the state, in my opinion.
>> Bill Whalen (28:44):
Well, for an insurer in California, Lee,
it's going to be like the old show let'smake a deal in door number one and
door number two, and door number three.
Door number one is going to be,well, let's settle out of court,
just avoid the hassle of this.
Door number two,we'll fight them in court.
We'll lawyer up and we'll take LeeOhanian, and we'll go up against me and
I'll just bleed Lee Ohanian.
But door number three, we're just notgoing to deal with California altogether.
(29:05):
We're just going to walk.
And this has been the trend you've beenseeing in California for years now.
The insurers are just getting out of here.
>> Lee Ohanian (29:10):
Yeah, insurers are getting out of here.
Energy companies are very concernedabout doing business in California.
Our refinery capacity in Californiahas declined over the decades.
And California uses a particular blendof gasoline that's not used in other
(29:31):
parts of the country due toour low carbon fuel standards.
So policy message is clearto energy companies.
We'll allow you to stay herebecause we sort of need you.
But we're going to tryto squeeze you on this.
And yeah, insurers may just want so again,if they do not get the rate of return
required in terms of the investmentsthat they're for their shareholders and
(29:55):
the people who invest withthose insurance companies,
they're going to go someplace else.
It's just the most basic economics.
And California can complain andtry to tax them and try to sue them,
they're just not gonna be around.
>> Bill Whalen (30:10):
One last question, Lee, and
I know Jonathan wants tosegue to the next topic.
One last question for you.
If you want to drivean automobile in California,
you have to have proof of insurance.
But if you own a home in California,you don't have to have proof of insurance,
you don't have to have tohave insurance at all.
But the problem with that,
if you don't have insurance is whathappens when your house burns down?
You turn to the state forinsurance, perhaps if you want to,
(30:32):
the next time around.
So question, Lee.
Should California require homeownersto have insurance or not?
>> Lee Ohanian (30:38):
Well, my understanding is that homes with a mortgage,
the lender does require somelevel of homeowner's insurance.
I do not know how much that is.
But those who own the home free andclear don't have to have home insurance.
But Bill, you bring up an important pointbecause I don't know the number of people
(30:58):
who own their home free and clear.
But yes, they can come to the state andsay, my goodness, my house burned down.
I have no insurance.
What do I do now?
So that imposes a burdenon state taxpayers.
And again, the issue comes up is, well,
should I be subsidizing someone whodecided to self insure, take that risk.
(31:19):
If you self insure andtake that risk, then,
you shouldn't be coming andasking us to pay for that.
And at some level, it kind of boils downto Congress looking at California and
seeing a city that didn't do the rightthing and they fired their fire chief and
saying, okay, so you want us to pay for amess that maybe could have been prevented.
(31:41):
Realistically.
Could have been prevented.
Because, look, you just fired your firechief saying that a thousand firefighters
could have been on the job here.
Two or three hundred of themcould be in the Palisades.
That wouldn't have happened.
And we wouldn't be havingthis conversation.
>> Bill Whalen (31:55):
It would be, it would be out of character for the legislature to
embrace the marketplace, but it has toembrace the marketplace in this regard.
When you have insurers leaving California,people who want insurance turn to where
they turn to the state fund forinsurance, which has two flaws.
Number one, it covers, I think,up to $3 million for your home.
And in the Palisades, $3 million doesn'tget people very far, some people at least.
(32:15):
But secondly,that fund's running out of money and
there's just not enough money to goaround as people keep flocking into it.
So California is going to haveto find more money for it.
If you look at the state budget right now,
we, we don't have moneyto go around like that.
So again, the states are going to have tofind a way to rejuvenate the marketplace,
plain and simple.
>> Lee Ohanian (32:32):
Yeah. The UCLA Anderson Business School Forecast
project, I believe,estimated somewhere around 150 billion
in property losses for the state,something along those lines.
And one of my columns citesanother estimate of losses,
including economic losses,the loss of life and so forth,
(32:56):
I believe around $250 billion.
Yeah, this is off the charts.
Yeah, again, it's like the the statebudgets was under tremendous pressure
even before, even before January of 2025.
>> Jonathan Movroydis (33:09):
A new poll is showing Kamala Harris as the overwhelming
front runner in the 2026 Californiagubernatorial elections,
with 57% of respondents expressingsupport for her candidacy.
Bill, you write in Californiaon your mind that week,
how formidable would Harris be shouldshe sets her sights on Sacramento?
Look no further than this Emerson Collegepolling slash inside California Politics
(33:31):
and the Hill survey.
Harris checks in with 57% support,as I just mentioned,
six times better than formerCongresswoman Katie Porter with 9%.
The rest of the pack is at 4% apiece,Lieutenant Governor Eleni Kunalakis and
former Los Angeles Mayor Antonio Viragosa.
Meanwhile, 17% ofthe electorate was undecided.
Bill, if she does decide to indeed run forgovernor,
(33:52):
does that mean she would likely haveto skip out on a presidential contest,
being that she was justelected to Sacramento?
You write that there is some precedent.
Please explain.
>> Bill Whalen (34:03):
Well, the president would be somebody who you're familiar with, and
that would be Richard Milhouse Nixon.
Jonathan who of course runs for presidentin 1960, loses, and in 1962 runs for
a governor of California and loses.
But that's not the end of the story forNixon.
As we know, McConnell is in a verydifferent situation in several regards.
Number one, it's an open race in 2026.
Gavin Newsom is term limited.
(34:23):
He can't go again.
So the seat is there for
the taking whereas Nixon in 1962 ranagainst Pat Brown, Jerry Brown's father.
But this field is just wide open inthis regard, 57% is a staggering number.
It suggests that unless she justhas the mother of all collapses.
I hate to match what would happento her to cause her to go down so
far as to not finish first orsecond in the open primary.
(34:45):
She would finish first or second.
If she were to draw a Republican asher opponent, she would win easily.
If she were to draw a fellow Democrat,she'd probably still prevail just based
on, you know, her standing in the party,her own formability in that regard.
But what got me to thinking about thiswas, okay, if she wanted to have both her
cake and eat it too, run for governor,then turn around and run for president.
And here I looked at Jerry Brown,who did this twice, 1976 and 1980.
(35:10):
Brown comes to office in 1975, andhe does run for president, but
he doesn't run Lee and Jonathanuntil March of the following year.
He has waited forthe Democratic field to play out a bit.
Jimmy Carter is now the front runner.
The party is uneasy about Jimmy Carter,people like Hubert Humphrey and
Scoop Jackson and
others are kind of circling aroundat the thinking about getting in.
And Jerry takes the plunge, makes himselfbasically a favorite sun candidate in
(35:32):
California, andruns to several other primaries.
The primary process back then,by the way, was much more backloaded,
much more action in March, April, May andJune than in the current situation.
So Jerry could run now,obviously he didn't get the prize.
The problem for
Kamala is everything's on a faster pacein presidential politics these days.
If, when she ran in 2019,she announced in early January of 2019 and
(35:52):
other Democrats were gettingin at the same time as well.
If she were to do the same in 2027,announcing in 2022 that year that she's
running for president, well, she'staking the oath of office as governor in
the first few days of the month, andthen you're going to tell me two,
three weeks later,she's going to announce for president.
No, that just can't happen.
So the only feasible scenario forher doing this, if she does run and
(36:15):
become governor of California, she wouldhave to wait and let the process play out
like Brown, and she would have tobank on chaos, and she'd have to bank
on some terribly flawed frontrunnerwho the party was freaked out about.
Perhaps she could then run asa favorite daughter candidate, or
whatever the proper terminology would be,given her gender, and play it from there.
(36:35):
But, people like me every four yearswrite about this stuff, and we like
to talk about the open conventions andfavorite sun candidates, blah, blah, blah.
And it never pans out, so the answer toyour question is no, she can't do both,
I don't think.
But the more intriguing question,Lee and Jonathan, is this,
is she the right person for the job?
And here I have two concernsthey're not partisan concerns, but
I think they're legitimateconcerns in this regard.
(36:58):
One, there's nothing to suggest that sheis a wonk, that she really is fueled
by policy, which California governorshave to be because it is a walk job.
You're just dealing with policy 24,7, around the clock.
Secondly, she has a terrible recordin terms of staff retention.
And I worked for Governor Pete Wilsonin the 1990s in California who
(37:18):
benefited from staff loyalty.
He had aides around him who went back withhim for 10, 20, 30 years in politics.
And that creates staff loyalty andultimately presents a better operation.
But I don't know, Lee.
I just look at her running for governor.
She's obviously processinga lot right now.
She just signed a contract withCreative Artists CAA in Los Angeles,
which means she'll be giving speeches,maybe she'll write a book.
(37:41):
But does she really want to bethe governor of California?
>> Lee Ohanian (37:45):
I can't imagine anyone really wanting to be governor of
California, just given the enormousproblems that we face.
And Bill, the poll numbers youcited were very interesting.
I can't help but
just think that those poll numbersare just more about name recognition.
>> Bill Whalen (38:01):
Yeah.
>> Lee Ohanian (38:02):
Than really much else.
I suspect if you, sample, you walk downthe street of any major city in California
outside of Sacramento and you ask,hey, who's the lieutenant governor?
I don't think a whole lot ofpeople would know Eleni Kunalakis.
Bill, interestingly,I checked her website, and
(38:22):
I believe she's received endorsementsfrom Hillary Clinton and
former Senator Barbara Boxer,which I thought was interesting.
There is Tony Atkins, who is inthe state legislature from San Diego.
Again, I don't think anyone outside of SanDiego is going to know who Tony Atkins is.
There's Tony Thurmond,state school superintendent.
(38:45):
Again, I don't think many peopleare going to know who he is.
So you go down that list, andeveryone knows who Kamala is, but
no one knows who the other people are.
They're going to know who Villa Ragosa is,but
I worry that the job is way over the headof your former vice president Harris I
believe is over the head of ThurmondKunalakis has is an interesting story
(39:09):
she was in the you know her family'sin the construction business her dad
is a great rags to riches story thatwe've seen so many times in this state.
But I believe my understanding is thatshe's been away from that since the Obama
administration when he tapped her fora diplomatic position I
believe was in in somewhere inEastern Europe she was ambassador.
>> Bill Whalen (39:32):
To Hungary so
full disclosure her husband Marcos Kakisis a Hoover Institution fellow so
we're we're friends with Marcos.
But you know, Lee this speaks to reallya bunch of people just mentioned they're
running just invisible if not invisiblevery low profile governor's races
especially the lieutenant governor.
If you go back and look at how GavinNewsom went after this job, he announced
almost right after the 2010 elections justgot in first and just established himself
(39:55):
and was very busy as lieutenant governorexcuse me he jumped in after the 12th.
The 2014 elections,I should say, pardon me, but
was also very busy in termsof promoting initiatives and
keeping himself in the news where shewas not used her office that way.
And when you see her at4% in that Emerson poll,
that suggests that she isperhaps not taking her office.
Right.But what stands out, Lee,
(40:16):
is also this USC poll from lastSeptember which looked at the field
without Komla in it, and it hadKatie Porter as the front runner, 14%.
But Porter ran forthe Senate earlier that year.
So again, it's a name recognition thing.
What stands out here, Lee and Jonathan, isalmost 50% of the people in that poll were
undecided, which suggests maybethey're looking for something else.
And if it's not Kamala, I wonder, goingback to a previous governor's race in
(40:40):
2010 when Jerry Brown ran against GavinNewsom, we forget Newsom actually ran for
governor briefly in 2009.
He couldn't get traction, wasn'tgetting anywhere in the poll numbers.
It just wasn't working.
He sensibly dropped out and later jumpedon the lieutenant governor's race.
But when Newsom dropped out of thatrace and it was just Jerry Brown,
very interesting poll came out andit showed that about 60 plus percent of
(41:03):
Democrats polled wereopen to alternatives.
And I wonder if you get into a situationwhere Kamala does not run and
it's all these otherDemocrats you mentioned, Lee,
all very kind of relativelylow profit Democrats.
If there is an opening for somebody tokind of swoop in and do this, someone like
Rick Caruso down in Los Angeles whocould kind of run as a problem solver,
(41:23):
if you will.
Somebody's not part of the system.
But I just wonder if there will be thatvacuum in the 2026 governor's race.
>> Lee Ohanian (41:30):
Yeah, very interesting.
I like the name of Caruso, who, [COUGH] Ibelieve is a more recently born Democrat,
[LAUGH] Which didn't really end uphelping him in the La Mare race.
Bill is interesting.
He has a shopping center.
He's a major real estate developer.
He has a shopping center in Los Angelesin Pacific Palisades that was saved
(41:53):
because he hired private firefighters.
And some of those firefighters, I believe,came from as far away as Arizona.
>> Bill Whalen (42:00):
Yes.
>> Lee Ohanian (42:02):
So you look at that and you just think, so
we can get firefighters from Arizona in,in time to fight the fire, and yet
we have our own guys aren'tthere to fight the fires.
And Bill, I look at the,serious thing about Katie Porter.
She ran for the Senate,she lost essentially to Schiff.
And I recall Schiff, I believe wasreceived much more significant support
(42:26):
from the, from the party as I recall.
>> Bill Whalen (42:28):
Well, this gets into now the politics of Washington.
Schiff carried the water onthe first Trump impeachment.
He was a Pelosi loyalist and so he verysmartly ran about the job by getting
Pelosi and Democratic money behind him.
And Katie Porter rufflesa lot of feathers.
She supposedly doesn't getalong very well with Rob Bonta,
the Attorney General who was thinkingabout running for governor but
then dropped out andsaid he'll run for a second term.
(42:49):
And some people in Sacramento willsay he's doing that because, A,
he thinks Connell's going to run but,B, he doesn't want Porter running for
that job,[LAUGH] If she drops out of the race.
So a lot of kind of funny inner workingswithin the Democratic Party, but you know,
at the end of the day it'sstill a one party state.
You have at least two Republicanslooking at this race.
One is already in the race.
That's Riverside CountySheriff Chad Bianco,
(43:11):
Steve Hilton, the former Fox News host,he is going to jump in.
Presumably he has a book coming outin March and he's going to jump in.
And then there's Rick Crinnellwho is very big in Trump world,
who has said that if Kamala runs,he'll run as well.
Well, now we get into the math problem,gentlemen.
You cannot put threeRepublicans on a match.
You can't put threeRepublicans into a prim.
(43:31):
They'll dilute an alreadyrather thin vote.
It'll just put twoDemocrats in the runoff.
>> Lee Ohanian (43:35):
Yeah, I believe state registration for Republicans is,
I believe it's under 30%.
>> Bill Whalen (43:42):
So it's about 24%.
Basically, it's about 46, 24 in termsof the Democratic Republican state.
So we are, so yeah,we're divided between the two.
So you need one dominant Republican ifthe idea is to get to at least November.
And you're going to say, well,does it really matter in November?
It does.In terms of turnout,
if you don't have a Republican at the topof the ticket, it's dispiriting for
(44:02):
some people.
They just don't want to vote andthat that cost you down ticket.
>> Lee Ohanian (44:06):
Yeah, and Bill,
you make an interesting pointregarding the timing for Harris.
If she was to be governor becausethe way politics runs today,
she would literally have toenter the presidential race.
I think probably the maximum,the maximum delay would be what?
Maybe late spring, early summer of 2027.
>> Bill Whalen (44:27):
I think she plays it this way.
I think she,I think now with her new friends at caa,
you're going to see her start giving somespeeches and she's going to go out and
test the waters a little bit andsee what the reception is.
Mitt Romney went through this,by the way, in 2013, 2014.
He was thinking aboutrunning again in 2016.
And he very smartly ran around the countryand talked to Republicans in various
(44:48):
states and he just got a kind of a badreaction, just Republicans saying, we,
we like you a lot, Mitt, but in otherwords, we're looking for something else.
So maybe she'll play it that way.
She'll go around andtry to kind of test the waters and
see if there's an appetite forher to run presidentially or not.
I mean, she could,if she wants to be national,
she could easily become something likethe president of Common Cause and
(45:09):
reestablish a national presence,if you will.
But again, I just to close out on this,there are good models for
being a governor of California,not so good models.
I'm afraid she's in the camp, not good so
model, given that she's just notintellectually curious by her nature and
just her management skillsare somewhat suspect.
>> Lee Ohanian (45:26):
Right, right.
I mean, your column pointed out justthe enormous amount of staff turnover
that occurred in her office.
And the Democratic Party isan interesting place now.
They're having to go through, you know,
the difficult process of perhapsrediscovering of who they are.
And if their 2028 candidate is going tobe somewhere much closer to the middle.
(45:46):
Someone more likeKentucky Governor Andy Beshear or
Pennsylvania Governor Josh Shapiro or
someone like Maryland Governor Wes,I can't remember his last name.
>> Bill Whalen (45:58):
Wes Moore.
>> Lee Ohanian (45:59):
Yeah, Bill,
I honestly don't know why she wouldwant the job of governor right now.
What, I think her life wouldbe much better if she didn't,
if she didn't have that.
But we'll, it's a concerning time for
me because we need someone who's going tobe able to get common sense things done.
(46:20):
I like the idea of Villaraigosa, but he,he's getting absolutely no traction now.
And he, he didn't in previous,I believe it was in 2018.
He tried right.
>> Bill Whalen (46:32):
Against Newsom in the primary.
>> Lee Ohanian (46:33):
Yeah, didn't get any attraction then.
>> Jonathan Movroydis (46:35):
Gentlemen it was announced earlier this month that
the famed California born chain In N Outwill be closing its Irvine corporate
office and consolidating its west coastoperations back up in LA county and
Baldwin Park.
Meanwhile, the chain is expanding itsoperations eastward in Tennessee with 35
new locations anda regional office just outside Nashville.
Not an economic blockbuster, butthe Tennessee's Economic and
(46:58):
Community Development Department showedwisdom in offering tax credits to set up
shop for In N Out.
Is there a California versionto the story, gentlemen?
Last fall Governor Newsom proposeddoubling tax credits from 333 million to
750 million for the film industryto stay in the Golden State.
Lee, is Newsom a devotee oftrickle down economics and
how else might he be creativewith business incentives?
>> Lee Ohanian (47:20):
There's kind of two ways to grow an economy from policy point
of view.
One is to have a remarkably productive setof fundamentals in the state that make
people want to set up shop and expand and
create new businesses because yourstate is a great place to do business.
California is struggling on that fronta bit in terms of friendliness towards
(47:41):
businesses regarding perceptions by CEOs.
They don't view California asa good place to do business.
The Tax foundation,which is a nonpartisan research institute,
ranks California poorly in terms of taxes.
There's litigation issues and labor issueswithin California that make it a less
complaining place to do business than.
Many other states.
So it takes time to turn that around.
(48:04):
So in the meantime, given the relativelyshort term vision of politicians,
you tried to do other things that make itattractive for business to stay in place.
So we've been losingthe entertainment industry,
the film industry to other states,to other countries.
It looks bad if it happens on your watch.
So the governor understands that and
he's talking about expanding those creditsto try to keep businesses in the state.
(48:28):
And I applaud him for his interest intrying to keep businesses in the state.
On the other hand, the governor's beenin office now for six plus years.
That's a lot of time to try to makechanges in policies where we get taxes,
regulations, reducingthe cost of doing business.
It's unfortunate that wedidn't see that happen more so
(48:49):
under the governor's watch thus far.
>> Bill Whalen (48:51):
No, Lee, what caught my eye with this story was you see this and
you first glance you think, my gosh,in and out's moving to Tennessee.
That's not the case,they're branching out into Tennessee.
But it, but what interests me about this,Lee, is that Tennessee has what it calls
the Department of Economic andCommunity Development.
This is Nevada has hadthese operations for years.
Arizona as well.
They look at other states and they tryto draw business from those states,
(49:14):
get them to invest in their states.
And it seems to be a trendin America right now.
Blue states are playing defense and
red states are playing offense whenit comes to this kind of attraction.
The question then,getting back to California, Lee,
is how could California playoffense in a game like this?
We talk about chunking out money forthe film industry,
have conversations about tax credits for,production infrastructure or
(49:36):
workforce development or things like that.
So I again, just getting back tothe idea of creative government.
I just don't think economically the powersto be in Sacramento are thinking on a high
enough level here.
>> Lee Ohanian (49:47):
No, Bill, they aren't.
And I think their oneproblem is one-party state.
I've spoken to people within the state,
either within the Democratic Party orvery close to the Democratic Party,
Republicans who are working withDemocrats within the state.
And I'm told that there'senough sensible Democrats,
(50:09):
ones who are talking likeyou're talking right now, but
who are reluctant to try to advance thoseideas because they tend to be younger,
they've been in politics for a shorterperiod of time than the leadership and
they don't want to buck the leadership.
And Bill, you're absolutely right.
I think when it comes to thinkingabout the leadership, in my view,
(50:33):
they're very partisan.
In my view, they're not willingto make the kind of investments
that you're thinking about andwhat will continue to happen,
which is more people locatingto places to Florida,
to Texas, to Nevada, to Tennessee.
Nashville is a rapidly growing citybecause at the end of the day it's
(50:57):
easier to make a profit there.
It's easier for people to live in thoseareas on the income that they can earn.
Bill, when you look at kind of livingin California, the average rent,
the median rent right now on a Californiaapartment low is about 2,700
to $2,800 per month for apartmentsthat are on the market presently.
(51:21):
The qualifying income for suchan apartment given the normal 30% standard
of pretax income allocated tohousing is over a $100,000 and
the median household incomein California is under that.
So it's just become a state that's sodifficult, so expensive to live in for
a large number of people andthat spills over to businesses as well.
(51:45):
So, yep, we love in and out.
They're sensibly expanding to the east.
We're going to see,I suspect we'll see that as time goes on.
>> Bill Whalen (51:53):
So this is all food for
thought as the Academy Awardsare coming up this Sunday.
You're gonna, if you watch it on TV,you're gonna maybe notice one thing.
The film industry is changing.
Even watching the Oscars is changing.
I'm not sure whatthe ratings are going to be.
I'm not sure if any of us on thiscall could name three Oscar movies,
much less have seen Oscar nominated film.
So times are changing and again,I just think that, you know,
(52:15):
California is strugglingto keep up with the times,
especially when it comes to tryingto bring business into the state.
And that's all I have tosay about it Jonathan.
>> Lee Ohanian (52:23):
And Bill,
are there going to be anyfistfights this year at the Oscars?
>> Bill Whalen (52:28):
Well, they're gonna be fist fights.
How many red hands are we going to see?
Which are signs ofPalestinian affiliation,
how many anti-Trump tirades or so forth?
Are they gonna go with Bob Dylan or
they gonna go with somethinggoing after the Vatican.
Who knows what direction they go.
But it's just the Oscars are justkind of fast becoming a bygone of a,
(52:48):
of a different era.
And California sadly in its economicapproach is kind of in the same camp.
>> Jonathan Movroydis (52:54):
Well, as always, this has been an hour of interesting and
timely analysis.
Gentlemen, thank you for your time.
>> Lee Ohanian (52:59):
Thank you. >> Bill Whalen
>> Jonathan Movroydis (53:00):
You've been listening to Matters of Policy and
Politics, the Hoover Institutionpodcast devoted governance and
balance of power here in America andaround the free world.
Please don't forget to rate, review and
subscribe to this podcastwherever you might hear it.
And if you don't mind,please spread the word.
Get your friends to have a listen.
The Hoover Institution has Facebook,Instagram and X feeds.
Our X handles @hooverinst,that's @hooverinst.
Bill Whalen is on X,his handle is @billwhalenca.
(53:22):
And Lee Ohanian is also on X.
His handle is @lee_ohanian.
Please visit the Hoover websiteat hoover.org and sign up for
the Hoover Daily Report where you canaccess the latest scholarship and
analysis from our fellows.
Also check out California On Your Mind,where Bill Whalen and
Lee Ohanian write every week.
Again, this is Jonathan Movroydis sittingin Bill Whalen's chair this week.
He'll be back for another episodeof Matters of Policy and Politics.
Thank you for listening.
>> Presenter (53:43):
This podcast is a production of the Hoover Institution,
where we generate andpromote ideas advancing freedom.
For more information about our work,to hear more of our podcasts or
view our video content,please visit hoover.org.
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