The Decline of the Golden State with Steve Hilton

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1:34Hello, I'm Anthony Scaramucci, and this is Open Book, where I talk to some of the brightest minds about everything surrounding the written word. That's everything. That's from authors and historians to figures in entertainment, political activists, and of course, Wall Street. Before we dive in, make sure to follow or subscribe wherever you get your podcasts. And don't forget to leave a review. Good or bad, I want to hear from you. I want to hear whether you're enjoying it or where we can improve. And I can take the hits. So let me know. If you don't like something, say it straight. Now let's get into it.

2:16Today, we're joined by Steve Hilton, whose new book argues that California's decline is a cautionary tale for the nation, exploring the policies he believes led to skyrocketing crime, time, homelessness, and economic hardship. Can California turn things around, or is this the future awaiting other states? Let's get into it.

2:45This is Open Book. I am your host, Anthony Scaramucci. Welcoming to Open Book today, Steve Hilton. He's an entrepreneur, political commentator, a bestselling author, and he's out with a new book. I love the title, Steve, Califailure. Califailure, reversing the ruin of America's worst run state. And so I'm assuming that that's California. There are other states. I mean, hopefully you'll write a New York failure book at some point. I don't know what you'll title that, but let's go to you first before we get into the book. It's a great book. I want to recommend it to everybody, but let's go to your career.

3:19For Americans that don't know you as well as I know you. You've had a phenomenal career. So let's start there and tell us what you're doing now. So most people here in America probably know me from Fox News. I've been with Fox News for eight years now, started in 2016, just as the populist movement was getting going with Brexit in the UK. Then, of course, Donald Trump here in America. So they see me primarily as a political commentator. I've been a contributor at Fox News. I hosted a show on Sunday nights, which you were a very fantastic guest on. You'll remember The Next Revolution, which I greatly enjoyed.

3:57I'd never done TV, though, before. It was a completely new thing to me. Most of my life, I've actually been, as you mentioned, an entrepreneur or someone who's worked in and around politics and government. I think the main thing I want to convey to people, because that's really an important part of who I am, is the fact that although my name is Hilton and I have an English accent, I'm describing myself today as a Hungarian-American. And the reason for that is, first of all, I am now an American. I got my citizenship four years ago, an amazingly proud day. It was such a beautiful moment. Slightly ruined by the fact that it was in the middle of the lockdown.

4:33So all the pictures have me with the sort of stupid mask and social distancing in the federal building in San Francisco. We live in the Bay Area out in California. But I say Hungarian because both my parents are Hungarian. My stepfather's Hungarian. My whole family is Hungarian. And so that, especially reflecting on that in writing this book and others I've done, you know, that immigrant experience, you know, coming from my parents coming from fleeing communism in Hungary to England, where I was born and raised. But, you know, they didn't have very much. We're a working class family. My stepdad worked construction.

5:10You know, that whole experience, I think, has been very, very formative. And then, of course, you know, me here now as an American and raising my family here, we're immigrants to America. So I think it's just a very important part of who I am. In terms of the career, I started out, I was at Oxford University, my first job full time, although in my gap year, I worked for a construction company in London. Again, very important, formative part of my life, going on construction sites and monitoring as a project manager. So that was like, that's a tough job. And I learned a lot through doing that. I worked after Oxford University at the Conservative Party as a researcher.

5:47Margaret Thatcher was then the prime minister. I had the privilege of working for her. but then I worked in advertising for a little bit worked at Saatchi and Saatchi a very big and successful ad agency in England through that I did a lot of campaigns in the in the commercial sector but also election campaigns around the world it's completely amazing time I had we worked for Boris Yeltsin in Russia that was amazing then I started my own business when was that the mid 90s with a friend we started a consulting company we started a couple of restaurants we did a lot of good, interesting things. Then I went back into politics because my friend David Cameron, meantime, had been elected as a member of parliament.

6:29And then when he wanted to run for the leadership of the Conservative Party, I helped him do that. He won. I joined him, became head of strategy and policy development. Then when he became prime minister, I went with him to 10 Downing Street, had an amazing time there. We can dig into that if you like. Very interesting, learned a lot from that. And then in 2012, we moved to America. My wife at that time was working at Google. And when our second son was born, there was a lot of, you know, it's just a lot of travel and made sense for us as a family to be together and move to California. And since I've been here, I've taught at Stanford University, I did a tech startup.

7:04And then I guess I'm right up to date, joined Fox News in 2016. So that's the menu. You can dig into any of that. It's important for me to have you establish your bona fides, because I do have a lot of young people on this podcast. They're going to hear your British accent and they're not going to really fully understand your tie to America unless you and I state it to them. Because I think it does give you some grounding and some perspective on some of the things that America does really well, entrepreneurship, culture of understanding failure, lots of meritocracy, people like you and I can rise in America despite what our family's origins are, whether it's from Hungary or Italy, It doesn't really matter.

7:46But then there's some things that we do poorly, frankly. We get over-bureaucratized and we start to get down these cultural rabbit holes that are hard to come out of. And so let's go to California. What inspired you? I know when I did your show, I used to come out to California to do the show. So I believe you live in Northern California. You used to fly down to LA to do the show. But talk about the writing of Califailure. what what did you see in california's struggles that are a cautionary tale for the rest of america so it's it's really interesting because um you know i love california i really do it's my home i raised my family there as i mentioned started businesses there it's it's the as far as i'm concerned there's nowhere better than california with all its problems there's nowhere better um and yet it does have a lot of problems i mean if you talk if we just look at the data you're numbers guy if we just look at the numbers and and i told you that there is one state in america which has the highest rate of poverty the highest taxes the highest housing costs the lowest home ownership the highest unemployment the highest cost for gas electricity water the highest homelessness by far um and then i could go on the list is longer than that there's one state out of 50 with all those records for being the worst performer, you'd say, wow, what is going on in that state to make it so bad on everything?

9:17That state is California. It really is the worst performing state, not just mid-table or 46th out of 50. It's 50th out of 50 on so many measures that are the foundation of a good life, of the California dream, the American dream. We're the worst. And it's been like that for a long time. I mean, just take something that's very close to my heart and yours, the business climate. Chief Executive Magazine runs an annual survey, which is the state's to do better or worse for doing business in. For 10 years, California has been the worst. And of course, the other numbers that are significant are that hundreds of thousands of people are leaving California.

10:02Businesses are leaving California. There's a story in my book, a firefighter from Orange County decided, because it was just so expensive to live there, but he loved his job, didn't want to leave his job. So he moved his family to Tennessee. And he now commutes from Tennessee to Orange County to do his job. And that somehow makes sense, makes more sense than staying in California. So something really serious is going wrong. And what I wanted to do is to understand, you know, not just list all the bad things, but understand why, like what is behind this? And that is the cautionary tale for other states.

10:38What, what, what is, what can we learn from this in terms of what not to do? Well, I mean, there's so much to unpack there, but I want to, I want you to do something that you're really good at. I want you to put the shoe on the other foot and I want you to be the politician in California, the mayor of Los Angeles that let the fires run amok, the governor, the state legislature, give me their theory of the case. Give me their, I mean, you know, by the way, I mean, just so you know, you can't even rebuild your house. The wildfire burnt the house down, but they have so many protocols and so many procedures that it may take somebody three years to rebuild their house.

11:17And so you've cut through the red tape to just get yourself reorganized after the wildfire. So, So I'm down on it. You're down on it. But I want you to take the other side of the case down. That's great. Tell me what Gavin would say, what Cameron would say. Tell me what the state legislature, tell me why this is the best state and why this type of regulatory regime benefits the state and its citizens. Well, they're not actually saying that. But let me just, I'll tell you what they do say. Tell me what they are saying then. Give me their case. Yeah, the first point is they make correctly that, well, it can't be that bad because we are, if California was a country, we'd be the fifth biggest economy in the world.

12:04That's true. I'm super proud of that. I'm a really proud American and a really proud Californian. I love our state. I'm incredibly proud that we're so economically successful in the aggregate. But if you actually, let me not do the but. I'll just start there. I'll be faithful to your question and go through this. So number one, something's going right because we're the fifth biggest economy in the world. Secondly, what we're doing in California, if you're a Democrat, you could say they focus on the fact that California is leading in a number of fields where government is advancing causes that they believe in.

12:42Top of the list, I would say, is climate, right, where they sincerely believe that California has been a world leader in advancing climate goals. I think you would also put on that list of leading the moves that have been made in California on what they would argue is gender equity or fairness or whatever you want to call it, LGBTQIA plus rights, if I'm using the terms that they would want to use. Same on race, you know, so social justice goals being advanced in California in a way that leads the nation, leads the world. I think that's really what they would say. And then also you would put, I do hear Gavin say quite rightly that we have companies and industries that are dominating their fields.

13:33Of course, you can point right now to AI, artificial intelligence, a new wave of the technological revolution that initially began in Silicon Valley, of course. Now the new wave, really based not in the Valley, but in San Francisco more than in the Valley, but, you know, Bay Area leadership there. So continuing to lead and dominate in key industries. I think that would be the positive case. So are they going to change? I mean, what you're saying in this book is irrefutable. The regulation, the nine pathologies that you talk about, we're going to get into the nine pathologies. The sclerosis of growth.

14:14It's astonishing to me and it's tragic because it's a beautiful place. It's probably one of the most beautiful states or beautiful areas of the United States, if not the world. It's got everything. And for so many years, when Reagan ran it and Pete Wilson ran it, they created Silicon Valley. They created all of this oasis of growth and activity. It's the cultural exportation vehicle for America. It's not just McDonald's and Walt Disney. It's Hollywood. Yeah. It's the whole essence of America from the Beach Boys to so many different things. Jamba Juice, okay, has come from the Pea Coast and permeated the world.

14:58So this is a wonderful, wonderful place. Yes. I guess they said, no, we're going to run it into the ground and have everybody leave it? What do they want to do? Do they want to change it? I feel like the point I want to make is that's all true. It's all true that we've got this great success is happening in the private sector, right? That's the important point. It's not the government that's doing amazing things. It's businesses that are doing amazing things. And I would say, yeah, imagine what we could do if we didn't have this overwhelming bureaucracy and overregulation that's standing in the way.

15:36Imagine how successful. We wouldn't be the fifth biggest economy. We'd be the third biggest. Because actually, if you look at the numbers, three, four and five are pretty closely bunched together, India and Germany and California. So I think that that would be an amazing. And by the way, part two of the book is called Califuture. And it's a plan for how we get there. I want to get back to your point. I think that a fair critique would be to say all these things that are now making it impossible to do anything. You see Bill Maher on his show regularly giving updates on how long it's taken to get permits for his shed in his garden with the solar panels.

16:16I see businesses the whole time. I've been on the road for the last two years. By the way, I've been running a policy organization called Golden Together, digging in deep into all these different areas. I've been on the road in California and I talk to businesses the whole time. It's just heartbreaking. I mean, just the stories are so insane. A winery in wine country, small independent one. And she wanted to expand her patio, have more visitors. She had a permit for 30 guests. She wanted to increase it to 50. It took going from 30 to 50 for her winery. It took six years and a million dollars in lawyers fees and consultants that you're forced to use and all this stuff.

16:55Right. I have a machine tools manufacturer in this year, a small, small, you know, manufacturing plant. He's taught me very, he gave me the numbers. He said he's spending more on regulatory compliance than on his employees. Two hundred thousand for his employees, one hundred and eighty thousand a month for regulatory compliance. It's just this. It's insane. And then you look at it on the big picture. You know, why do we have the highest housing costs in the country where a media, the median house price, the typical house price, a million dollars? It's insane because it's impossible to build anything because you've got the environmental regulations and the labor regulations.

17:31And let's just take those two. Right. The environmental regulations and all the bureaucracy around it. It's not it's not badly intentioned. It's a good intention to protect the environment and reduce carbon emissions. I agree with that. Same with the same with the labor regulations. We want workers to be looked after and well paid. That's true. But the real theme of the book is what's happened is because it's a one party state, one party rule, it's not a one party state. It's much more Republican than people think. But for 25, 30 years, the Democrats have pretty much controlled everything. Dominant in the state legislature with super majorities in the recent years, running all the, you know, basically run by Democrats.

18:12So there's no real challenge ideologically. So they've gone further and further to the left. So all these things have just been taken to the extreme, to the point where you just can't do anything. And I think that is the truth of the matter, which is that, no, of course they didn't intend to have these negative consequences. By the way, you say what a Democrat is saying. Right now, Gavin, I mean, it's revealed in their response to the wildfires, where you have Gavin Newsom literally almost talking like me, saying, we have to sweep away. This is a quote, the nonsense bureaucracy. And my argument is, yeah, I agree.

18:48So why don't you sweep it away for the whole state, not just in Los Angeles, in a couple of neighborhoods that need to be rebuilt. And same with Karen Bass. They are acknowledging it in respect of L.A. rebuilding. But actually, the truth is it applies right across the state and it's having negative consequences everywhere. Ford Blue Cruise hands-free highway driving takes the work out of being behind the wheel, allowing you to relax and reconnect while also staying in control. Enjoy the drive in Blue Cruise-enabled vehicles like the F-150, Explorer, and Mustang Mach-E. Available feature on equipped vehicles.

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20:04okay let's go to a few of the big pathologies and then i want to make you the czar of california right and if there were one or two policies that you would put in right away to cure some of these pathologies so let's you've got nine pathologies but pick one or two that you really dislike and then tell me a couple things you would do to cure these pathologies well the pathologies are The way I sort of set it up is that the real underlying problem in California is that everything's become so ideological. It's not practical. So what are the components of the ideology? So these are things like elitism, compassionism.

20:45I'm going to do that one, I think. You know, climatism, socialism, cronyism, narcissism. And so each one, I think, captures some of the things that have gone wrong. I want to talk about compassionism. So that's a word you may say, that's a made-up word. But I think it's really important because it really touches on what's been going on in relation to crime and homelessness and so on. So, again, it's something that's coming from a good place, compassion. We want to be compassionate to people who are in desperate situations. But actually, it's become a pathology. It's become something that's actually not compassionate at all.

21:25It's become cruel because where it's ended up is saying to people with mental health problems, addicted to drugs and alcohol and everything else who are living on the streets. Remember, the homeless problem is an absolute crisis. We have 11 percent of the U.S. population in California, 45 percent of the unsheltered homeless. So this is a massive problem. And it's not just Skid Row in downtown San Francisco. It's like right across. You see it everywhere in the state. And so the thinking has been, well, we can't force people to do things that they don't want to do. We can't force them off the streets.

22:05We can't force them to get drug rehab. We can't force them to get training. We can't force them to do anything. We have to give people the freedom to make their own choices. But people living in crisis like that, that's not compassionate. That is compassionism. It's become a kind of pathology. Like we want to look like we're being compassionate. But actually, you're being cruel because you're condemning people to a life that you would never accept for someone you really loved. You would never accept that for a family member, someone you loved, was living like that. You wouldn't behave like that.

22:37You would say, we've got to get this sorted. We've got to get you into treatment or whatever it is. And so that's the pathology behind, for example, we're the only state in America that passed this law called Housing First, which is the law in California right now, which means that if you are in receipt of any state money for any kind of homeless service, it is illegal to require any kind of behavioral compliance. It is illegal to require sobriety or participation in a job training program or anything. It's illegal to put conditions on housing. So you end up in the insane situation where you've got what people call the homeless industrial complex, where you've got, I mean, just recently, the numbers were published by the state auditor, $38 billion, billion, spent on homelessness with no effect.

23:29The numbers have just gone up, can't track it. That's all gone into building what they call permanent supportive housing for people who are homeless. That's apartment units. And because of all the other problems in California, these cost$700 ,000,$800 ,000 per unit, per unit to build. And you put a homeless person in there with no requirement for drug treatment or anything else. And I mean, I've been on the streets with the people who deal with homeless people. It's like a second home because they're still addicted. They go back to the streets, dealing drugs, living on drugs. You know, it's a total disaster.

24:05And it's driven by a belief that they're being compassionate, but they're not. Okay. I mean, so well said, and it's all, it's all, it's beautifully written. And so how do we, how do we, what do we do? We got to do something with the bail reform, right? Or to use your own words, make crime illegal again, right? We have to do that. What are some of the other prescriptions? So I think that the biggest single thing that needs to be, the underlying thing is to get rid of the government bloat, you know, the bloat in the bureaucracy and the regulation and so on. And that is something you can be can be done through executive action.

24:47But I do want to just focus on one, one simple change that would be transformative in California, because I want to come back to the issue that's really the number one driver of people leaving the state. I mean, just and this is really important because I think there's a complacency around the economics of California because of the fact that we're the fifth biggest economy. Everything's fine. But a lot of that is driven by these, you know, tech companies that generate huge revenue, but don't employ very many people. And if you look at the first wave of the tech boom, you know, the Googles and Facebooks and so on, you know, giant revenue, not that many people.

25:27You look at AI, it's even more revenue, even fewer jobs. And so the real issue is, and that's why we end up last year with the highest unemployment for most of the year. Now we're number two. But I want to come to housing costs because it's the number one reason people are leaving the state and businesses are leaving the state, which is it's so expensive to live in California. You just, why would you start a company there? There's nowhere for your workers to live. The one thing that would make it easier to build in California, it's a very technical point. It's super important is to, there's a lot of people blame this law.

26:02You just saw Ezra Klein out with his book targeting this law that you hear a lot in California policy conversations, CEQA, the California Environmental Quality Act. It was the first of its kind in the world, signed by Ronald Reagan in 1970. But over the years, and it's well-intentioned to protect our beautiful environment. But over the years, it's been expanded and interpreted by judges, not by the legislature, to give anyone the right to sue under CEQA. There's a private right of action under CEQA that means that anyone can bring a lawsuit under that law to enforce it. And that is actually the main driver of high housing costs, because right now what you have is any time a developer wants to build housing, whatever, you're hit by a lawsuit.