Can egghead Tom Campbell defeat two rich outsiders in the GOP primary?
by Ben Casnocha
January 7, 2010
from The California Recorder
The Audacity of Hope
In 2003, on The Tonight Show, Arnold Schwarzenegger announced he was running for governor of California. He told host Jay Leno that he had a special message for Democrats and Republicans alike: “Do your job for the people and do it well or otherwise you are hasta la vista, baby!”
In his victory speech, he set forth his fundamental philosophy: “For the people to win, politics as usual must lose.” Neither party specifically took the heat; it was partisanship and petty politics at which Schwarzenegger aimed. He presented himself as a reformer: “I want to clean up Sacramento. I want to go in there and reform the system so it’s back in the people’s hands. The people should make the decisions, rather than special interests.”
Barack Obama’s campaign rhetoric was more evolved than Schwarzenegger’s recall-election theatrics, but emphasized the same ideas: transcend partisan divides, think big, fix the system, introduce change:
What’s stopped us is the failure of leadership, the smallness of our politics — the ease with which we’re distracted by the petty and trivial, our chronic avoidance of tough decisions, our preference for scoring cheap political points instead of rolling up our sleeves and building a working consensus to tackle big problems.
Both Obama and Schwarzenegger’s ears were tuned to “the people,” and they reported that the people were mad as hell and they were not going to take it anymore.
It’s too early to judge Obama’s follow-through on the soaring rhetoric. So far the usual buzzsaw of partisanship has forced him to water down grand policy ambitions. And his calls for unity have not yet changed the tone in Washington. “You lie!“
Schwarzenegger’s record is clearer. Despite his bulging muscles and outsider status, politics did not “lose,” as he promised. Politics won, and won big. The very Sacramento special interests he vowed to demolish have outwitted, outplayed, and outlasted the Hollywood star. Collie-fornia remains a state in disrepair — its bonds hover just above “junk” status, its schools are ranked among the worst in the country, prisons are crowded, parks are closing, and the governor and legislature’s approval ratings have never been lower.
After electing a would-be transformational governor and president since mugged by reality, will chastened California voters seek a more tactical administrator? Can a bland policy wonk defeat dynamic, self-funded outsiders who talk about “leadership” and conducting “top down reviews” of government? Can a commensurate insider who’s first a realist beat optimistic outsiders who “reject false choices” and think they can re-make a culture?
Charismatic Generalities vs. Bland Specifics
On September 16th, at the Silicon Valley Leadership Conference at Santa Clara University, Republican gubernatorial candidate Tom Campbell took the stage with three local CEOs to discuss the future of California. The CEOs alternated in sounding alarm over the Golden State’s dimming star. Ed Colligan, the former CEO of Palm, roused the crowd when he declared the state health care program and failing K-12 schools unacceptable. He was quick to add, however, that Silicon Valley is the “greatest place in the world for entrepreneurs and innovation” and went on to praise the region’s weather, culture, and people. It is the California way when talking about its politics: with despair acknowledge the depth of darkness the State finds itself in, but conclude with near-delusional self-confidence that, gosh darn it, we’re California, of course things will work out. The California Dream is a highly potent dose of Americanism, and nothing stirs a local audience more than playing directly to the bi-polar hot points which make up this shared imagination.
Tom Campbell was the last of the four to speak. He spoke softly and deliberately. He carefully offered three specific policy prescriptions on health care, stressing the benefits of inter-state competition of insurers, anti-trust reform, and litigation reform. (He asked the audience to download his 15 page policy paper.) On immigration, he described the argument for more H-1B visas, and the counterargument. On education, he proposed vouchers for the most disadvantaged and vowed to exempt community college grants from cuts.
It was an impressive breakdown of policy. Absent were emotional pyrotechnics. Campbell served up no red meat. He never once denounced the system in sweeping terms, nor did he anchor his ideas in appeals of hope and optimism. He garnered only polite applause.
Earlier in the year, at the Sacramento Press Club, Campbell partook in a similar story of contrasts, only this time his foil was another Republican candidate in the race, Steve Poizner. The topic was the California budget and related propositions on the May ballot.
Campbell led off. “I’ve put a handout at each of your seats giving as much detail as I possibly can,” he told the assembled press corps, on how he would bridge what was then a $15.4 billion dollar budget deficit. Standing at a whiteboard, this professor of 20 years identified specific cuts in government spending, added them, and circled the 15.4 bottom line.
Poizner went next. Saying nothing, he lugged out two enormous white binders. As they hit the table with a thud, a reporter let out a laugh. It was a dramatic display and made for a good photo op. “This is the 1,244 pages of the current budget… I’m pretty sure there’s no one in this town who’s even read this budget that passed a few weeks ago,” Poizner said. He went on to deliver an impassioned assault against the proposed tax increases on the ballot but most of all on the budget process itself: “When this big huge budget was ready for a vote, they sent it into the legislature…they locked the legislators in the building for 40 hours, on no sleep, and then asked them to vote on this thing, with no opportunity for analysis, or transparency. Now what is this, Zimbabwe?!”
Tom Campbell: Wonkish Fiscal Conservative
It’s not often you find someone go back and forth between academia and politics over one’s career, but then Tom Campbell is not your usual candidate.
Born in Chicago, he attended the University of Chicago for undergrad and for a Ph.D. in economics, where Milton Friedman was his doctoral advisor. He then earned a J.D. from Harvard Law School, after which he clerked for Supreme Court Justice Byron White.
His career in public service began as a White House Fellow and then as Director of the Bureau of Competition under President Reagan in 1981. It was Reagan, he says, who instilled his core political values: “free markets, individual liberty, small government.” He left Washington in 1983 to accept a professorship at Stanford Law School, where he taught until 1988. He left Stanford to run for congress, and went on to represent Silicon Valley in the House of Representatives for five terms. He also held a State Senate seat for one term. Along the way, he twice ran unsuccessfully for the U.S. Senate, and tried but failed to generate momentum for his Republican Majority Coalition, which sought to “exclude issues of morality and conscience as litmus tests” in the Republican platform and instead emphasize economic policy.
He returned to Stanford Law in 2000 where he stayed for two years until he was named Dean of UC-Berkeley’s Haas School of Business. He took a one-year leave from Berkeley to serve as Arnold Schwarzenegger’s finance director. In this capacity he participated in key budget negotiations, but did not have the authority to push through the policy he envisages he would if he were governor himself.
Now’s he running for Governor of California. At 57 years-old, Campbell is the elder in the primary. At the California Republican Party Convention he joked that he attended his first state party convention before some in the room were born — though with his quiet energy and near-unshakable high spirits you’d never think it. With age comes more than 5,000 votes in the House, thousands of former students, and an intimacy with the inner workings of government that give him the self-confidence to talk very specifically about what he would do as Governor.
“Campbell has got one great advantage: he actually knows what he’s talking about,” Jack Pitney, a professor of government at Claremont McKenna College near Los Angeles, told the San Jose Mercury News.
If you had to guess his profession from afar, you’d pick egghead over politician: he speaks with law-professor precision and in paragraph form, and he doesn’t naturally marry policy ideas with heart-warming stories (“Let me tell you a story about Betty in Fresno, who lacks health insurance”). If Gavin Newsom is the closest thing California has to Obama dynamism, Tom Campbell most resembles Obama’s Budget Director Peter Orszag.
His economics and finance background dovetails nicely with the issue at the center of the race: budget policy and the economy. California faces a $24 billion deficit. Unlike the federal government, all states except Vermont cannot carry a deficit into the next fiscal year. California’s government is trying to develop a habit of spending only what it has and not what it wishes it had. In the meantime, the people are being “taxed like socialists and subsidized like libertarians,” as journalist Troy Senik put it. It is not a temporary problem; much of the deficit is structural. Campbell’s focus is fixing the structural problems in four politically explosive ways:
1. Huge, specific cuts in government spending. He has proposed between $24 and $28 billion of specific cuts. Explosion: Protests from the interest groups being cut.
2. Give-backs from labor. California’s public labor unions over the years have brokered outlandish compensation schemes that cost the state millions. Campbell has requested salary givebacks from state employees, and if they don’t agree, he’ll furlough (read: fire) them. If the prison guards’ union won’t play ball to restore sanity to their top-in-the-U.S. compensation, he’ll let them strike and order the National Guard to run the prisons. Explosion: Warfare from the unions
3. Use of line-item veto. As Governor he can line-item veto expenditures down to a level of realistic revenue. Most Governors promise legislators not to veto certain expenditures in exchange for them helping advance the Governor’s own legislative agenda. Schwarzenegger, for example, had known soft spots in health and human services. Campbell says he has no agenda more important than balancing the budget and therefore will not trade favors. Explosion: Battles with the legislature
4. Tax increases. Earlier this year Campbell proposed a one-year, 32-cent gasoline tax, and supported ballot initiatives which would extend other tax increases by two years. It’s made him vulnerable to attacks. But this disciple of Milton Friedman hasn’t backed down. “I’ve been proved right,” Campbell says, noting that the budget that did pass sans taxes relies on assorted trickery such as stealing money from cities and counties and postponing by one day the salary payments of state employees so 1/12 of their wage gets kicked into the next fiscal year. Besides, an exasperated Campbell told me, the most recent budget made it so taxpayers pay 70% of their estimated tax in the first 50% of the year: “Anyone who’s taken a basic finance course knows that’s a tax increase — if you know the time value of money, and it’s the worst kind of tax because it’s post hoc and by surprise.” Explosion: Protests from people who face a tax increase
Suffice to say, Campbell is an unorthodox Republican with immense political courage. And those are just his economic views. He also supports gay marriage, when 82% of Republicans in the state oppose it, and the right to have an abortion. He and Andrew Sullivan would make good bedmates. Sullivan is a conservative in the wilderness and subtitles his blog “Of No Party or Clique.”
Lest Campbell’s ideas seem too random, here’s one way to cohere them: The Economist. It is Campbell’s favorite magazine — which he reads, along with the state’s major newspapers, each morning on his Kindle — and his views approximate almost perfectly with the British editors’ in charge.
The Other Republican Candidates
If substance and heterodoxy are two words that leap to mind about Campbell, there is only one that captures both his Republican opponents, Poizner and Meg Whitman: rich. They are high tech entrepreneurs from Silicon Valley who have tapped their personal warchests of cash to launch political careers.
Poizner grew up in Texas, attended Stanford’s business school, and made his Silicon Valley fortune putting GPS receivers into cell phones. After twenty years in the private sector, in 2004 he entered politics by spending $5.75 million of his own money in an unsuccessful bid for a State Assembly seat. In 2005 he spent $2.25 million of his own money to support a re-districting proposition, which also failed. Try, try again. In 2006 he spent more than $14 million of his own money to run for Insurance Commissioner of California — that time he won.
The entrepreneurship that generated all this personal wealth makes him especially credible on the importance of innovation and start-ups to economic growth. It also motivates Poizner’s centerpiece proposal: 10% cuts in both personal and corporate income tax. “If you have lower tax rates then you will attract more taxpayers,” Poizner says, “The core of my economic plan is to bring more taxpayers back to California…I’m absolutely convinced that lowering tax rates will produce an increase in tax revenues.”
There are two problems here. First, there is no consensus among economists, even fiscally conservative ones, that supply-side tax policies actually increase total tax revenue. Second, California’s gigantic structural deficit is so bad that it has a credit rating worse than third world countries. This makes a Poizner tax-cutting strategy exceedingly risky. If the supply side dream doesn’t pan out, it would be positively disastrous to the State’s anemic coffers.
What does Poizner say to the body of evidence showing lower taxes do not in and of itself increase total tax revenue? Or to evidence that high income households are no more likely to leave the state than low-income households, which would cast doubt on the idea that high taxation is to blame for the exodus of taxpayers? They’re “just not right,” Poizner told the L.A. Times, citing “anecdotal evidence.”
Fiscal conservative Mike Genest, Schwarzenegger’s budget director, says, “There’s no basis to believe that a tax cut now would be affordable given the budget situation the state faces.” Adam Mendelsohn, a political advisor to Schwarzenegger, says candidates who call for a budget which doesn’t touch taxes, let alone lower them, must “put a plan on the table that shuts down people’s schools and releases prisoners onto the streets — but at least it won’t raise taxes.”
Campbell has a more philosophical take on his Republicans’ read-my-lips-no-new-taxes approach: “The absolutist position [of no new taxes] is almost always the wrong one in public policy if you wish to be effective.”
Meg Whitman, the third Republican candidate, also wants to lower taxes. We think. But who knows? Leading in the polls, Whitman has played it safe by avoiding debates and releasing scant details on her policy prescriptions. She says she will identify the specific programs she will cut once she’s governor. For now she can rely on name identification from her CEO post at eBay, where she grew the company from 30 employees to 16,000. Impressive, though it remains an open question whether growing and directing a focused business is relevant to one’s ability to successfully navigate and facilitate a State legislature that in turn steers the uniquely diverse state of California.
Whereas with Poizner you get the sense that he’s genuinely interested in reforming a state that’s been so good to him over the years, Meg Whitman’s candidacy seems opportunistic. She is said to have timed her exit from eBay to accommodate political ambitions. Her route has been methodical: she registered to vote in 2002, raised money for Mitt Romney and John McCain in 2006 and 2008, resigned as CEO of eBay in 2007, and in 2009 wrote herself a check for $15 million to launch her campaign for governor. In conjunction with becoming a conservative candidate, she came out against gay marriage, and not very convincingly.
She is not shy about using her wealth to achieve desired ends. In 2002 she donated $30 million to Princeton, her alma mater; her sons matriculated there in 2005 and 2007. So far in the race, she’s spent on private jets about what Campbell has spent in total. But money can’t buy you love — especially from California voters, who have a history of rejecting self-funded mega-rich candidates such as Al Checchi, Michael Huffington, and Steve Westly.
Whoever wins the Republican nomination will become flush with cash. Republicans will no doubt unite to battle the lone Democratic candidate, Jerry Brown. Brown, former governor of California and current Attorney General, has unrivaled name recognition. Yet with his long track record comes a long list of reasons why Republicans hate him.
Polls show Brown trumps all in a general election. Yet Campbell’s fiscal conservatism and social liberalism make him a strong contender in a general election. Democratic operative Bill Cavala says, “Campbell is the Republican who scares us the most.” The Economist also notes that he’s “the only one with the intellect and experience of government to match Mr Brown.”
Can He Win?
What makes Campbell’s campaign so improbable is not just that he lacks personal wealth — that barrier’s been surmounted in the past — but that he is positioning himself as a truth teller when there’s little evidence truth telling is successful in politics.
I asked Campbell if he had case studies of candidates who confronted brutal realities with straight talk, focused on policy substance over slogans, and proposed rational solutions that threatened important political constituencies — and won. He replied, “It’s who I am. I can’t do it any other way.”
Most savvy politicians hold an ends-justifies-the-means attitude toward campaigning. Economically literate Democrats say to themselves: I’ll implement the right policies once in office, but first I need to get in office, and doing that requires appeasing unions with protectionist talk. When Obama the candidate dished populist rhetoric that worried America’s trading partners, his economic advisor Austan Goolsbee notoriously quipped that Obama was playing domestic politics and that NAFTA was going to be fine. There wasn’t a microphone around Goolsbee after that.
Campbell, by contrast, says exactly what he thinks on third rail issues. He’s not hedging on politically risky positions. He’s not obscuring the seriousness of the budget situation. Campbell’s bet is that Californians will take the time to engage his ideas thoughtfully. They may not agree with him but at least they’ll respect his courage, the thinking goes. If there were ever a time this strategy might work it would be now: a moment of a peril and one where 80% of Californians say the state is on the wrong track.
Among voters who have an opinion — a more informed subset, given how early the race is — Campbell’s unconventional approach seems to be working. He polls neck-in-neck with Whitman, with Poizner a distant third. To keep it this way, he will need to do four things.
First, he needs to raise enough money to be competitive. He estimates this number at $10 million so that he can run TV and radio ads when it matters. Last reports show he has less than $1 million in the bank, compared to Whitman’s approximately $17 million and Poizner’s $15 million.
Second, he needs to operate a stellar grassroots campaign to make up for his smaller bank account. He told me “the biggest element of my campaign is the web” but at present his web presence is the weakest of the three Republicans.
Third, 1/5 of state voters are “decline to state” or Independent. As they can vote in the Republican primary, they will be drawn to a centrist candidate and need to vote for him.
Fourth, he needs to get lucky. He needs to hope that Whitman and Poizner obliterate each other in negative advertising so that, like Gray Davis in 1998, he can emerge as the white knight.
The Idealistic Vote of Cynicism
To support Tom Campbell the candidate is an act of idealism. The idea that a not-wealthy professor who articulates specific budget cuts more than a year before a primary could defeat mega-wealthy, high profile CEOs who stick to safe generalities strikes most serious political commentators as absurd.
To support Tom Campbell’s policy agenda is an act of cynicism about government. It is to support ideas that primarily serve to shrink government, render null legislators’ dreamy revenue forecasts which enable more spending, and stimulate the economy by making government functional and stable and then getting out of the way.
The cold, hard bottom line is that California state government does not need “leadership” as it is often thought of. California does not need big personalities. We’ve seen how they fare. California does not need outsiders who think they can transform the most complex state in the union, transcend divisiveness, re-make a culture, and balance the budget by eradicating government waste. It needs, instead, someone who can negotiate among entrenched interest groups, a task with no analog in the private sector, and spend four years focused on cleaning up the State’s balance sheet.
“We’re looking for profiles in courage here,” Campbell told the L.A. Times, in reference to Democrats willing to negotiate with unions and Republicans willing to consider new taxes. And of the voters, he has his sights set higher still: he’s looking for profiles in rationality: “I think I win the primary on the basis of being substantive.”
Ben Casnocha is the author of My Start-Up Life: What a (Very) Young CEO Learned on His Journey Through Silicon Valley. He founded an e-government software company that serves thousands of local government employees in California. He was named one of the “25 most influential people in the world of internet and politics” by PoliticsOnline. He publishes a daily blog about entrepreneurship, books, and ideas.