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California gubernatorial candidate Meg Whitman on Obamacare, and what else ails the Golden State

Sunday, March 28, 2010
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HH: A brand new report out of California today – 12.5% unemployment. To discuss that and the state of the national economy as well, I’m joined by Meg Whitman, former CEO of e-Bay. She wants to be governor of California. Why, I do not know. Meg Whitman, welcome, always good to talk to you.

MW: Thanks, Hugh. How are you doing today?

HH: Good, but 12.5% unemployment in California, it inched up after some false hope last month. Your reaction to these numbers, Meg Whitman?

MW: It’s terrible, and it’s why my number one priority in this race is to put people back to work, because if we do not put Californians back to work, there is no way out of this mess. And that 12.5% unemployment is equivalent of 2.3 million Californians without a job. I mean, for perspective, that’s more population than fifteen states. And you know, when you lose your job, you lose everything. And so we have got to turn the economy around and get people back to work.

HH: Now this week, Obamacare passed. And part of that has been a little magic exploding surprise for states like Arizona. I haven’t yet seen analysis of California, where it’s going to make the Arizona budget much worse off. Do you yet have an assessment of what Obamacare’s going to do to the Medicaid burden in California?

MW: Yeah, it’s about $3 billion dollars of incremental, unfunded mandates that will hit the state in about two years when we can least afford it. I mean, as you know, Hugh, we have a $20 billion dollar budget deficit over the next sixteen months. And this will add to that. So because we’re the biggest state in the country, we have the biggest unfunded mandate. It’s a really tough situation.

HH: So $20 billion owed now, $3 billion coming. Do you see anything in Sacramento right now being put forward, either by the governor or the Democrats in control of the state, to close the budget gap other than, you know, they will propose taxes, which we can’t afford. But is there any plan up there that you approve of?

MW: You know, they just have not, what’s amazing to me is how slow the legislature has been to address this issue. I mean, here’s a perspective for you. We have a, of that $20 billion, $6 billion is the hole in the budget in the next three months, I mean, before the end of the fiscal year. Can you imagine running a business where you had a $6 billion dollar hole in your budget that no one was working 24 X 7 to close? It is remarkable to me, and this is why I think frankly, someone with a business background will make a big difference. You know, I’ve balanced budgets, I’ve created jobs, I’ve met a payroll, I understand what it’s like to be on the receiving end of regulation. So we’ve got to take this up, and it’s inaction there that is stunning to me, really.

HH: Can it be solved? I went to the Pacific Research Institute seminar on Saturday to give a speech that was not about the financial situation, but I heard a couple of presentations. It’s staggering how large it is.

MW: Yeah, well, I think it can be fixed, but it’s going to take a very different approach, and a different kind of leadership. And the truth is, since we’ve let this run with, you know, no time left on the clock if you will, I mean, the set of alternatives in the near term are not good. But longer term, we have to attack this budget deficit, really, in two ways. One, we have to cut government spending. The truth is, we have a government we can no longer afford. And I’ve identified about $15 billion dollars worth of savings that fall in really four areas. One is we’ve got to cut the size of the government workforce, we have to reform the pension system. I mean, this is the, you know, $60 billion dollar unfunded pension liability coming down the track at every Californian. We have to take on the public service employee unions on that issue. We’ve got to reform welfare. I mean, this is a remarkable thing that’s happened. We have 12% of the population in the United States, and 32% of the welfare cases. And then last, we’ve got to use technology to find the fraud and the waste, and get things done more efficiently there. So we’ve got to cut government spending, and I’ve been, you know, I spent a lot of time on this. We have a spending problem of epic proportions, Hugh. I mean, I’ve never seen anything like this. So that’s the first thing. And then secondly, the only way to sustainably increase revenues is to put people back to work. We have to improve the business climate here. We’ve got to get unemployment down from 12.5%, I mean, ideally, back down to 4.6%. That’s going to require creating two million jobs in California. So that’s the way out of this crisis.

HH: A criminal investigation into CalPers was announced today.

MW: Yeah.

HH: It’s being picked up in the Sacramento Bee, et cetera. Should the current leadership of CalPers step aside for at least the duration of this investigation, Meg Whitman?

MW: Well, what has gone on at CalPers is stunning, isn’t it? I mean, this really is remarkable. So I don’t know whether leadership should step aside, but we’ve got to regain control of CalPers. If I was a public employee union member, I would be fit to be tied, because think about it. We’ve lost more money, I think CalPers has performed the least well of all state pension funds in the last 12 months.

HH: Yes, yes.

MW: You know, lost hundreds of millions of dollars. I mean, frankly, the civil service should be outraged, and should be calling for a whole overhaul of how CalPers is run and staffed, and their governance guidelines.

HH: I asked your likely opponent in the general election, Jerry Brown, on this program, oh, nine months ago, if CalPers needed a top to bottom investigation. He demurred. He didn’t say no, he didn’t say yes, he kind of dodged the question here. But I don’t think there’s any doubt anymore. If you’ve got a criminal investigation, that there’s much rotten in Denmark.

MW: Oh, there is. It’s all rotten in Denmark. I mean, this thing needs a complete overhaul. And you know, an overhaul of investing guidelines, an overhaul of governance. It’s terrible, and again, I just feel so badly for the people who are relying on CalPers for their retirement. I mean, this is gross neglect in mismanagement, and I’m sorry about it. It can be fixed, but it’s a real problem.

HH: Meg Whitman, I don’t know that you have an answer for this, although I may ask you the next time, which is it seems to me part of the problem is that we have too many former state legislators and state employees in positions of seniority, hierarchical importance, and authority in the state government. And it’s just a good ol’ boys club that has perpetuated itself again and again. Will you look outside of government, outside of politics to bring in people who will actually manage this disaster like a business?

MW: Yes, yes. Absolutely. I mean, one of the big levers that you have as governor that isn’t discussed very much is the power of the appointments process. You know, I did not run e-Bay by myself. I will not govern California by myself. Anyone who’s ever run anything from a company to a non-profit knows you’re only as good as the people who work for you. I mean, you’re only as good as the people who work for you, and so we have got to get these appointments correct. And the governor gets 3,000 appointments, 300 of which are essential. They’re your agency heads, your department heads, and all the gubernatorial appointments to the 395 boards and commissions that we have in California. That’s a whole other subject. You know, we have got to reduce that number as well.

HH: All right, I look forward to talking to you about that later, and hopefully get a pledge not to hire these legislators. But I’ve got to ask you about Obamacare again.

MW: Yeah.

HH: Today, AT&T announced that they’re going to have to take a $1 billion dollar charge tied to health benefits.

MW: Yeah.

HH: John Deere did the same thing, Caterpillar did the same thing. This is a massive, massive hit on the private sector. Should we be working already to reform and repeal Obamacare to take this burden away?

MW: I think we should. You know, you’re seeing it all over companies across America who are taking one-time charges to cover the increased cost of health care. Everyone understands what’s going on here. You know, this was the wrong legislation at the wrong time, with a spending increase that is almost hard to contemplate. You know, I think you and I were talking the last time, and trillion has become the new billion. I mean, it’s just remarkable. And so I think this is not going to be good for America. We already talked about how it’s not going to be good for California. And so I’m supportive of all those efforts.

HH: What do you make of Jerry Brown’s refusal to join the lawsuit brought by at least fifteen other states attorneys general about various aspects of Obamacare? He’s in the tall grass on this one.

MW: Yeah, he is. I think he is not doing the right thing. And what’s happened, of course, is that it’s partisan politics, right? He’s a Democrat, he doesn’t want to take on the Democrat administration, and I think it’s the wrong thing. If he’s looking out for the interests of California, and the interests of California business, he would be joining that lawsuit.

HH: Last question, Meg Whitman. You had a debate with Steve Poizner, well, about a week ago, I guess, down in Orange County, Cailifornia.

MW: Yeah.

HH: Are any more of those planned? And what did you learn from that exchange? What was the takeaway from that exchange?

MW: Yeah, we have another one on May 2nd. It’s with the cable broadcasters, and so that’s on the docket. I’m excited about that. And I actually think it was a very good debate. It was largely around policy, and what we cared most about in terms of the focus of the state. And I think it was a very good event. I enjoyed it tremendously.

HH: We’ll check in after the next one, Meg Whitman. Thank you for joining it. What’s the website, Meg Whitman?

MW: www.megwhitman.com.

HH: Well, that’s hard. www.megwhitman.com, America.

End of interview.

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