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Gavin Newsom meets reality with California’s budget deficit

Gavin Newsom's budget deficit has ballooned to $32bn. Credit: Getty

May 16, 2023 - 4:00pm

Gavin Newsom, the would-be president many Democrats hope might be an alternative to the current dodderer-in-chief, has landed himself in hot water. Once an enthusiastic backer of just about every progressive cause, the California Governor must now cope with a budget deficit that has already ballooned to $32 billion. This will no doubt limit his ability to spread largesse to the party’s loyal constituencies.

Perhaps nowhere is this more evident than in the coming battle over reparations for African Americans. Newsom approved a reparations task force in the midst of the frenzy which followed the murder of George Floyd, but he now faces a bill that could top $800 billion. Newsom has already hinted that the reparations discussion is about “more than cash payments”, but in reality cash — estimated as at least $125,000 per individual  but sometimes much higher — is what this is all about.

Newsom’s attempt to spin reparations as a moral lesson has been sharply attacked by reparations advocates and, as usual, he has now backed off from his earlier remarks. Yet at some point he will have to confront the outrageous numbers involved in the scheme, which would overwhelm the state’s daily functions and make it all but impossible to pay for things such as public employee pensions and elaborate “green pork” subsidies for key constituencies like consultants, investment banks and tech oligarchs.

The budget shortfall, itself reflective of mass outmigration of both people and businesses, threatens to place Newsom at odds with the environmental, racial, and economic justice advocates who now dominate his party. When the coffers were brimming with Covid aid and money from tech IPOs, Newsom could play Maecenas to the poor in a state with the nation’s highest cost of living adjusted poverty rate, while still keeping close to the oligarchs who would fund a future presidential bid. Now conditions have changed, and Newsom looks increasingly unsure how to cope.

This reflects a larger problem for other blue state governors, including Illinois’s Jay Pritzker and New Jersey’s Patrick Murphy, both of whom have been earmarked as possible post-Biden presidents. This is particularly embarrassing given that the much-hated red states, like Florida, Texas, and even West Virginia, boast large budget surpluses. Evidently, lower taxes, less regulation and even lots of demon fossil fuels is what makes for a healthy economy today. 

These other blue states, including New York whose uninspiring Governor is on no one’s presidential list, also show all the problems associated with California: huge pension debts, outmigration of people and businesses, and slow economic growth. But they lack the remarkable assets that California still has in critical fields like space, software, agricultural technology and biomedicine. These are all states that lack powerful economic drivers and have far less potential to stage a comeback than California.

But these advantages, if they are allowed to develop, are not likely to provide Newsom with the news he needs in the near future. Instead, he will be spending his time fighting off the increasingly dogmatic Left on climate policies, housing, reparations and expanding the welfare state. Their solutions tend to be for more taxes, which threatens to accelerate the exodus of high-income taxpayers; 0.5% of all tax returns filed in the state collectively pay about 40% of all California personal income taxes, the state’s primary source of revenue. 

Something has to give between reality and progressive fantasy. The days of Newsomesque preening may have to end, and the blow-dried king of Sacramento, like his Democratic counterparts, may have to actually deal with the problems that their policies have caused, rather than rely on ceaseless virtue-signalling.


Joel Kotkin is the Hobbs Presidential Fellow in Urban Futures at Chapman University and author, most recently, of The Coming of Neo-Feudalism: A Warning to the Global Middle Class (Encounter)

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Brian Villanueva
Brian Villanueva
1 year ago

I live in Sacramento, CA. The subhead implies that there are 2 wings: “radical progressives” and “normie liberals”. There are not. Whatever liberals (let’s just say, Democrats who don’t think men can get pregnant) remain in CA, this diminishing number has never been Newsome’s constituency. He’s from San Francisco.
“Something has to give between reality and progressive fantasy.”
And in true postmodernist form, what will give is reality. Progressive fantasy is a theology. CA may face serious problems, but we’re a long way from so bankrupt that Newsome or the Democratic Party is going to abandon the god of personal autonomy that has been their idol since the sexual revolution.
We have lots of experience in this state at milking obviously unsustainable and pointless programs. We’ve spent 15 years “building” a high speed rail line that has no usable track yet. The Democrats bilked CA taxpayers for $6B simply to payoff their friends who write environmental impact reports. Reparations present another huge opportunity for the same.
Predictions for this year: apologize for slavery, make some token antiracism programs, throw grants at black political organizations to buy off the angriest and most organized voices, and hold legislative hearings on making a “downpayment” on reparations for everyone else.
Predictions for the next 3-4 years: hire grievance studies PhDs as consultants to study how best to implement reparations.
Predictions for 5+ years: This process will end the same way high speed rail did: petering out slowly so that no one has to acknowledge failure.
You fail to understand just how dysfunctional this state really is.

Andrew Fisher
Andrew Fisher
1 year ago

Why on Earth do you choose to live there though?

Matt Hindman
Matt Hindman
1 year ago

Apparently he thinks his constituency constitutes more than San Francisco. The man has presidential ambitions.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
1 year ago

The disaster films focused on California used to start with the San Andreas fault. At least Newsom has given Hollywood screenwriters a different angle

John L Murphy
John L Murphy
1 year ago

If Newsom wants a cause, why not take up that of the Hollywood writers on strike, or at least in keeping the film industry in the Golden State? Toronto + Atlanta offer big tax breaks that keep luring away this “legacy” business. My wife’s family has worked in it in L.A. since the 1930s. It’d help many of the little folks who work in this field, and who must often leap from job to job in an unpredictable enterprise. More “equitable” than reparations, perhaps…

Last edited 1 year ago by John L Murphy
John L Murphy
John L Murphy
1 year ago

If Newsom wants a cause, why not take up that of the Hollywood writers on strike, or at least in keeping the film industry in the Golden State? Toronto + Atlanta offer big tax breaks that keep luring away this “legacy” business. My wife’s family has worked in it in L.A. since the 1930s. It’d help many of the little folks who work in this field, and who must often leap from job to job in an unpredictable enterprise. More “equitable” than reparations, perhaps…

Last edited 1 year ago by John L Murphy
Andrew Fisher
Andrew Fisher
1 year ago

Why on Earth do you choose to live there though?

Matt Hindman
Matt Hindman
1 year ago

Apparently he thinks his constituency constitutes more than San Francisco. The man has presidential ambitions.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
1 year ago

The disaster films focused on California used to start with the San Andreas fault. At least Newsom has given Hollywood screenwriters a different angle

Brian Villanueva
Brian Villanueva
1 year ago

I live in Sacramento, CA. The subhead implies that there are 2 wings: “radical progressives” and “normie liberals”. There are not. Whatever liberals (let’s just say, Democrats who don’t think men can get pregnant) remain in CA, this diminishing number has never been Newsome’s constituency. He’s from San Francisco.
“Something has to give between reality and progressive fantasy.”
And in true postmodernist form, what will give is reality. Progressive fantasy is a theology. CA may face serious problems, but we’re a long way from so bankrupt that Newsome or the Democratic Party is going to abandon the god of personal autonomy that has been their idol since the sexual revolution.
We have lots of experience in this state at milking obviously unsustainable and pointless programs. We’ve spent 15 years “building” a high speed rail line that has no usable track yet. The Democrats bilked CA taxpayers for $6B simply to payoff their friends who write environmental impact reports. Reparations present another huge opportunity for the same.
Predictions for this year: apologize for slavery, make some token antiracism programs, throw grants at black political organizations to buy off the angriest and most organized voices, and hold legislative hearings on making a “downpayment” on reparations for everyone else.
Predictions for the next 3-4 years: hire grievance studies PhDs as consultants to study how best to implement reparations.
Predictions for 5+ years: This process will end the same way high speed rail did: petering out slowly so that no one has to acknowledge failure.
You fail to understand just how dysfunctional this state really is.

Jim Veenbaas
Jim Veenbaas
1 year ago

I think Victor Davis Hanson said it best; “Once socialism takes hold, every mediocrity, every ossified bureaucracy, every constipated careerist, every hack writer and nobody actor, comes out of the woodwork to find his socialist ‘fair share’ of what he lacked in talent or accomplishment. ”

Jim Veenbaas
Jim Veenbaas
1 year ago

I think Victor Davis Hanson said it best; “Once socialism takes hold, every mediocrity, every ossified bureaucracy, every constipated careerist, every hack writer and nobody actor, comes out of the woodwork to find his socialist ‘fair share’ of what he lacked in talent or accomplishment. ”

J Bryant
J Bryant
1 year ago

Music to my ears, and yet… I believe the extreme left are now so powerful in California nothing will change until there is complete economic collapse in that state. That would likely require tech to leave en masse, that the movie/entertainment business mostly relocates, and green policies render California’s impressive agriculture sector unprofitable. It’s possible the woke will push the state that far, but I suspect cooler heads will pull back at the brink and California will limp along indefinitely.
So far as reparations goes, it’s politically impossible for Newsom to scrap that idea now it’s out of the bag. He’ll have to reduce the proposed amount of payments. It will be interesting to see what California voters make of that.

J Bryant
J Bryant
1 year ago

Music to my ears, and yet… I believe the extreme left are now so powerful in California nothing will change until there is complete economic collapse in that state. That would likely require tech to leave en masse, that the movie/entertainment business mostly relocates, and green policies render California’s impressive agriculture sector unprofitable. It’s possible the woke will push the state that far, but I suspect cooler heads will pull back at the brink and California will limp along indefinitely.
So far as reparations goes, it’s politically impossible for Newsom to scrap that idea now it’s out of the bag. He’ll have to reduce the proposed amount of payments. It will be interesting to see what California voters make of that.

AC Harper
AC Harper
1 year ago

There will always be people who believe that they are due their ‘fair share’ of other peoples’ money. Indeed this constituency of clients is usually sought and encouraged by left wing politicians who don’t mind spending other peoples’ money. But eventually the ‘other people’ move away or their money dries up.
Perhaps the best way forward is to award reparations of 1 million dollars to each person that believes they qualify – and then impose a ‘special reparations’ tax rate of 99c on the dollar. After all if you have a big wodge of money the State can always find better ways to spend it…

Mike Doyle
Mike Doyle
1 year ago
Reply to  AC Harper

You’ll need to cover the admin costs, so 102 cents on the dollar might make more sense…

Mike Doyle
Mike Doyle
1 year ago
Reply to  AC Harper

You’ll need to cover the admin costs, so 102 cents on the dollar might make more sense…

AC Harper
AC Harper
1 year ago

There will always be people who believe that they are due their ‘fair share’ of other peoples’ money. Indeed this constituency of clients is usually sought and encouraged by left wing politicians who don’t mind spending other peoples’ money. But eventually the ‘other people’ move away or their money dries up.
Perhaps the best way forward is to award reparations of 1 million dollars to each person that believes they qualify – and then impose a ‘special reparations’ tax rate of 99c on the dollar. After all if you have a big wodge of money the State can always find better ways to spend it…

Erik Hildinger
Erik Hildinger
1 year ago

The use of the term reparations in this context is an abuse of language, one that I wish journalists would refrain from, at least those who don’t support these proposed transfer payments. If they did so, readers could then easily tell which side a journalist was on, and judge the reporting accordingly. This abuse of language is useful to those pushing this divisive policy and, by acquiescing in the abuse, one helps promote the policy, obscure the debate, and degrade the language.

Ian Barton
Ian Barton
1 year ago
Reply to  Erik Hildinger

yep – e.g the term “gender critical” has been too easily adopted by pro-biology commentators.

Ian Barton
Ian Barton
1 year ago
Reply to  Erik Hildinger

yep – e.g the term “gender critical” has been too easily adopted by pro-biology commentators.

Erik Hildinger
Erik Hildinger
1 year ago

The use of the term reparations in this context is an abuse of language, one that I wish journalists would refrain from, at least those who don’t support these proposed transfer payments. If they did so, readers could then easily tell which side a journalist was on, and judge the reporting accordingly. This abuse of language is useful to those pushing this divisive policy and, by acquiescing in the abuse, one helps promote the policy, obscure the debate, and degrade the language.

Susan Grabston
Susan Grabston
1 year ago

Joel, if you see this, your recent piece in the Spectator was masterful.

Susan Grabston
Susan Grabston
1 year ago

Joel, if you see this, your recent piece in the Spectator was masterful.

Michael Daniele
Michael Daniele
1 year ago

My concern is that if CA remains in difficulty, the national Democrat regime will simply bail it out. We have a regime that already had decided unilaterally to absolve all students of their debt, and dictate how our savings may be invested. It would be small potatoes to toss CA a hundred billion or so…

Michael Daniele
Michael Daniele
1 year ago

My concern is that if CA remains in difficulty, the national Democrat regime will simply bail it out. We have a regime that already had decided unilaterally to absolve all students of their debt, and dictate how our savings may be invested. It would be small potatoes to toss CA a hundred billion or so…

UnHerd Reader
UnHerd Reader
1 year ago

”the murder of George Floyd,”

If any of you are not hoarding rice, canned food, and gold you are a rabbit frozen in the headlights….

UnHerd Reader
UnHerd Reader
1 year ago

”the murder of George Floyd,”

If any of you are not hoarding rice, canned food, and gold you are a rabbit frozen in the headlights….

neil sheppard
neil sheppard
1 year ago

Delicious.

neil sheppard
neil sheppard
1 year ago

Delicious.

Brian Cashman
Brian Cashman
1 year ago

Won’t California simply tax the payments? Problem solved.

Brian Cashman
Brian Cashman
1 year ago

Won’t California simply tax the payments? Problem solved.

Ray Zacek
Ray Zacek
1 year ago

Cali will be forced to ban U-Haul trucks leaving the state, and perhaps build a wall on its borders.

James Stangl
James Stangl
1 year ago
Reply to  Ray Zacek

Or impose a nose-bleeding “Calexit” exise tax.

James Stangl
James Stangl
1 year ago
Reply to  Ray Zacek

Or impose a nose-bleeding “Calexit” exise tax.

Ray Zacek
Ray Zacek
1 year ago

Cali will be forced to ban U-Haul trucks leaving the state, and perhaps build a wall on its borders.

James Stangl
James Stangl
1 year ago

*Evidently, lower taxes, less regulation and even lots of demon fossil fuels is what makes for a healthy economy today.*
And if one looks at the paper from the author’s employer, Chapman University, one of the three models that is proffered for CA to learn from in terms of intelligent economic and labor development is another hated Red state, Utah. Seems those weirdo conservative Mormons know something that the uber-smart CA lefties don’t. And like a lot of other “hated Red states,” UT the rest of flyover country has natural resources (especially energy), lower taxes, and agriculture. Hmmmm.
Also, the purported “assets” that Kotkin seems to think are unique to the Golden State (aerospace, software, ag technology, biomedicine) can be easily transferred out of state. In nearby Washington, Boeing has moved significant chunks of its aircraft building (and management) out of state. Software and biomed can flourish in places like Utah (or Texas, etc.). And any state with a large agricultural footprint probably has very similar ag tech. CA isn’t as special any more as it would like to think.

James Stangl
James Stangl
1 year ago

*Evidently, lower taxes, less regulation and even lots of demon fossil fuels is what makes for a healthy economy today.*
And if one looks at the paper from the author’s employer, Chapman University, one of the three models that is proffered for CA to learn from in terms of intelligent economic and labor development is another hated Red state, Utah. Seems those weirdo conservative Mormons know something that the uber-smart CA lefties don’t. And like a lot of other “hated Red states,” UT the rest of flyover country has natural resources (especially energy), lower taxes, and agriculture. Hmmmm.
Also, the purported “assets” that Kotkin seems to think are unique to the Golden State (aerospace, software, ag technology, biomedicine) can be easily transferred out of state. In nearby Washington, Boeing has moved significant chunks of its aircraft building (and management) out of state. Software and biomed can flourish in places like Utah (or Texas, etc.). And any state with a large agricultural footprint probably has very similar ag tech. CA isn’t as special any more as it would like to think.