The $100 billion “California Comeback Plan” that Gov. Gavin Newsom unveiled Monday makes perfect political sense.
Newsom faces a recall election next fall and while the odds favor his retention, he knows that California’s economic recovery from the COVID-19 recession has been sluggish and personal financial angst played a role in getting enough signatures on recall petitions.
$5 Billion in Stimulus Payments and Rent or Utility Aid
“California’s recovery is well underway, but we can’t be satisfied with simply going back to the way things were,” Newsom said. “We are tripling the Golden State Stimulus to get money in the hands of more middle-class Californians who have been hit hard by this pandemic. Two in three Californians will receive a check from the state and more than $5 billion in aid will be made available to those who need help paying their rent or utility bills.”
The largesse, one can assume, will make recipients less likely to vote for the recall.
One might even say that the plan makes humanitarian sense. So many Californians lost their incomes and ran up those rent and utility debts because of the business shutdowns that Newsom ordered to curb spread of the deadly virus. Helping them get back on their feet is an acceptable, or even laudable, use of the $75.5 billion budget surplus that Newsom announced.
“We want to get money in people’s pockets as rapidly possible,” Newsom said as he unveiled his plan in Alameda County.
Federal Aid Hindering People to Return to the Workforce
But economic sense? Not so much.
Newsom bills his plan as a way of jump-starting the economy and returning to the prosperity that California was enjoying prior to the onset of the pandemic 18 months ago. However, while the $100 billion in state tax revenues and federal aid that Newsom wants to inject into the economy is a hefty sum, it’s a relative drop in the bucket of an economy that approaches $3 trillion a year.
True recovery would come when the more than 1.5 million Californians who are either unemployed or have stopped looking for work are once again on the job, supporting their families and paying taxes. There’s precious little in Newsom’s plan to make that happen and it could have the opposite effect.
Throughout California, as employers resume operations, they complain that they can’t find enough workers to fully staff up. The phenomenon is not confined to California and economists agree that one factor is that enhanced unemployment insurance benefits and other pandemic relief programs have removed some incentives for the jobless to seek work.
Newsom to Propose Revised State Budget
Newsom loves to announce grandiloquent schemes, what he has termed “big hairy, audacious goals,” and having a relatively massive projected budget surplus — the result of high-income Californians’ huge taxable gains in stocks and other capital investments over the past year — gives him an opportunity to think big.
The relief plan he announced Monday would consume about $20 billion and he intends to roll out other spending plans this week, leading up to proposing a revised 2021-22 state budget that will spend many billions more.
The question, however, is how much will be for one-time or short-term expenditures like those he revealed on Monday and how much will be in new entitlements whose costs will continue year after year, such as the expansion of child care he announced on Mother’s Day.
Newsom’s fellow Democrats in the Legislature and advocates for expansive health and welfare services have a long list of proposals for permanent new spending commitments. We’ll soon learn how many of them will wind up in the revised state budget.