Newsom’s Humiliating Budget Disaster

In the wake of his embarrassing defeat in the debate with Florida Gov. Ron DeSantis, in which he sang the praises of California and its governance, California Gov. Gavin Newsom now faces a major fiscal crisis, as his state suffered from a record-breaking $68 billion budget deficit.

"Newsom and the state legislature now must come up with a plan to cover this deficit. Newsom will present his plan in January and then negotiate with state lawmakers through June. The next budget year begins July 1,” reports the Associated Press. "Newsom’s first term in office was buoyed by record-smashing surpluses of more than $100 billion in some years. The money allowed him and his Democratic allies in the state Legislature to greatly expand government, including paying for guaranteed health insurance for all low-income adults regardless of their immigration status and free lunches for all public school students."

The report continued.

Now, in his second term, growing budget deficits could threaten some of Newsom’s accomplishments at a time when he is building his national profile that could lead to a run for president beyond 2024. The Legislative Analyst Office says their projections, from 2022-2023 through 2027-2028, show a cumulative deficit of $155 billion.
Still, even in the face of deficits, Newsom and the state Legislature last year gave a lucrative tax break to the state’s film and television industry while also agreeing to gradually raise the minimum wage for health care workers to $25 per hour. That wage increase will cost the state about $20 billion this year in increased labor costs and Medicaid payments to hospitals.

"Republicans cautioned that this level of spending would lead to greater deficits, and it would be more prudent to show restraint. Unfortunately, the majority party ignored those warnings," state Sen. Roger Niello (R-Fair Oaks) told the Associated Press.

This news doesn't do Newsom any favors, as he's currently seeking to expand his national profile in what many believe to be a shadow campaign for the presidency in 2024. Amid Joe Biden's awful poll numbers and concerns over his physical and cognitive health, Newsom has been seizing the opportunity to build a national organization that could easily be converted into a presidential campaign should the situation arise that he needs to. But Newsom's poor management of his state could be a huge liability for him in a a national campaign.

According to the report, "The economic downturn has had a greater impact in California than other states, mostly because of its size and that it relies heavily on taxes paid by the wealthy. The number of unemployed workers has risen by nearly 200,000 since last year, enough to increase the state's unemployment rate to 4.8% from 3.8%. The national unemployment rate is 3.9%."

Contributing to the problem is that the technology sector, which has been the source of most of the economic growth in the state and thus a huge revenue generator, has been plagued by layoffs.

"They expanded greatly during the pandemic, and now they are finding that they have too many people and they need to cut back expenses," said Sung Won Sohn, an economics professor at Loyola Marymount University.

And to think, Newsom was bragging about California's economy during his debate with DeSantis.