Governor Reagan, Sacramento and the Welfare Fight Nobody Remembers

Ask a room of conservatives what Ronald Reagan did as governor of California and you will hear a lot of silence, followed by someone saying "the Berkeley thing." Ask what he did as president and the answers come in a flood: the tax cuts, the Cold War, the speech at the Brandenburg Gate. That is a pity, because the Reagan most of us celebrate was built in Sacramento. He learned there how to govern with a legislature run by the other party, how to give ground without giving up the game, and how to lose a ballot fight and come back smarter. The famous Reagan was the finished product. The governor was the workshop.

Let me take the claim seriously and see how it holds up, because the record in Sacramento is not all triumph. It includes a tax increase that his admirers would rather skip, a ballot defeat that stung, and a welfare reform that most Americans have never heard of. It is also the best answer I know to a question conservatives ask every time they lose a majority: what do we do now?

Two elections and a hostile legislature

Reagan, a former actor and television host who had become the face of a conservative movement after his 1964 speech for Barry Goldwater (the story is told in The 1964 television speech that turned Ronald Reagan into a conservative leader), ran for governor in 1966 against the Democratic incumbent, Edmund G. "Pat" Brown. He won, and took office in January 1967. He ran again in 1970 against Jesse Unruh, the longtime Democratic power in the Assembly, and won again, serving until January 1975.

Now look at the arithmetic of his situation. Democrats controlled the California Assembly for his whole tenure, and they held the state Senate too. So Reagan had a mandate from the voters and no majority in the room where laws were written. If you want to know why he later seemed so comfortable working with Tip O'Neill's House of Representatives, this is where he practiced. A governor who wants nothing from a hostile legislature will get nothing, and Reagan wanted a lot.

The tax increase

Here is the part that conservatives like to skip. Reagan campaigned on cutting government and found, once in office, that the state's finances were in worse shape than he had been told. California was running a deficit, and the budget had to be balanced. In 1967 he signed a large tax increase, widely described at the time as the biggest any state had ever enacted. It raised income tax rates and other taxes, and it was the sort of bill a campaigner for smaller government does not frame and hang on the wall.

Was it a betrayal? Think about the choices. Reagan could have refused to sign, which would have left the state with a deficit that the constitution does not let a state ignore, since California cannot print money (more on that in Why Your State Cannot Print Money the Way Washington Does). He could have cut spending deeper than the legislature would pass, which was not available when the other party writes the budget. Or he could sign a deal, take the most conservative version he could get, and live to fight another day. He chose the third. I'd call that a lesson, not a stain: a governor who cannot balance the budget has nothing to bargain with, and a governor who cannot be trusted with a balanced budget will not be trusted with anything else.

He also signed a law that he later wished he had not. In 1967 Reagan signed the Therapeutic Abortion Act, which liberalized the state's abortion law, and he later said that he regretted it. Even a conviction politician makes mistakes, and a fair reading is that he learned from them. That is what separates a leader from an ideologue.

The welfare fight

Now the story that almost nobody remembers. By the end of the 1960s, California's welfare rolls had grown at a pace that alarmed taxpayers of both parties. The state's biggest programs, Aid to Families with Dependent Children and the Medi-Cal health program that California created in 1965, were growing faster than revenue. Reagan made it a priority. His administration, with a welfare specialist named Robert Carleson, spent months planning a major restructuring.

The planning is the first lesson. Carleson and his team did not just yell. They studied the law, found what was in federal and state hands, and worked out which parts California could change on its own. Reagan sold the plan on a simple idea: help those who truly cannot help themselves, and ensure that the people on the rolls are the people the law intends.

The second lesson is the one conservatives forget. He did not get his plan through by outshouting the legislature. In 1971 he sat down with the Democratic Speaker of the Assembly, Bob Moretti, and bargained. The result was the California Welfare Reform Act of 1971. In broad terms, it tightened eligibility and verification rules, took those it deemed ineligible off the rolls, and raised grants for the recipients who remained. You will notice that the bill gave something to both sides: the Democrats could say that the neediest got more, and Reagan could say that taxpayers got a program with edges.

This was not a compromise made with a clenched jaw. Moretti and Reagan got on well enough to produce a landmark. And it carried an implication that Reagan took with him to Washington. A program does not become permanent just because it is old; a legislature, even one run by the other party, will sometimes agree to reform if the pitch is "make it work for the people it was meant for." Years later, welfare reform became a national cause; the story of how the states led the way is in How the States Rewrote Welfare Before Washington Finally Caught Up, and the 1996 federal law that followed is covered in two vetoes, one signature and the 1996 welfare law that put marriage in statute. The ideas that powered those later victories had a rehearsal in Sacramento in 1971.

I should be precise about what I am claiming. I am not saying the California reform solved poverty or that every number cited for it at the time holds up. Reagan's own supporters, and his opponents, argued for years about how many people came off the rolls and why. What I am saying is that the structure of the achievement is a model: a clear goal, a prepared plan, and a deal with the opposite party.

The defeat: Proposition 1

Now the loss. In 1973, Reagan took a different approach and went directly to the people. He backed a constitutional amendment, Proposition 1, that would have limited state taxes to a share of Californians' personal income, with the share declining over time. The idea was to put a permanent cap on how much of the people's money the state could take.

The measure went on the ballot in a special election in November 1973, and the voters defeated it. The campaign against it was fierce, and the opponents argued, among other things, that the complicated formula would hurt schools and local governments. They said the details were murky, and that was partly fair: the proposal was hard to explain on a bumper sticker.

What do you do with a defeat like that? Reagan's supporters moved on. Five years later, in 1978, two California citizens, Howard Jarvis and Paul Gann, put a much simpler measure on the ballot: Proposition 13, which capped property taxes at 1 percent of assessed value. This time the voters said yes by a wide margin. The tax revolt that Reagan had tried to lead from the governor's office was finished from the grass roots, with a measure anyone could understand. How Proposition 13 Started the Tax Revolt That Reshaped the GOP tells that story in full. The lesson is a hard one. An idea can be right and the packaging wrong. Reagan had the principle; Jarvis and Gann had the sentence.

The executive craft

Put the pieces side by side and you get a picture of how the future president worked.

1. He used the veto and the budget. A governor in California has a line-item veto over appropriations, and a governor who uses it sets the terms of every negotiation.
2. He built a team. Carleson on welfare, and a cabinet and staff brought in from business and the professions, gave him people who knew their subject. He delegated, and he stayed on message.
3. He went over the legislature's head when he had to. His television speeches to the people of the state were a pressure tool. A legislator who gets a thousand letters pays attention.
4. He bargained when he could not win. The 1967 budget and the 1971 welfare deal both involved giving something to the other side.
5. He accepted defeat and reframed. Proposition 1 lost. Proposition 13 won. The goal stayed the same; the method changed.

Nobody should pretend that this was a spotless record. Reagan took criticism for his handling of campus protest at the University of California, for the budget cuts that hit some programs, and for decisions that opponents said fell hardest on the vulnerable. He had to deal with a legislature that did not want him to succeed, and with a party establishment that had not quite made peace with him. Those criticisms are part of the record, and a profile that left them out would be a campaign brochure.

The objection from his own side

Here is the strongest criticism, and it comes from conservatives, not liberals. It says: Reagan talked like a limited-government man and governed like a pragmatist. He signed a record tax increase. He signed a liberalized abortion law. He signed the Family Law Act of 1969, California's no-fault divorce law, which took effect in 1970. The state government was larger when he left than when he arrived. If the test of a conservative governor is how much he shrank the state, the argument goes, the record is thin, and treating Sacramento as a model teaches the party to compromise itself into irrelevance.

Take that seriously, because part of it is true. Reagan's eight years did not produce a smaller California government, and some of what he signed he came to regret. Any profile that pretended otherwise would deserve the scorn of the very people it flattered.

But look at what the argument asks us to believe. One, that a governor facing a hostile legislature and a deficit could have done better by vetoing everything and waiting. Two, that the voters would have rewarded a stalemate. Three, that the alternative to compromise was victory. In practice the alternative to a deal with a hostile legislature is no deal, and the budget is written by the other party. The test of a governor in that position is not whether he got everything. It is whether he moved the state in his direction, protected what he could, and left himself and his movement stronger. Judge Sacramento by that test and the welfare act, the sharpened budget process and the political education he took to the White House all count. The tax increase is the price he paid for them, and honest admirers should say so.

There is also the matter of what came next. A movement that never learned to bargain would have been lost in 1981, when Reagan faced a House of Representatives controlled by the other party and still passed the biggest tax cut in a generation. The skill was learned in Sacramento. Say what you like about the tax bill of 1967; the man who signed it knew how to count votes in 1981.

What a conservative can learn

Here is the question that matters for the reader today. Suppose your side wins the governor's chair but not the legislature. Or suppose it holds the legislature and not the governor's mansion. Or suppose, as sometimes happens, it holds nothing in the capital that counts. What do you do?

Reagan's answer, from Sacramento, was: you govern anyway. You prepare a plan so thorough that the other side cannot pick it apart. You find the one issue where the opposition has its own reasons to deal. You take the win you can get rather than hold out for the one you cannot. You tell the people the truth about the trade-offs. And when you lose a vote, you do not sulk, you go home and write a simpler sentence.

This is useful beyond California. What a Governor Can Actually Do and What Only the Legislature Can explains the formal powers a governor holds, and divided government gave us welfare reform and a balanced budget shows the same principle at the national level, when a Republican Congress and a Democratic president found common ground. For the Reagan who came after Sacramento, see The Reagan Tax Cuts Rate by Rate and the Tax Reform of 1986.

The bottom line

• Reagan served two terms as governor of California, from January 1967 to January 1975, with Democrats running the legislature the whole time. He had to govern by bargaining.
• He signed a large tax increase in 1967 to balance the budget, and he regretted the abortion law he signed that same year. Both are part of the honest record.
• The California Welfare Reform Act of 1971, negotiated with Democratic Speaker Bob Moretti, tightened eligibility and raised aid for the neediest, a model of reform by deal.
• Proposition 1 lost in 1973, and Proposition 13 won in 1978. The lesson is to put a good principle into a sentence people can understand.
• If you are in the minority, use his playbook: prepare a plan, pick your deal, tell the truth about the trade, and keep going.