Jerry Brown is a happy man who rarely smiles. That’s because underneath all that energy and California optimism, there’s an old, practical Buddhist. This is all that can be done. We can tax the rich a tiny bit, if we do it right now and we show lots of ads of happy kids getting schoolbooks. We can build high-speed rail, if we slash aid to the poor. Brown dreams like Governor Moonbeam and governs like Babbitt. He lacks the charm and salesmanship of a politician. Or, as Warren Beatty, his friend since 1970, sums up: “I think what you’re saying is he’s not full of s- – -.”

A lot of people are saying that, now that he’s done what was long assumed impossible: balance the California budget. This is California, the Greece of America, the liberal state that wants to spend on everything and the libertarian state that won’t pay for anything. Californians are so committed to their faulty economic theory that they built laws to enshrine it: The legislature has to pass tax hikes by a two-thirds vote, and citizens can put new laws on the ballot as propositions. When Brown took office two years ago, the state had a $27 billion deficit. Standard & Poor’s (MHP) rated California’s credit the worst of the 50 states, and 24/7 Wall St. ranked it as the worst-run state in its 2011 and 2012 surveys.

This year, California will have an $850 million budget surplus in the coming fiscal year. Unemployment, which peaked at 12.4 percent just before Brown took office, is 9.4 percent. S&P has upgraded its outlook on the state. Confidence remains fragile, according to a survey of 1,142 large and small business leaders conducted by the California Business Roundtable: More than six out of 10 say it’s still harder to do business in California than in other states. But 24 percent of businesses say they plan to add jobs this year, compared with 16 percent that intend to cut them.

There are two versions to the story of how Brown, 75, did this. The first is about an old man, defeated and discarded, having long ago lost a run for the U.S. Senate and three for the White House, a man so far from power that the 1995 David Caruso movie Jade has a California governor telling an assistant district attorney to drop a case “unless you want as much of a future in this state as Jerry Brown,” to which the guy answers, “Who’s Jerry Brown?” But this old man humbles himself and works his way back, first as mayor of Oakland (Oakland!) and then as attorney general to Arnold Schwarzenegger (Arnold Schwarzenegger!). He stops dating starlets and marries a brilliant businesswoman who becomes his partner in governance. Using the wisdom he’s gained from his struggles, he reclaims the very office his dad occupied and makes his memory proud.

That’s not the way Brown tells it. “What’s the time? Everything is, ‘What time of day is it?’” he says, summing it all up in his own Buddhist koan. Voters, he says, finally felt so much pain from cuts to schools and libraries and basic services that they were willing to pay for them. Or, more accurately, the disproportionately left-leaning voters who went to the polls in November 2012 were willing to tax the rich to pay for them. Point is: He didn’t skate to the front of the net. He was Gretzky behind the goal, waiting for the play to develop. “You got to go with the grain, you got to go with the narrative, the storyline,” he says. “The storyline is written by history, not your own ‘I want.’”

Brown believes California has been led for too long by “I want.” His office at the Capitol is empty except for two photographs, some books, a couch, a coffee table, and a thick wooden table with a monastic bench. Many of his staff offices are empty, too, since he has barely any staff; the governor doesn’t employ a chief of staff or speechwriter.

This is a man who remembers World War II ration cards with fondness. “This idea you can have ice cream every night? Ice cream was for your birthday,” he says about his childhood. “It wasn’t an austere world. In fact, it was a normal world. It’s only austere juxtaposing the indulgence, the overconsumption, the profligacy—people don’t like those words because part of our economic growth is buying all this stuff.” Brown, who took a vow of poverty and chastity and lived in near-total silence while studying for the priesthood in the late 1950s, cites the Jesuit philosophy of tantum quantum: take what you need.

The real story of how Brown killed California’s deficit, awakened its economy, and provided hope that the U.S.’s biggest state can be great again is complicated and far from over. But it does illustrate that unsentimental, grown-up leadership can solve an economy’s most intractable problems. Which is also why what Brown has achieved in California isn’t likely to happen anywhere else.

In his fifth decade of public life, Brown is a political orphan. He’s a former chairman of the Democratic Party who now refers to “the Democrats” in the third person. He briefly quit the party to run as an independent for mayor of Oakland in 1998 and quotes Nietzsche about how a thinking man cannot be a party man. Above the couch in his office is a large framed photo of his great-grandfather, August Schuckman, who came to California in the 1850s and whose Colusa, Calif., property Brown inherited; a rock from Colusa is the only thing on his office coffee table. “When he came out here, you got your hands in the dirt, you got some people to work with you,” he says. “Here we’re trying to use government to do those things, and it doesn’t feel quite the same way. Welfare creates dependency and builds the power of the state. If everything is state-centric, it doesn’t fit with the idea that we can do more on our own.” Reviving California’s economy has required him to embrace big business: “People who do things tend to have a lot of money at the end of the day. It’s not the granola crowd who are going to move mountains.”

For more than three decades, California’s politicians failed to reconcile runaway public spending with the citizenry’s aversion to taxes. The antitax insanity began in 1978, when Brown was also governor. Howard Jarvis, a retired Los Angeles industrialist, got signatures for an initiative that would reduce property taxes to 1 percent, prevent raising the value of a house for tax purposes until resale, and require a two-thirds majority in both legislative houses to raise taxes. Brown was against it. The Republican party was against it. “They put Jarvis on Channel 7. It was a segment like ‘Bum of the Night.’ They put them up and knocked them out,” remembers Brown. “But no matter how sophisticated they were—professors, businessmen, and politicians—that Jarvis was a folk hero and he wasn’t worrying about the details.” Proposition 13 won easily.

During his first stint as governor, Brown tried to cut the state’s budget to fit the new constraints. He cut so much that in Brown’s reelection bid, Jarvis made a TV ad supporting him. But California public schools, which had been among the nation’s best, sank below those of most Southern states. And debt took off: It’s now twice as large as the next-highest state, New York. A few years ago, the budget-making system was so dysfunctional that the state had to issue IOUs for a few months. Shortly after Brown was elected as governor in 2010, Stockton and San Bernardino declared bankruptcy and Moody’s warned that 30 more California municipalities were teetering.

At first, Brown’s 21st century governorship offered little change. He wasted his first year trying to persuade four Republican senators to allow a ballot proposition asking voters to decide on a tax hike. “I tried. Almost on bended knee. In my personal loft sitting with four Republicans, pouring good wine. Going to their house. It was almost like Camus’s theater of the absurd: The human heart yearns for meaning, and the universe is silent. Well, I yearned for a vote on my tax initiative, but the Republicans were silent,” he says. “I said to this one lady, ‘Why don’t you vote to put this tax on the ballot and you can be the leader of the opposition and you and I can go around debating, and you are kind of an obscure assemblywoman and you’ll become quite famous?’ ” It’s not quite the script to the movie Lincoln, but it’s the same basic idea. Unlike Lincoln, though, Brown failed. And the public, whom he had promised a balanced budget, blamed him.

Brown needed money. He couldn’t borrow much more due to the Standard & Poor’s credit rating. Worse, the Supreme Court decided in May 2011 that California’s overcrowded prisons provided such bad health care that it was cruel and unusual punishment. Unable to spend to improve care, Brown used the ruling as an excuse to save cash. He pushed “realignment,” in which non-violent criminals who would have served time in prison were moved to local jails, which has reduced the inmate population by 29,700. An additional 64,000 have been realigned straight to probation. Republicans freaked out. Brown saved $1.5 billion.

Then he did some real cutting. “We cut child care—I’m sorry to say—old age pensions, the disabled, the elderly, and the blind. You can’t get any more sympathetic than that,” he says. The only cuts left to make, Brown claimed, were to public schools and, most significantly, the state’s universities and community colleges, which Californians—especially California’s many immigrants—consider a key part of the American meritocratic system.

The only way to save them was a tax increase. To get it, Brown used what he had learned from Howard Jarvis. In the Great Recession, the fervor isn’t antitax, but anti-rich. If President Barack Obama could have put the Buffett Rule to a public ballot, he probably would have gotten it approved. So Brown just wrote a proposition and gathered enough signatures from the public to get it on the ballot.

In June 2011 he tried to call a special election to ask voters to decide on a tax hike, but failed to gather support in time. He was lucky it didn’t work out: The special election would have had low turnout, which favors Republicans. By waiting for last November, Brown got the advantage of a new law that allowed online registration, which created 1 million young, liberal voters, who turned out in huge numbers. He also got lucky that a group of Orange County Republicans put an anti-union proposition on the November ballot, mobilizing union voters.

Brown had originally proposed a car tax, a 1 percent hike in the sales tax, and removing the tax credit for having children. In the end, Proposition 30 raised taxes only on incomes higher than $250,000 a year, after deductions, and increased the sales tax by 0.25 percentage point. “It’s more like a tip,” Brown says. “When you take polls, the only people you can tax are the very wealthy. Liberals say, ‘Tax the oil companies.’ You can’t tax them. They’ll spend $50 million to stop it. Look what happened when they tried to pass those soda taxes.”

Photograph by Mark Peckmezian

To get tax-hating Californians to vote to raise their own taxes, Brown became Governor Gloom. If the tax-cutters’ theory was to cut taxes so much we’d have to shrink government, he was going to shrink government so much that people would raise taxes. In addition to schools and community colleges, he would cut medical programs, aid to the disabled, and child health care. “Our breakthrough came because of the breakdown,” he says. “There were more layoffs, more pink slips, more agitation. Cutting was very conducive to the success of Prop 30.” In short: Jerry Brown scared the crap out of people.

It worked. The proposition passed by more than 10 percent. After taxes went up, so did approval ratings for Brown and the state legislature: Brown to 57 percent, the legislature to 36. Even the opposition is digging him. “When Governor Brown released his proposal for this year’s state budget, I couldn’t believe my ears,” says Assembly Republican Leader Connie Conway. “It truly sounded as though the governor channeled his inner Republican.” He’s also won over much of the business community, though he raised their personal taxes. “He comes at things differently than Arnold Schwarzenegger,” says Allan Zaremberg, chief executive officer of the California Chamber of Commerce, who worked with Brown on his first, abandoned tax hike. “You better be damn well prepared when you talk to him.” Zaremberg is pleased with Brown’s work to lower health-care costs to businesses and reform the state’s environmental quality act, which he says can be burdensome.

“He’s analytical, and it’s important to have that kind of maturity when we have a term-limited legislature—nearly half of the assembly is completely new to state government this year,” says Zaremberg. “He’s a stabilizing force.”

Brown lacks the chummy charisma of a normal politician, but he has something better: mystery. You can see how his bachelor life included relationships with Linda Ronstadt, Barbra Streisand, Natalie Wood, Stevie Nicks, Liv Ullmann, and Arianna Huffington. He’s intimidating and unwilling to suffer anyone who isn’t into suffering. He’s also eager to engage: This is not a man who is going to stop a good conversation because of his schedule.

Even more compelling, Brown has a natural curiosity. When he quotes the Yeats poem Byzantium and I say it describes an opium dream, he tells me I was mistakenly thinking of Shelley’s Ozymandias, then quotes that, too. I tell him how academic that is. “It’s not academic! Yeats was not in the academy, as far as I know,” he says. Which is so academic.

Brown tells me about his 2005 wedding to his girlfriend of 15 years, Anne Gust, and how he was married in the same church as his parents, and how the aunt who was the witness at his baptism was the witness for his marriage. I remark at how romantic that is, just as his wife walks through the door.

“It was sort of romantic,” she says. The governor, whose hawklike face rarely changes, turns red. “You’re blushing,” she says. “Golly, that’s cute.”

Along with smiling more, Gust, 55, is even more practical than her husband. A corporate lawyer and former chief administrative officer for Gap who now has the title of “special adviser” to the governor, she’s not only his de facto chief of staff but the one who makes Brown buy new clothes when they get holes in them. She’s got him working out every day: a three-mile run, weights, or pull-ups and chin-ups. At one point, Brown pulls out softcover books with horribly designed covers, many of which he’s rereading. One of them is Compulsory Mis-education, and the Community of Scholars by Paul Goodman. “He also wrote a book called Growing Up Absurd,” says Brown. “He’s an anarchist.” Gust laughs.

“Why do you laugh at that?” Brown asks, earnestly.

She shakes her head. “That’s not …”

Brown finishes the thought. “Because we’re not in that business,” he says.

The business of politics, he argues, is about storytelling. “We have 2,000 bills. Little bill bits. You can’t run a world on bill bits. That’s not what moves people. There has to be drama. Protagonist and antagonist. We’re on the stage of history here.”

So now he’s trying to tell a simple story about California’s future. When he was a kid, all the movies and TV shows about the future were utopian: flying cars, jet packs, robots, food pills, moon colonies. Now they’re all dystopian. So the action movie plot Brown’s selling is one in which California escapes disaster. Where seas rise and earthquakes rumble, but the state’s water supply is protected through a $14 billion project that will build two 40-mile tunnels running beneath the Sacramento River. Where highway traffic and airport security lines are circumvented via a high-speed railroad spanning the state.

Still, how do you persuade people to pay, right now, for a $68 billion train when, right now, you’re cutting benefits to the elderly? “As I get older, I realize I’m going to want to sit down and not drive,” Brown says. Then he gets going: “This is freedom! The freedom of movement. It’s a good. It’s dreary to think it’s all taxes and government. The joy, the aliveness, the poetry of life, that’s what I want to bring.”

Despite the balanced budget, California is still mired in debt. A study by the Pew Center on the States estimates that California’s pension funds have more than $100 billion in unfunded liabilities; state and local governments are short an additional $77 billion to cover retiree health benefits, according to Bloomberg News. Brown says he will use the new taxes and cuts to pay the debt down to $4.3 billion by 2017, but there are skeptics. “I thought that Brown might actually reform government instead of just raise taxes to pay for it,” says Grover Norquist, president of Americans for Tax Reform. “Instead, California is careening toward Detroit status. They’re screwing everybody instead of fixing government.”

Brown knows he has to reform the pension system and that it’s going to be the biggest fight of his governorship: It’s good to have a supermajority in the legislature, except when you want to do something your own party loathes. One reason he has a shot at succeeding is that he’s old. If he serves a second term as governor (really, a fourth), he’ll be 80, and, though he’s healthy now, he’s had prostate and skin cancer. He says his spiritual journeys have made him immune to the public’s love. “My soul is elsewhere,” he says. “I’m not beguiled by the fleshpots of Egypt here.”

Warren Beatty, whom Brown named to the California Hall of Fame (“Just another example of his brilliance,” Beatty says), is impressed by Brown’s pragmatism. “Since he has been chief executive of the largest state in the country twice, he has achieved a level of wisdom about the realities of the various conflicting forces that very few people have been able to achieve,” he says.

Being realistic means working with the opportunities available, which is why Brown doubts his map to balancing the budget will work for others. “D.C. is in a real pickle,” he says. “It’s not governable until there’s some breakthrough, and that will probably require more breakdown.”

So that’s his theory: cut, cut, cut until the people can’t take it anymore. Then inspire them with stories of what government can do. He’s getting worked up about the possibilities, already having talked for nearly two hours more than the 30 minutes he scheduled for this meeting. His aides try to interrupt several times because he’s flying to China the next day for a trade mission, but he stops in the office hallway of the now-empty Capitol building to talk some more about the power of government. He sounds more like the liberal side of California than the libertarian. “I’m aware of the Roman Empire. It’s hard to have a rally after 80 BC because you can’t walk the streets. It’s bad news.” As he’s pulled away by his staff, he yells something positive about California—“The sun is still rising in the West”—and quotes Antonio Gramsci: “I’m a pessimist because of intelligence, but an optimist because of will.” Brown is a politician long past being afraid of quoting a Marxist.