You Didn’t Have to Watch To Know Gavin Newsom Beat Ron DeSantis

Up front, I loathe California governor Gavin Newsom. Leaving aside his unctuous personality, I’ll never forgive his dictatorial actions related to the coronavirus. Imagine the arrogance that would cause Newsom to think he was smarter than the largest (by population) state in the U.S.? The reality is that the people are the marketplace, and the people didn’t need to have their freedom taken from them in order to take cautious steps regarding the virus. Precisely because the weak-kneed governor errantly felt the virus was a major threat to Californians, that was all the reason for him to do nothing. If and when something threatens, freedom is crucial while governmental force is superfluous.

It’s also difficult to forget Newsom’s laughable suggestions to Californians to put their masks on in between bites of food and sips of drinks once restaurants were “allowed” to reopen. Oh yes, the virus takes a break between bites….On July 4th of 2020, I rejoiced from the east coast when Californians gave Newsom and other authoritarians the proverbial middle finger by putting on their own firework shows across the state after public shows, including the brilliant Rose Bowl version (I grew up in Pasadena), were cancelled.

So while I’m no fan of Newsom, it’s easy to tell that he beat Ron DeSantis in their debate. The fact that there’s been little post-debate commentary from my side about how DeSantis owned the “woke” (an overused word would be harder to find today) Newsom says it all. Instead, quiet has followed all the pre-debate trash talking.

After that, it’s not difficult to speculate why DeSantis lost. He lost because he’s advised by happy talkers as opposed to people who think seriously about economics. The growing aversion to reason in pockets of the right rendered DeSantis a sitting duck.

To see why, stop and contemplate most right-of-center commentary about California. To read it is to read endless opining pregnant with U-Haul imagery about a state that’s “dying,” that’s been depopulated, that is burdened by “deficits” born of economic contraction. The analysis is hard to take seriously even if you, the reader, correctly disdain the size of California’s government, the government’s policies, along with the authoritarian qualities (think the lockdowns yet again) of some in power.

Deficits will be addressed first. About them, and without defending the massive tax that is government spending for even a second, California has lots of debt precisely because its economy is so large. Members of the right should understand this best. They properly reject dopey lefty notions about “predatory lending” to individuals given their understanding of the basic truth that no one loans money in the hope of not being paid back, but forget that’s what’s true about individuals is also true about states. California can borrow in enormous amounts because it takes in enormous amounts of tax revenue now, and is expected to take in even greater amounts in the future. This wouldn’t be true if the state’s economy were in decline.

Along these lines, it’s no reach to speculate that Newsom pointed out in his debate with DeSantis what is true, that if California were a country, it would be the world’s fifth largest economy. There’s your explanation for all the debt, but also quite the response to the popular notion that the Golden State’s best days are in the past.

More realistically, California’s economy is the most powerful driver – by far – of the global economy. My source for this: conservative hero (rightly so) George Gilder. That’s the case simply because it’s stating the obvious to point out that the vast majority of the world’s greatest technology companies, the very technology companies that relentlessly lift the productivity (in other words, growth) of the world’s citizenry, are based in California. Quick: look up the U.S.’s most valuable companies. How many are in California versus Florida. Is it even close? Don’t you think Newsom brought this up?

Just thinking about the rise of AI technology, technology that will think and do for the world on the way to monumental leaps in individual human genius and productivity, tens of billions of dollars have flowed into California in the year 2023 alone to fund this leap that will powerfully transform global living standards for the better. One guesses Newsom talked about this too in a debate meant to expose California as a state in decline.

Expanding on the above a bit more, conservatives rightly believe free markets are fundamental to prosperity, and that market signals tell the prosperity tale. This is important given the popular view on the right that people and businesses are leaving California in droves. Editorials and opinion pieces have made this case for years. Funny how investors didn’t get the memo. To use but one example, a conservative editorial from 2010 made the familiar assertion about businesses rapidly departing California for Texas, and notably over the next ten years venture capital investment into Texas doubled from $1.5 billion to $3 billion. It was very impressive indeed, until it’s recognized that over the same timeframe VC investment into California startups more than quadrupled from the $13 billion to $60 billion.  Conservatives ideologically “invested” in California’s economic decline rely on emotion (a lefty tactic), but the facts were and are on Newsom’s side. The bet here is that he brought VC investment up. As Ronald Reagan once quipped, facts are stubborn.

The VC investment crucially tells a bigger story. Conservatives point to the outflow of people from California, but who’s leaving and who’s coming? This is important. Investment relentlessly follows talent, and as evidenced by the fact that half of the world’s venture capital flows to California, it’s apparent that the superstar talent decidedly not reliant on U-Hauls for moving isn’t leaving the Golden State in the way that conservatives are told by media favoring their viewpoint. The latter may help explain another inconvenient truth: housing prices in California are hardly at bargain levels, but they surely would be if the talent were departing en masse.

At the same time, are Californians leaving? For sure some, and maybe even a lot are. Facts are once again stubborn. But are they leaving because the state’s economy is weak, or because they can get much more house in parts of the country not nearly as prosperous as California, not to mention how much more livable the rest of the U.S. is in the era of air-conditioned everything? Absent the proliferation of the latter, does anyone seriously think the outflow of Californians into Arizona, Texas and Florida would be nearly as great?

Which brings us to taxes. At the high end they’re 13%+ in California, but zero in states like Texas and Florida. No doubt the latter factors in human migration simply because taxes are a price. At the same time, California taxes have always been high, but the out-migration not as great. It gives the impression that standard of living advances (think air conditioning once again) have factored much larger in the outflow than tax rates.

After which, it’s long been correct conservative wisdom that states are where the vast majority of governing and spending should take place, that our level of taxation should go down the further the governmental entity is from us as individuals. Without defending taxes, payment of them should be greatest locally, and least nationally. In other words, in a more perfect conservative version of the world, all Americans (including Texans and Floridians) would be taxed the most in state, and be allowed to credit what they pay in state against their federal bill. Really, isn’t a major – and laudable – point of conservatism that we should keep our money out of Washington as much as possible? If Californians are paying for all sorts of dumb lefty ideas (and they are dumb) in state, use a tax credit to make sure their dollars are not reaching Washington, right? 

These are things to think about in the aftermath of a debate that conservatives were rather certain DeSantis would win with ease. So much quiet since. This isn’t a defense of California’s many bad policies as much as it’s a call for conservatives to re-embrace the economic reason that used to define conservativism. If so, post-debate commentary would well exceed what preceded it.

Republished from RealClear Markets


  • John Tamny

    John Tamny is a popular speaker and author in the U.S. and around the world. His speech topics include "Government Barriers to Economic Growth," "Why Washington and Wall Street are Better Off Living Apart," and more.

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