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

All right, everybody, welcome back to the All In Interview Show. We're very lucky today to have a candidate for the governor of California who is extremely unique in a number of ways. First of all, he's a Republican, and second, he's a Brit. Welcome to the program, Steve Hilton. You've decided to increase the degree of difficulty in two ways, but you're polling fantastic. You've got 5 or 6 people in the poll, so he's leading the field. You're leading the field. Obviously, it's going to get narrowed a bit when the Democrats shiv a couple more people and get them out of the race and then pick their eventual winner in their cobble whenever that happens, when Nancy Pelosi picks who's running. But Steve, maybe you could start by— sorry, guys, I got jokes. But Steve, maybe you could introduce yourself a bit and tell us why you're running.

Well, hang on. Can I just say, just after that great intro where you just tried to kill my chances, in just a couple of words. Thanks a lot, Jason. Really appreciate it.

Let me actually tee this up. I've known Steve since 2012, 2013, when he and his wife Rachel Whetstone moved to Silicon Valley. Rachel worked at Facebook initially, and then she worked with you, Jason, at Uber, and then has had a great run. And then Steve, similarly. And you said it in a funny way, but ultimately this is an incredible land of immigrants, and Steve has a really compelling story. So before we jump into the questions, I know your background, Steve, but I do think it's important. Go back to your parents, your mom, how you grew up, and just set the stage for how you made it out from the way you started, because I think that's important, and then how you got to the United States and why.

Thank you. Thank you. I appreciate that. And you're right, we've known each other a long time now, and it's a great joy to be here. By the way, just want to say it's a great joy to be on a show where I don't have to wear the the suit and shirt. And you know, that's one of the, one of the things about running for governor that, um, I'm, I'm loving most of it, but dressing up is not the favorite part for me. So it's great to be with you. I thought for this show, you know, we gotta get it right. I think that the back, the more I think about my background, the more I think it is really important. Um, in, in terms of how I see things and what I want to get done. Um, my parents are Hungarian. They were refugees from communism. And I grew up in England in a town called Brighton on the south coast. And we just had a regular working class immigrant aspirational family story, I guess. It was my parents actually split up when I was young. My stepfather's also Hungarian. He had an amazing story.

He was a refugee as well, but literally ran across the border. He grew up in a small village on the west side of Hungary, and in 1956 when you had the Soviet invasion, And he tells this amazing story. They heard on the radio, the Russians are coming. And he and his brother and some friends from his school, he was 14 years old, like one year younger than my youngest son right now. And they just ran. They literally ran for, they said, right, we want our freedom. They ran to the border, barbed wire fences, minefields, got shot at by the guards, all that. Half of them were killed. And he ended up in a refugee camp in Austria and from then to England. So All of that, I guess, just gives you that sense of real appreciation for actual, for freedom, for freedom and opportunity. And I grew up in England, worked very hard, ended up at Oxford University, but my first job was project manager for a construction company. I just wanted to earn money. I just wanted to get out. I think that's exactly the right phrase that you used. And that's been the story.

After Oxford, I went to work for a little bit at the Conservative Party in England, Then I worked all— I worked for a big ad agency, worked all around the world, started my own business, couple of offshoots of that, including a couple of restaurants. Then went back into politics when my friend David Cameron, who I'd met many years before, had gone into politics, got elected to Parliament. I helped run his campaign for the leadership of the British Conservative Party, won that election, and then worked with him to get the Conservatives elected when he became Prime Minister in 2010. Joined him in 10 Downing Street. I was senior advisor to the Prime Minister. Most of my job was really focused on trying to implement our reform program. And then in 2012, that's when we met. We moved here because Rachel, actually before Facebook, she was at Google. And she had this big global job at Google. She was running comms and public policy for Google worldwide. I had my job in Number 10. It was actually when our second son was born. It just, it was a lot, you know, the travel for her and the time difference.

So that's why we moved here. And I don't know, should I stop there or do you want me to keep going?

Well, you're also notably, you became naturalized. You're a citizen of the United States now, so you have dual citizenship.

Yes.

Less people are confused by the accent. Yes. You're running for governor and you're a citizen of the United States.

Well, let's talk about your political setup. So being a child of Hungarian immigrants raising communism, you're going to hear a certain version of what the role of the state is versus what the role of the family or the individual is. Then growing up in the UK, I'm sure your attitudes either get cemented or change. Give us the setup. What is the political evolution of Steve Hilton? What did he believe? And then what does he believe now? And what has shaped these beliefs?

I think it goes back to just around when I first really started thinking about it. All. It was just as Margaret Thatcher was coming to power and you'd had the '70s in England were a disaster and a decade that was just— the economy was completely stagnant and sclerotic. Unions ran everything. There was this period called the Winter of Discontent in 1979 when you had massive strikes, famously The dead went unburied and trash was piled up in the street, just real collapse of everything. And that's what Thatcher came in to fix. And I really did identify with that as well as with the very clear stand against communism. And so really she was, funnily enough, when I was thinking about the video that I made to launch my campaign about a year ago now, we ended up putting that in there and I thought, well, actually that was the thing that got me going. I was totally Inspired by her, but also the focus that she had on business and enterprise and hard work. And remember my stepfather, they weren't at all political, by the way. It wasn't like some household where we talked about politics.

It really wasn't. But he had this thing that stuck in my mind when he talked about the, like in England, you've got the Conservative Party equivalent, the Republicans, and for the Democrats, it's the Labor Party. And I remember He just used to say, Mrs. Thatcher's for the workers and Labor are for the layabouts. And I just, this phrase stuck in my mind about the importance of work and hustle. And I think about that all the time.

Where do you think California is if you contrast it?

Well, this is the, this is the point I was just about to get to is we really are there. There are so many things I see in California today that are exactly like the UK in the '70s. You've got the massive dominance of the unions in policymaking. You've got a sclerotic economy. You've got massively high taxation. I mean, it was higher then. At one point, I think the top rate when you add in the wealth taxes in the UK was literally 98%. But you had that confiscatory taxation and top rate of 60% and so on. So very, very similar. And actually, funny enough, Mike Moritz actually sent me a report that someone had done about the UK today. And again, there's just these eerie parallels with just how impossible it is to do anything in the UK, to build anything, the overregulation. When I read this report, it just is exactly like California today. By the way, one thing, Jason, just to be clear, I am a proud American now, but I actually renounced my UK citizenship.

Oh, okay.

I did that because I just wanted to be clear that I'm, just to borrow the title of this show, all in.

You wanted to be all in.

All in, literally. I think it's really important that everyone knows that. And I am.

And you have some, to get into some, maybe some policy, thanks for the background there. You have some unique policy positions. Taxes, I think, is the most unique. And dare I say, pretty populist. You want to have no state tax in California for people with under $100,000 in income, and then a flat tax for everybody over $100K of but 7.5%. How is that possible? And is that something you've studied? And where did this come from?

The tax plan that, um, that I put out there, that was the first day of my campaign. I think of it as pro-worker and pro-growth. And I think we need both of those things because if you look at what's going on in California today, just big picture, obviously you can look at the data that's a real economic disaster. I'm not sure people appreciate just how bad things are because hiding behind that data point of having the fourth largest economy in the world, which is true and obviously I'm proud of that. I want California to be big and successful and growing, but that fourth biggest economy Data point underneath that, you've got this— we're the state with the highest unemployment rate in the country and the highest poverty rate in the country tied with Louisiana. There's a United Way report just the other— about a year ago, they do it every 2 years, sort of an assessment of living conditions in California. And they found that over a third of Californians cannot afford to meet basic needs. And so the starting point for my tax plan is what can we do quickly to help people who are really struggling.

If you think about it, the working poor who aren't particularly being taken care of by the welfare system, they're working incredibly hard, but they're being squeezed by all these costs. We have the highest gas prices in the country, as you know, the highest electric bills everywhere except for Hawaii, housing costs the highest in the country. Insurance, all these costs are so high. So what can you do to help working people quickly? And so the starting point was, and what's affordable? The $100,000 mark, I remember when I was just playing around with numbers, actually I did it with some economists from the Hoover Institution where I was a fellow. The first couple of years that we moved here, I taught at Stanford, including in the public policy department, also the D School at Stanford, but I was also a fellow at Hoover. And so we did the math on the tax plan there just about a year ago. And so that first part, first $100,000 tax-free, actually in many counties in California today, the def— the official definition for low income is $100,000. So that number may sound very high to people in other parts of the country.

It's actually the definition in a lot of counties of low income. So you've got people earning $70,000, $80,000, $90,000 in California, They are paying 9.3% state income tax. That rate is higher than the top rate in most states in America. So to me, that's ridiculous when you've also got all these other taxes that those exact people are paying: sales tax, property tax, gas tax. All of those are the highest in the country.

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

Yes, but can I just do the other part of it? I'll just give the other part, which is the 7.5% flat tax. I just thought when you look at the facts about economic performance, the fact that, for example, Chief Executive magazine ranks us and has done for the last 10 years or so, the 50th out of 50 for business climate, a big driver of that is tax. And I'm sure we'll get into the insane proposed billionaires tax. All these things that are driving wealth creation out of our state and business investment out of our state. So it's not enough just to take care of or give some relief to people who are on the lower end of the scale. You've got to actually have a pro-investment, pro-growth tax framework. And so apart from anything else, the complexity is ridiculous of our tax system. These endless different rates, it's ridiculously complicated. And that itself is a cost, the bureaucracy, and hassle associated with that. That's why I think a flat tax makes sense. Remember, this is in the context of federal taxes, all these other taxes, it's not the only component. But the cost is, to get to that cost, you've got to reduce spending exactly as you say.

And basically the cost of that in total is about an 18.5% reduction in revenue, which takes us back, it takes us down about $60 billion, something like that. Which is not even going back to what the budget was just before the pandemic. They've actually do— if you look at the budget of the state of California, it's nearly doubled in the last 10 years. In the last 5 years, it's gone up something like 75%. And so this is just bringing the budget back to achieve that entire tax cut would bring the budget back just to where it was roughly before the pandemic.

Let me just summarize. So if you make between $0 and $100,000 a year as a California resident under your plan, —no tax.

No state income tax.

No state income tax. If you make $100,000 and a dollar and above, you pay 7.5% flat tax.

Yes, that's the concept. Okay.

How many Californians does that impact? So what percentage of the population now get that affordance if you were to be successful?

About 7 million. How? The tax number's usually on the households. And so it's about 7 million households would benefit from the under 100,000 reduction.

And do you know how many that is as a percentage? Well, working house, we've got 40 million people.

I think that's about probably just over a third, something like that.

Okay. So a third of homes now essentially go to zero tax.

State income tax. State income tax, yeah. And remember, there's all these other taxes that are coming.

Now the pushback would be if we then take it dollar for dollar from the operating budget, programs will suffer. And to your point, your comment is, I'm putting words in your mouth, but you fill them in. Well, not really, because we're just going to go back to 2019, 2020 budgets. And the difference was we spent a dollar in 2020, we now spend $2 and nothing has changed. So go from $2 back to $1.50 and everything should be fine, is your point.

Yes. And I'd actually go further than that. So first of all, what we've seen happen to the budget is basically the expansion that we saw in the pandemic and afterwards has gone baked into the baseline, which is totally unsustainable. And so we've got to get back to, even without tax cuts, I would argue you've got to get back to a more reasonable growth in spending because you go bankrupt as we're seeing with these deficits that we are getting even when in times when we are not in recession and taking money out of the reserves, out of the rainy day fund to plug the gaps, which is what they're doing. Totally irresponsible fiscally. But actually it's more than that. Even if you just, if you don't change anything in the composition of the spending and just get back to where we were, that gives you scope for a major reduction in tax. But the other part of it is what we are discovering in terms of where the money is actually going. And so obviously the whole fraud story has exploded as a national political and economic story ever since Nick Shirley's first investigation in Minnesota just around the time of Thanksgiving last year.

Well, we've been making our own contribution to that. So a few months ago, I set up our— I literally called it CalDOGE, California Department of Government Efficiency. I know that's a controversial brand, but the idea of it, efficient government, is something I think everyone would support. So I thought, why not use that? Because Everyone knows what it is. So we've been just looking at the published data on spending to find examples and to make an estimate of the total amount of fraud, waste, and abuse in the system. And we've now published 4 separate fraud reports out of CalDOGE. When I say we, by the way, I mean, this is a longer story we can get into, but one of the ways I think I'm running this campaign differently is that I'm actually putting together a team before the election of the— in terms of others who will run with me for statewide office, because you've got some very important positions alongside the governor that are going to be crucial in putting us back on track. In this instance, the state controller is very important because the state controller is an elected position, has the legal power to audit any organization receiving state money and to stop the flow of money if there's any, um, suspicion of improper spending.

So there's a guy running with me called Herb Morgan, and we've been doing this work together and we've published 4 reports now, 3 of them on individual examples of fraud. We can get into that in a second if you want to know. Some of the examples are really shocking. And then the 4th one was an estimate of the total, and we just went through published data from the state auditor, from Medicaid error rates and so on to make an estimate of the total amount of fraud.

What did you find? Give us a couple of examples. Here's some specific examples.

Now, the second fraud report, it's a classic. $1 billion over the last 10 years, $100 million every year since 2015. This is from the Climate Change Mitigation Fund, which is part of the cap and trade system. This is actually gas taxes and surcharges on electric bills and so on. 100 million a year was allocated to be spent on climate change mitigation. In this case, it was solar panels for low-income apartment buildings. So we actually tracked that money and with an AI partner that can get all the reports. And of that 1 billion total in 10 years, The actual amount spent on the purported benefit here, solar panel installation, was $72 million. $928 million actually went to nonprofits doing all the usual Democrat-associated bullshit, frankly, voter registration, environmental justice campaigns, all that kind of stuff. The actual thing was mostly spent on that. That's $1 billion. The, the first one was the cannabis tax, Proposition 64, legalizing cannabis. There's a tax associated with that supposed to be spent on, um, substance abuse prevention. We found $350 million that was supposed to be spent on substance abuse prevention, again, going to this network of nonprofits, over 500 of them, and small individual grants.

When you look at what each of those organizations does, it's all the usual stuff, voter registration, activism. So the third one was Project Homekey that we looked into, which was the homelessness thing that they set up after the pandemic, which was buying up property for homeless people and sometimes building new property for homeless people or converting hotels. $3.8 billion on that one that we found. I mean, there's others have found other amounts, most of which went into the pockets of developers Without any real—

The California budget, if I'm not mistaken, $350-odd billion?

$350 billion. $349 billion this year, yeah.

What percentage of it, in your best estimation with you and your team, do you think is inefficient, fraudulent, wasted?

Well, our number over the last 5 years total, our estimate was $425 billion. So averaged over the years, it's about $80 billion a year. So it's around— You know, 20% or so. That's unbelievable.

Yeah. And now just to bring some reality to the situation, you would have to get through the legislature, which is both controlled by Democrats. You can't unilaterally as the governor just say, hey, we're cutting these services. And we had a governor, Schwarzenegger, who tried this very thing. He had to move to the center. You, of course, I believe in California, have a line item veto. So you have some balance there. But this is fantastic for people to maybe get a reprieve from taxes. You're going to get a major fight with Democrats to cut any spending. What's your plan there if you were to win?

So, Jason, a couple of things. You're right about that, um, and I'm very thoughtful about the realities of these things, and I always make clear that I think what is certainly on the tax plan that taxes definitely, you can't do that without the legislature. I think that actually we'll get a, we, there's a possibility of a consensus around some of these items where we can actually work together with the legislature to make it happen. One indicator of that is actually one of my Democrat opponents in the governor's race, Katie Porter. Um, actually, you know, we were doing a debate the other week in Fresno and she just said, We were talking about affordability or whatever it was and she said, "Well, I've decided I'm stealing Steve Hilton's tax plan. I agree with him, first 100 grand tax-free and I think we should take good ideas where we find them." So it's just an interesting example that I think that part of it I think we may be able to actually persuade the legislature to do.

And then I noticed she yelled at you and said, "Get the hell out of her shot." She replied in her video. Except a stronger word than hell.

So the attitude that I've got on that whole question of the legislature is that when I'm elected, that's— and I'm sure your eyebrows are raised and saying, what are you talking about? It's impossible for Republicans to win. And we'll get into that. But I'm doing this on the basis that I will, and I'm preparing to actually start implementing the big changes we need to make in a thoughtful manner on day one, because otherwise What's the point of doing this?

Steve, do you think that there's legislative agreement or momentum to give you the win, even though to your point, I think it's quite significant that the Democrats would signal that it's a legitimate policy proposal, but do you think that if you win, people would see the forest from the trees and realize how important it would be to take salaries under $100,000 to no state income tax?

Look, the, we, I've, I've seen the, The Democrat arguments now upfront, many, many times, we've done a lot of events together, some of the televised debates, many more that aren't televised. We're literally all saying the same thing in terms of the diagnosis of the problem. It's incredibly expensive to live here. People are really struggling. The business climate is a disaster. We're massively overregulated. We cannot build anything. Everything takes too long. Everything's too complicated. There's a real consensus about diagnosing the problem among all the candidates. And so I think that that doesn't mean that we agree, of course, on the solutions. I would argue that the Democrats all, in some version, are more of the same actually, despite what they say about the problems. But I think that there are certain things where we will be able to get agreement. I also think that when you have a situation where you have the first Republican governor elected for 20 years, that really will change the dynamic in Sacramento. I think it actually may loosen things up a little bit because I think that there are people there in the legislature who really understand that things have gone too far.

I mean, some of them have said it to me personally, Democrats there, but they feel constrained by the current political situation, the machine being in control. They can't really move. And I think that'll shake things up a little bit. That's one point. Secondly, I really do have experience working across party lines like this. I think that I'll be able to bring some of that into play. I mentioned earlier, I worked in 10 Downing Street, senior advisor to the Prime Minister. He was a Conservative Prime Minister, but it was a coalition government. And I literally shared an office in 10 Downing Street with my opposite number, from another party and we would hash things out and argue. We were part of the team that negotiated a coalition agreement and then tried to implement it. And I think that those skills of actually putting something together where you don't agree about everything, but you can make some things happen, I think it'll be useful in this situation. And I think we can, I mean, look, everyone agrees we can't go on like this. In California.

And it's not farcical to think a Republican can't win here. Pete Wilson did 2 terms, Schwarzenegger did 2 terms. That's 16, I guess, of the last 36 years. It is completely conceivable that a Republican could win. And you and Katie Porter have the same plan. I think Chad Bianco has the same plan, which is under $100,000, all of you agree no taxes, that you're all attacking affordability. They don't believe in cutting services though. They want to increase taxes on businesses. If I'm correct. And so why is that plan not as good as yours, I guess, is the question. Which one do you think would be more appealing to the voters? Would the voters— I think they'll all agree paying less tax is fantastic, makes you more competitive with Florida and Texas. But if they had their druthers, they're probably going to want to see Google and Apple pay more in taxes and not lose their services.

Yeah, but we're losing jobs, and I think that that's the consequence of squeezing businesses and high earners more and more. And you're seeing it right now. You're seeing the business exodus. If the billionaire tax proposal goes through, I mean, that absolutely puts— I think that's just a complete disaster for the tech ecosystem and what we've built in Silicon Valley over the years and all the job creation and wealth creation that comes with that. You're seeing, I mean, it's not just tech. Everywhere you go in the state, there are so many conversations. You sit down with business people, we are on the brink of leaving. I don't think people realize quite how near the cliff edge we are. And I'll give you another example. I was just in Pomona the other day down in Southern California. Fantastic company, Sheet Metal. It's an HVAC duct manufacturing. It's exactly the kind of thing you'd want here. They're union jobs actually. It's a great manufacturing facility. They are making the HVAC systems, the air conditioning, incredibly important as you know for TSMC and these semiconductor factories and all these high-end manufacturing that's happening in other states. And these facilities now, massive amounts of investment in the AI economy and and tech more broadly, but none of it's happening in California.

I mean, we just published our policy report on that today, how we can get some of that full stack of those jobs in California. But that company, they said to me, since the facilities are all now being built in other states, we are on the brink of moving our facility to be closer because what's the point of making this stuff in California? It's not going to be used because nothing's happening. Nothing's going to be happening in California. So, You have to stop this squeeze on business. You really do.

Let me ask about the broader cost of living for a second. Probably the most impactful cost to people's lived experience is the cost of housing. Yeah. Double-click into that for a second. For the 40 million residents of California, what is going on? Why are rents so high? Why are homes so expensive and what can actually be done to make the cost of living and rent cheaper?

So the thing, this particular issue, I think almost captures better than anything else the underlying structural reasons why everything is so difficult in California and so expensive. 'Cause you've got these three structural forces. That I think underpin the problem and show why a Democrat can't fix it. And the three things are union power, litigation, and climate dogma. And they all come together in the housing story. The first part of the story is that we are just not building enough homes for the number of jobs that we are creating and the size of our population. It's a classic supply and demand situation. Now within that, there are certain wrinkles. You could point out that because of rent control, which has got completely out of control, there are a lot of empty properties in California that could be used to house people, but they're not because landlords don't want to do it because the rights have swung so far in favor of tenants. But I don't think that's the major driver. The major driver is the fact that we just haven't built enough housing of different kinds. And if you go through the reasons for that and why it's so expensive, it brings into play these 3 factors.

First of all, it just costs more to build anything in California. The same exact floor plan, house, apartment building, industrial building, whatever it is, costs 2 or 3 times more to build in California than in neighboring states. The first reason is the building codes, the actual requirements for construction are just way more onerous driven by climate dogma that actually doesn't really provide much of a benefit.

What does that mean, climate dogma? Well, you have to install— here we are. Because Nevada's hot and drought-ridden and Arizona has issues. So what is it that we say that those states don't say?

So when you build apartments or when you build parking, You have to put in EV charging and the scale of what's required for the EV charging just makes it more expensive. You have to, like you do a parking structure, you have to reinforce the floors, the bays have to be wider, just it adds to, you have fewer bays per structure. There's specific costs associated with that. Solar panels, we talked about that earlier in terms of low-income apartments that taxes are paying for, developers have to pay for that as well. Insulation, energy efficiency, all these things are good. And I think that's pretty much the story of California, which is things that start with good intentions actually end up being taken to an extreme where it just makes it too expensive to build at a rate that people can afford to buy the properties.

And the other two are really that CEQA where anybody can sue on demand. Exactly.

The private right of action under CEQA. So But let's unpack that because that brings together the three things, climate, litigation, and unions. Because CEQA, the California Environmental Quality Act itself is a nightmare in terms of the amount of regulation you have to comply with. The private right of action means anyone can sue. 70% of CEQA lawsuits are used to block housing. Most of those lawsuits are filed by unions. They're used as leverage to negotiate what they call project labor agreements, where you have an agreement for the site. And usually they have one or two of these components, both of which sound great. Skilled and trained workforce, which means union only. So it's a closed shop and prevailing wage. Again, sounds very good, but it's 2 or 3 times market rate wages. So both of those things inflate the cost. Often I've spoken to many developers, there aren't enough union workers in the area to actually do the job. So they have to sometimes fly them in from other states to do the job and the cost of travel and accommodation. It's just crazy. This is the key, Chamath.

There's no equivalent to CEQA in Texas where I now reside after 20 years in California. The other thing is the fees. It's $30,000 per door in fees to the government. Impact fees, exactly. Yeah. To build a door in California, It's under 1,000 in Texas. And California has 3 times the new units per capita than California. So every year we produce 3 times as many new homes per capita.

Just a simple question though, guys. Put this into ChatGPT or whatever. California's mandate with CEQA is to protect the air, protect the water, protect the land by some measures. Texas doesn't have it. Is it the case that Texas's air is worse, the water is worse, and the land is worse? No, definitely not. So is it roughly the same, meaning the particulate count, the pollen count? Is the air quality the same? Because if it is, then what is CEQA doing other than just slowing down and retarding the progress of housing? Why hasn't that study— because I think, again, all of this, guys, comes back to when the data is presented in a way that's factual, there's very little room for people on both sides to argue it because they're all relatively smart. It's when it's presented either in a partisan way or by somebody who reeks of partisanship that I think people attack the messenger versus the message. So I'm just trying to understand why hasn't the California government confronted this? It has the highest rents in America. It has the highest poverty rate in America, and it also has the highest regulation that has the lowest and the slowest unit housing growth.

Steve, I guess what I'm asking you is, how does that not get to the legislature some more?

Well, I'll tell you. Okay. Well, I'll tell you. I'm afraid the answer is the corruption within the system and the interest groups that have taken over the system. I'll tell you a story, which is my first I know a lot about housing policy because it was the first area of policy I studied when I decided that I wanted to get into the whole world of policy and politics in California. I actually tried to get a ballot initiative qualified for the ballot that would have two elements to it. One is what Jason just mentioned, capping impact fees, which are now up to about 20% of the cost of housing. I wanted to do a statewide cap of 3%. Of construction cost. And the second component was eliminating the private right of action under CEQA. I didn't succeed in getting it on the ballot, didn't raise enough money in time. So then I tried to pursue it through the legislature. I said, "Well, let's see if we can make some— something happen in the legislature." So I went to Sacramento, I took meetings with legislators, started to engage with Sacramento. There was one meeting I had with a legislator who was described him as good on housing.

This is a person you need to talk to. And we had a great meeting. They said, "This would be transformational." I said, "Great, let's work on it together, bipartisan. You're a Democrat, I'm a Republican. That'd be great. People like that." "Oh, I couldn't support you publicly." "Why not?" "Well, the unions would hate it." "Why?" "Because if you take away the private right of action, you take away the union's leverage." And I said, "Yeah, but you just told me it would be transformational. We were sitting in an office, you could see the state capital down below, high up. They just waved their arm around like this and said, "Yeah, the unions run this place." And that's the real reason. If you look at, for example, Newsom touted these two bills last year, AB 130, AB 131, that were going to solve the housing crisis. He said, "This is the moment where we are embracing abundance," and all the rest of it. Big CEQA exemptions, for certain types of housing. But if you look at the fine print tucked away in it, you only get the exemptions if you have these project labor agreements and union closed shop and prevailing wage.

So you're just writing back in exactly the things that CEQA is causing the cost increases from. So because the union— and let's follow all the way through. If you look at Gavin Newsom's political donations, over the 16 years he's been running statewide, just as a proxy for Democrat politicians, by category. The number 1 category, government unions. Number 2, trial lawyers. Number 3, non-government unions. So that's why nothing changes because the interests that benefit from this system are funding the politicians that make the decisions.

Yeah, and Chamath, to your other question of is the environment better since 1970? when this regulation came into pass, California still has the worst air quality in the country, largely because of the addiction to cars and traffic. And then Texas, as a comparison, just has industrial waste problems because we have a lot of chemicals here or chemical processing done here.

So we have a car-loving culture in California, to your point, Jason, as part of our cultural fabric, driving down Highway 1. It's just a very iconic thing that's embedded in the state. Steve, I have two questions. What has all of the incremental regulations done with respect to climate quality, whether it's EV mandates or the ICE engine requirements? And then separately, just as a more general way to explain it, why is gas in California $7, $8 a gallon and why is it $3 everywhere else? Why is ours more than 2x that it costs everywhere else, including other states that are also quite expensive to live in.

Well, also that they don't— we have the highest gas in the country, including Hawaii in the middle of the Pacific Ocean, even though we have abundant oil reserves here. So we have way higher gas prices than states that don't have oil reserves. We actually have very significant oil reserves in California. The fundamental reason that gas prices are so high is because Again, in the name of climate, but without actually— actually in this case, it's counterproductive to climate. Instead of using the production that we have here in California, I've been to the oil fields in Kern County mainly near Bakersfield. We are now importing nearly 80% of the oil that we use. Over the period of the— since really this all started in 2006 with the passage of the Global Warming Solutions Act. That was the sort of foundational climate legislation in California. Over that period, our use of fossil fuels has declined by not that much. And the proportion of our energy that's coming from fossil fuels is about 80% still. The rest of the country, it's about 81%. So it's barely any different. But the difference is we used to produce most of what we use in-state.

Now we are importing nearly 80%. And that has driven up the cost. You have to ship it from halfway around the world, Our number one provider is Iraq right now. That's the number one source of oil.

But sorry, sorry, sorry, sorry, sorry, sorry. The state of California itself, we are wholly dependent on Iraqi oil to sustain our economy? Not wholly.

It's the number one provider. Yes. So if you look at the sources of oil, number one, Iraq, number two, I think it's Ecuador. But the broader point on that is because the— let's just go back a few steps. We had a really strong energy industry and infrastructure in California where we produced most of the oil and gas that we use. And we had refineries, about 40 of them around the state, mostly in the Bay Area down near LA that refined and turned it into products that we use, gasoline and so on. Now we're down to 7 refineries. One of the main reasons for that is that we're not producing what we could be refining. We're shipping it in instead because there are no pipelines of— there are no oil pipelines into California. Whatever we don't— if we don't use our own, we have to bring it in by tanker. Because of this and because of the fact that the refineries were built to to refine California crude, which is known as heavy crude. There are different types around the world. You've got to have a good match. Iraqi oil is a good match. The other place whose oil is a good match for our refineries is South America.

And so as a result of Democrat climate policy, we are now expanding oil drilling in the Amazon rainforest in order to provide the right kind of oil for California's refineries. I mean, it's just so utterly insane and incoherent. And of course in the process we're spewing out carbon emissions because the tankers run on what's called bunker fuel, which is the most polluting form of transportation there is. And just to make the whole insane scheme work, CARB, the California Air Resources Board, which is obsessed with having all other businesses account for their carbon emissions right down the supply chain, Miraculously, the carbon emissions for the oil imports are only counted from when they're 12 miles off the coast of California. It's just so crazy. Change the finish line.

Yeah. The taxes add like a dollar a gallon and then there's this carb standard. It's about 60.

Yeah, it's more like 61. I thought it was 65. I can't remember exactly. It's just going up again. Yeah. Yeah. It's just going up again. Most of the $2 premium as it were for California is regulatory, not taxes.

Yes. And most of the oil that's been pulled out of the ground in California, we got the easy stuff out. What's left is generally dirtier or thicker.

That's not right. I've had lots of conversation with the industry on this. And the problem is that you've got fields that could be producing, but— and actually it's a good example of what you can do as governor without the legislature because The way that they've been shutting down production is not legislatively, it's through an agency of the state government called CalGEM, the California Department of Geologic and Energy Management. And it's simply a question of refusing to issue permits for the various stages of production, including maintaining existing wells or expanding. There's a process called sidetracking where you can take a well that's doing 5 barrels a day and increase it to 100, whatever, and then drilling new wells in existing fields, and they're denying permits for all of that. Actually, you can pretty much turn that around overnight by appointing people who are pro-energy, who will issue permits because I think there's a simple common sense rule here, which is as long as we are using oil and gas in California, let's use our oil and gas rather than importing it. But my conversations with the industry is that I said, look, what could we do if we had a kind of green light from a governor and a regulatory framework that just says, "Let's do what we can.

Let's produce what we can." The estimate that I've got from them is that we can double production every 2 years in California.

If we're already one of the big gas-burning states with the worst air, or previously my state, then you're going to get into the circular conversation with the public of, do we want the air quality to decrease And most people would say the EV credits were actually a good thing because we had 20 years of smog going down. Even though we're still worse, it's gotten a lot better.

So that's to do with— But there's a real misunderstanding. So I completely agree on air quality. And one of the major advances that has been made is on— it's back to picking the LA Basin— is on smog. Obviously, I wasn't here then, but people say it was really bad and now it's not. You have clean skies and you can see Mount Baldy or whatever. It's like a really different world. But that's nothing to do with carbon emissions. And that's to do with, actually the main driver of the air quality improvements in California actually are technology. And if you look at EVs, I mean EV penetration, even with all the subsidies and so on, it's incredibly low in California. So you can't point, it's about 4 or 5%, something like that. Tiny. So actually the improvements in air quality, dramatic improvements that you saw in LA were nothing to do with EVs.

Steve, I want to switch topics to education. This is a thing that we on the pod talk about a lot. We're all the byproduct of a pretty fantastic education system, affordable education, frankly, at every level. We had options to pay for it. We all had access to things like AP to really distinguish ourselves, even Jason. Yeah. It's true. What's happening in the California education system? Why are we stripping away things like AP and how do we tie compensation to outcomes? Because I think a lot of us would want to pay teachers triple, but we'd want to tie it to something that says, wow, the test scores are going up. Our kids can read, our kids can write, our kids can compete on the global stage. And it just feels like we are moving backwards.

We really are. And it's just, I mean, the, the numbers are horrific. I mean, you've got, we, first of all, we, we spend nearly the most of any state per student right now in this year. It's about $27,000, just, it's more than just over $27,000 per student per year in California. If you take the average out the money and we get some of the worst results in the country, let, I think the number for It's 47% that meet basic standards in English and reading. So less than half meet basic standards. For math, it's 35%. So two-thirds do not meet the standards. It's just an insane level of failure considering we spend nearly the most. And I think again, you've got to look at this in a practical way. There's a long-term structural reform that I think we need because the driver of this is really the grip on the government school monopoly of the teacher unions who increasingly have been driven by ideological factors. You saw that, for example, in the pandemic when you saw the longest and most destructive school closures in the country. And I was always struck by LA, the teacher union in LA, when they put out their demands for reopening schools, It was just a list of— it was a wealth tax, Medicare for All, something about Palestine.

They've completely become an organized political interest group that's about their members and broader political goals rather than anything to do with the interests of students and kids in school. So I think that the fact that you've got this monopoly of the public school system controlled by the unions, They of course in turn control the politicians. As I mentioned earlier, the number one donor to Democrat politicians are these government unions, including the teacher unions. And so you've got to break that grip. So I think that long-term the answer is to move in the direction of school choice, which I've always been a strong advocate of. You're seeing that school choice revolution across the country now, many states moving very rapidly in that direction with really good results. It's not a panacea, but I think that that is the long-term structural change you need, but that takes a long time and it's going to be very, very hard to get that moving in California given the fact that the teacher unions basically control the legislature through the Democrat politicians they put there. So there are some practical things that we've got to do immediately to improve these basic standards.

And here we got to look at what works elsewhere. And you see a lot of attention now on Mississippi. Rightly so, because for one-third of their spend per student than California, their results are spectacularly better. And it's really happened in the last 10 years. And there's some simple practical things that they do. Number one is how you teach kids to read. There's a technique of, to, of reading instruction. I mean, this was a debate I remember having back in the day in England in the '90s, and it was pretty much settled then. Which is there's a technique called phonics. It's a way to teach kids to read, and it's totally clearly established as the most effective. It's barely used in California schools at all. It's like in a very small proportion of schools, of public schools. So that's something that the governor can drive forward through the State Board of Education where you appoint all the members. Secondly, in, in Mississippi, they introduce something very common sense, which is, as everyone in education says, up to about third grade, you are learning to read, and then from 4th grade you are reading to learn. And if you can't read, you can't learn.

And so there's widespread consensus that reading by 3rd grade, by the end of 3rd grade, is incredibly important benchmark. In Mississippi, if you don't read by— you don't pass the basic reading test by end of 3rd grade, they give you a bit of help over the summer. And if you still don't make it, you repeat the year. They don't let you go forward. That single change, has transformed their results. And then your point about accountability also happens there where they give— and this is something else that we could implement here, which is taking the publicly available test scores and data, but really assigning it in a very visible way to individual teachers and individual schools. And that's one of the proposals I've got in my campaign, which is a grade for every school and a grade for every teacher. So we can reward the good ones and remove the bad ones.

Two more topics that Californians are very passionate about and have a lot of opinions about. I think one is pretty challenging and the other one seems pretty easy, and other states have handled it where it's easier. Crime and then homelessness. Mm-hmm. Uh, crime, obviously as a society, we've seen violent crime go down over the long arc of our lifetimes in the last 40 or 50 years. But California, still 30% more violent than the rest of the country. So we definitely have a violence problem specific to California. And if you live in the major cities, San Francisco, Los Angeles, they let people out for petty crimes under $850. There seems to— and we see going to a drugstore, everything's locked up. So there is a feeling, and a lot of debates over the numbers, that there's a lot more property crimes. Some people Claim people don't report it anymore. That was my lived experience in California. What is your take on crime? And then we'll go to homelessness.

Yeah. I mean, it's just this classic thing in California where they seem to be brilliant at passing laws, right? Every year, more and more laws, more and more bloat and bureaucracy, more nanny state nonsense. Last session, for example, they passed This is one session, 1,118 bills. That's the number of bills that the legislature passed. We did a thing outside the state capital. I mean, I'm not very tall. We printed them all out. It was like double my height. I mean, just ridiculous. The point I'm making is really good at passing laws, but not very good at enforcing them. There's just something missing in terms of the willingness to just enforce the law. That's going to be one of the main points I make in terms of homelessness. But when you get to crime, there's just this attitude. I mean, there's something off about how the left has seen this issue. And just when you think it's the worst excesses of defund the police and all that have receded, you've now got them popping up. What is it? This new thing, microlooting, right? Oh, microlooting. The New York Times and Slack podcasts are going on about, "Oh, it's fine because it's just social justice and we're allowed to kind of basically steal things because it's okay." It's just unbelievable subversion of basic values and morality.

It's just unbelievable. On crime, it's very decentralized in terms— I mean, there's some state things that need to be— Remember the law that you are talking about that legalized theft up to $950 a day, that part has been overturned That was Prop 47, which was a few years ago, has been overturned by Prop 36, which was overwhelmingly passed in 2024 by about 70%. But of course it's not being properly implemented. Gavin Newsom was against it and so were most Democrats in the state. The people passed it anyway, but now there's real resistance to enforcing it, which is ridiculous. In terms of the overall picture though, it is very localized. You know, you've got local police forces and sheriff's departments and so on. So my focus has been, well, what can you do as governor? And then one of the biggest drivers I think that's caused the problem is it really started with Jerry Brown before Gavin Newsom. Gavin Newsom's accelerated it, which is the prison closure program. They've basically— also, this is classic California. They've reduced the number of prison places by half. Guess what happened to the budget? It doubled. Not quite that bad, but it's a classic.

They cut the numbers in half, doubled the budget. But the point, the serious point is that you've had tens of thousands of really dangerous violent criminals either released directly into the community or more destructively for the system, transferred to county jails, which are now completely overcrowded. Therefore, at the local level, the whole system is aware that you've had all these transfers from state prison, the system is full, and so there's no capacity. And that really undermines the kind of accountability that judges and prosecutors would want to seek at the local level because they know the jails are full. And so that in turn undermines law enforcement because they say, what's the point? I mean, I hear this term all the time from law enforcement around the state. I'm traveling the state the whole time. They talk about catch and release as the basic operating rule for the kinds of crimes you're talking about. You catch them, they're just released, nothing happens. And so that undermines law enforcement. They think, "Why bother if we're just going to bring these people in and nothing's going to happen to them?" And that in turn undermines public confidence because everyone sees that and then they, as you just said, don't bother reporting it.

So a simple thing we can do that is completely within the governor's control is stop and reverse the prison closure program, which is what I've committed to doing, is to increase prison capacity in California. That means that you can relieve the pressure on county jails, but also that means that you can use the prisons for what they should be doing, not just bringing accountability. You commit a crime, you should be punished, but also rehabilitation. We've got one with, not the worst, but one of the worst recidivism rates in the whole country. And if we did One of the best states is Virginia. They're less than half what we have. So that would massively reduce crime if you could just get— you've got to take seriously the rehabilitation part. I mean, a huge proportion of prisoners in these jails, they can't read properly. Many have dyslexia. You've got to have a really serious view on it and they just don't. They have an ideological view. I think that is the problem with so many of these issues. It's ideology. In this case, it's decarceration. Can't have people in prison. Prison is racist. Criminal justice reform. All this ideology instead of just practical things to keep people safe.

Newsom shut down 4 or 5 of the California state prisons. You're absolutely correct, uh, according to my notes. And then it peaked in 2006. California had 165,000 people in state prisons. Now 93,000 people. So it is definitely a trend, uh, and I think a lot of folks who are living here or who are living in California where I used to live are not in favor of that. Looking at homelessness, is it intractable in California?

No. One thing I'll just point out, if people are interested in digging in further to some of the things I've been saying, there's a couple of places you can go for real depth on this, which is the last 3 years I've been traveling the state and kind of learning about this stuff and developing solutions. And I had a policy organization for that called Golden Together. Goldentogther.com, and you can find policy reports on many of these areas we've discussed and more, including one on homelessness called Ending Homelessness. And actually, my real partner in developing that was someone called Michelle Steeb, who's done a lot of work on this. She actually run homeless shelters and really at the kind of street level of this for many, many years. Also someone called Tom Wolfe, who's given me a lot of great advice. He's in San Francisco, a recovering addict, a recovered addict who's just fantastic.

He's very vocal on Twitter and— Yeah. —a very common sense approach.

Yeah, exactly. Okay. So it's very simply, I'll try and sort of capture it simply. It's 3 points. Number 1, it actually already is illegal to live on, and the homeless encampments already are illegal. They've always been illegal. It's another example of where we just got to enforce the law. For years, local politicians in California hid behind a court ruling that is called the Boise ruling from many years ago, which stated, it's a Ninth Circuit ruling, applies to the Western states, which is that the statement there was you can't remove people from the street unless you have sufficient shelter available locally. And they used this to say, we can't remove people because we don't have enough shelter. It didn't define what shelter was. They defined it as these permanent supportive housing units costing $900,000 a door, but it could have been a camp with cots. There's no reason. But even that excuse has been lifted because there's a Supreme Court case called Grants Pass versus Oregon in 2024 overturned that. So there's no excuse. These people running local governments, whatever, they have the power, and the legal authority to remove every single homeless encounter, and they should.

And my argument is, I'll give that once I'm elected, I'll give them a certain amount of time, and if they haven't done it, then I'll use state law enforcement resources to take people off the streets. And then you get to point 2 and 3 of the plan, which is, what are you— you got to give people help in a compassionate way, help them get their lives back on track. So over 80% of people who are homeless have drug or alcohol problems, addiction, or severe mental health problems, so you gotta deal with that. So the second part is drug and alcohol recovery. You gotta get people into recovery. That used to be the rule in California, rehab or jail, and we gotta get back to that. It can't be an option. You've got plenty of service providers who can do it. You've gotta require it. I mean, last year, even the— going back to our point about the legislature, even the Democrat legislature passed a bill called the Sober Housing Act, which would've taken a certain proportion of homelessness spending and allocated it to shelter where you had a requirement was sobriety. Newsom vetoed that bill.

It's unbelievable. So we got to have it 100% sober requirement for any kind of state services on homelessness. The third part is mental health where honestly, going back to the jails conversation, you talk to sheriffs around the state, the number, It varies, but they say 50, I've heard as high as 70% of the people in their jails have severe mental health problems. That's where we are actually treating people with mental health problems. Either they're on the street or they're in jail. It's totally barbaric. And one of the reasons is that when you're talking about the homeless population, obviously low-income people, so it's very much entwined when you talk about mental healthcare with Medicaid, with the federal system. And there's a rule in Medicaid that was set up right at the beginning when it was founded in the mid-'60s called the IMD rule, Institutions of Mental Disease. And this was a time when they didn't want large mental asylums and whatever. The idea was you have small facilities in the community. So the rule is there is no Medicaid reimbursement to the states for any mental healthcare provided in a facility with more than 16 beds.

It's a 16-bed rule. Of course, that makes the whole thing incredibly uneconomic and inefficient. Imagine if hospitals could only be 16 beds, how inefficient that would be. The first Trump administration created a waiver, the IMD waiver, the states could apply for so you could get around the rule. California, a lot of other states have taken that up. California hasn't. There's plenty of money in the system. Like we've been saying, the budgets are there. They've just been diverted into the wrong places. So the third part of the plan is to take the money that's currently going into the homeless industrial complex, these ridiculous apartment units for people who should be either getting mental healthcare or recovery treatment, take that money and put it into modern large-scale mental health facilities. And then we can treat people properly. Yeah.

And when you do your fraud work, that's a great place for you to put a big magnifying glass because that's where there's massive amounts of corruption. 100%. Cannot believe how much we spend in this— or we spend in California on homeless. And if you pay for something, you will get more of it, and they're getting a lot more of it.

Steve, as we wrap up, give us the quarterback view of your path to victory. Walk us through the sequence of events, the key moments leading up to the primary vote, and then from primary to Election Day. What has to happen for you to get to Sacramento?

So we have the top-two system, For those who— I mean, another crazy California thing where you end up with two candidates going through to the general election regardless of party. The idea of this was to have more moderate politics. Ever since it was introduced, this state's gone further and further to the left. And so you've got various scenarios that are possible. Right now I'm leading in all of the polls on the Republican side. There's one other candidate. I think with President Trump's endorsement, of my campaign, I think we can expect, I'm pretty confident that we can make it into the top 2. It's not certain. We've got to fight very hard over the next month or so. The ballots go out next week, early May. But I think that we are going to have a top 2 with myself and one other Democrat. And right now it looks as if it's going to be one of Tom Steyer, Katie Porter, or Javier Becerra. And all of those three represent either no change from what we have now or a move even further to the left in the wrong direction. So I think broadly the argument is going to be very straightforward, which is, are you happy with the way things are going in California?

Do you want more of it? And if you do, you vote Democrat. Or do you think we need a change? So it's a classic change versus more of the same election. Getting into the numbers, I know a lot of people look at California and say, "Well, it's impossible for a Republican to win." And Jason was pointing out we've had Republicans in the past, but that was a long time ago. And you could say special circumstances because Arnold Schwarzenegger was elected in a recall election and so on.

And he was a celebrity who was highly notable and loved in Los Angeles, half the state.

Exactly. All of those things are true. And so I've always said from the beginning of this that it's not going to be easy to win. It's going to be very difficult because of the structural factors in California, but it's not impossible. And given the seriousness of our predicament and how much I think the whole country depends on a successful, growing, thriving, leading California, then we should go for it because getting things back in a common sense direction is just a really important thing. I would say California means to America what America means to the world. And so this matters. If you look at the numbers, some people look at the voter registration numbers and they say Democrats outnumber Republicans 2 to 1, and that is true. But when you look at actual voting, the gap is a little bit closer. Over the last 20 years where you haven't had Republicans elected, pretty much the average Republican vote has been just over 40%. So it's been like a 60-40 split. Obviously, that's not close, but the gap is perhaps not as wide as some people might think. But then you look at a couple of factors that I really think are different this year.

First of all, there's a dissatisfaction with the way things are going that wasn't there before. If you look at that basic number, is the state on the right track, wrong track? Even 4 years ago in the last governor's race, the wrong track number was kind of mid to high 40s. Now it's mid to high 50s. So there's a majority for change in California. Just put it that way, which is a good environment to be going into as a candidate representing change. The second point is if you look at the actual votes you're gonna need to win, this is a midterm election, 2026. If you try and get some kind of sense of how many votes will be cast, in the midterm election this year, take the average of the last two, 2018, 2022, you get a total of 11.7 million total votes as an estimate. So to win, you're going to need just over half of that, call it 5.9 million. Now when people say there aren't enough Republicans in California to win, in 2024 in the presidential race, President Trump in California without even campaigning here or spending money on ads or anything, Wasn't a targeted state, got 6.1 million votes.

In other words, there's more than enough people who've just voted Republican for President Trump. Now, of course, you are not gonna get 100% of a presidential year turnout in a midterm election. But the reason I make that point is that the votes are there actually, even with just Republicans. Now, I don't think we are gonna get there just with Republican votes, but that's the starting point. Is a strong campaign to turn out Republican votes. And a big driver for that this year that again is a unique feature this year is the fact that in November we're gonna have voter ID on the ballot. That just qualified for the ballot. Um, and Republicans particularly are enthusiastic about voter ID. It's like gonna help us get a big turnout. And then in terms of the coalition for victory, I think that you've got a real opportunity to put together the kind of multiracial working-class coalition that President Trump put together. Because going right back to where we started, it's working-class people who are really, really struggling and being hammered the most by these policies.

They get to vote directly for no taxes, no state income taxes.

Exactly, because that's my tax plan. I just put this out there just the other day, which is no tax on tips. That's the other part. I mean, which has been implemented at the federal level, but California won't do it at the state level. Just my whole plan is geared toward a $3 gas. I call it Cal affordable, $3 gas, cut your electric bills in half, your first 100 grand tax-free, a home you can afford to buy. Really simple, practical, common sense things that particularly help the people who've been hurt the most over the last few years.

And I think that's how we pull this off. Steve, on behalf of All In, I just want to say thank you for being so incredibly candid and open with us. We're wishing you the best of luck. Thank you for joining us.

Thank you so much.

And just from my seat, if you wanted—

Jason's moving back. No, I mean, if you want to just—

I left for a reason and part of it was the dysfunction of the state. And if you want things to continue, I think, you know, having an unbalanced government that's all in one party, is a way to do that. You got to try to find some balance here, and I think why not give it a shot if you're in California? You have nothing to lose. The state is in a massively dysfunctional situation. So I wish you great luck, Steve Hilton.

Thank you, guys. Great to be with you.

All right, cheers now.