How America’s Bluest State Can Be a Model for the Other 49

AP Photo/Rich Pedroncelli

Lieutenant Governor Gavin Newsom shakes hands with an election night crowd after he defeated Republican John Cox to become 40th governor of California in Los Angeles. 

In the 2018 “blue wave” that flipped the House of Representatives, California flipped the most. Of the seven target congressional races in the state, all seven were won by Democrats. Orange County—a key launching pad for the anti-government ideologies of the modern Republican Party—will now be represented in Congress entirely by Democrats. Democrats also won every statewide office and will enjoy super-majorities—sufficient to pass tax legislation—in both state houses. (They’ll hold at least 60 of the 80 Assembly seats and 29 of the 40 in the Senate.)

Golden State progressives may be permitted a brief moment – well, maybe a long weekend – of celebration. After all, the state that gave the nation Ronald Reagan, tax-cutting frenzy, and anti-immigrant hysteria now seems to have a Democratic advantage locked-in; even longtime GOP leader and consultant Mike Madrid has said about the state Republican party, “It’s dead.” But with great power comes, if not great confusion, at least a great lot of options. One is reminded of the scene in “The Candidate” when after running a race designed to highlight new ideas, a Senatorial candidate portrayed by Robert Redford discovers he has won and asks “What do we do now?”

The slate is not entirely blank. Californians just elected a governor—Democrat Gavin Newsom—who promised to boost spending on early childhood education and expand health insurance coverage as a step towards a single payer system. But Newsom was largely able to avoid many policy specifics: having drawn a Republican contender, John Cox, who proudly boasted of his ties to Donald Trump– an immediate “kiss of death” in deep-blue California—Newsom wisely agreed to only one debate, and that was a morning conversation with his opponent on a San Francisco public radio station.

But a lack of debate does not mean a lack of problems. California may have the world’s fifth largest GDP, but it also ranks fourth among U.S. states in terms of income inequality and first among U.S. states in poverty, according to the Census expanded definition that takes into account housing costs. Racial inequality is rampant: the ratio of Latino to white household income has barely budged since the 1990s, while the ratio of Black to white household income has actually declined. 

Getting it right is important for California, but it is also important for the nation. With Republicans still in control of the Senate and the White House, Democrats in Washington are likely to have to content themselves with stalling destructive legislation, launching selective investigations, and acting as a check to presidential power. Virtually any new policy they propose will collapse in the Senate or face a Trump veto—and any attempt to strike a deal with Trump could anger their own newly activated base. 

If progressives hope to show what they are for and not just want they are against, states will be a key battlefront and testing ground. After all, the New Deal—the national social compact that dealt with the insecurities and fears of an earlier economic era—was actually developed by state-level experimentation that later became the basis for federal policy. California, having proudly served as the face of resistance – with its attorney general repeatedly suing the Trump administration to protect gains on immigrant rightsand climate policy—now needs to offer an alternative that tackles the economic inequality and insecurity plaguing many Americans. 

California is important for another reason: in many ways, it is America fast-forward. Its demographic change foreshadowed the nation’s—and its reaction to that change, which took the form of 1994’s Proposition 187, a measure that sought to strip social and educational services from undocumented residents, certainly seems to be echoed in the current Trump moment. What many forget about that era is that California also experienced nearly half of the nation’s total job losses incurred in the early recession of the 1990s, as its aerospace industry—then a proud source of high-wage employment—shrank by nearly 45 percent due to the end of the Cold War and cutbacks in defense spending. The state’s hard times stirred up the sort of demographic anxiety and economic uncertainty that is currently plaguing the nation.

Just as in Trump’s America today, it was easier to blame immigrants who were somehow both stealing jobs and living on welfare than it was to have boring but essential discussions about how to adjust to successive waves of deindustrialization. But that conversation can no longer be avoided: globalization, automation, and dynamism—which for the average citizen all read as job churning and economic insecurity—are hallmarks of the future, and neither a reliance on markets nor an expansion of the current social safety net seem fully up to the transformational tasks ahead. 

Any new approach should be guided by the understanding that economic institutions and policies need to accomplish three tasks: they need to grow employment and the economy, strengthen connections between people and places, and provide security for families and communities.  That, after all, was the real secret of the New Deal: a Keynesian willingness to pump the economy when it sank in recession; to invest in those parts of the country, like Appalachia, that would otherwise have been left behind; and to expand security by creating unemployment insurance, expanding retirement systems and eventually health insurance. 

Of course, any new approaches undertaken by the Golden State would be greatly helped by a supportive federal government. But that’s not the world we’re living in and so we are left with a key challenge: how can California provide leadership, not just in lawsuits but in economic policy? 

We think a 12-step program—designed for recovery from our state (and national) addictions to inequality, racial division, and short-term thinking – could help. Much of what we suggest could and should be pursued at the national level,but here our focus is on state levers. And while we offer a few examples of each of these steps, we sketch out even more policies and their interconnections in a new report entitled From Resistance to Renewal.

First, support innovation and secure public benefits. A hub of innovation and disruption, California’s receives over 50 percent of the nation’s venture capital. But if you take apart an iconic example of California’s tech prowess—the iPhone—you find a wealth of public investments in basic science and engineering that has made innovation possible. The state can promote further innovation by promoting green technologies and advanced manufacturing; its commitment to 100 percent renewable energy in power generationby 2045 is an example of a policy that will drive economic opportunity. But it should also capture public benefit by instituting a “technology dividend” for residents—modeled after the Alaska Permanent Fund– which could be funded through a variety of mechanisms, such as capturing a share of the revenue from patents linked to public funding or instituting a levy on initial public offerings when start-ups go public. 

Second, we must strengthen the caring economy. The real demographic challenge that California faces isn’t race but age: In 2010, 11 percent of Californians were at least 65 years old, but by 2060, that number will be 26 percent. To provide better care for elders, we need to take better care of those domestic workers and those family members providing direct support. Expanded family leave, caregiver tax benefits, and enhanced training and improved wages for caregivers could help; as a first step, Governor Newsom could promise to approve legislation to establish a Domestic Work Enforcement Pilot Programthat was vetoed by Governor Brown. 

Third, we should empower and equip workers for change. Worker productivity in California has soared by over 90 percent since 1980even as the real median wage for year-round, full-time workers has stagnated. This was not just a function of shifting returns to technology, which helps to explain why skill-based wage gaps have grown but not why the middle has been stuck. Re-empowering workers is key and could be furthered by making unionization easier and creating industry wage boards. Also key is encouraging easier adjustment for individual workers with on-the-job training, apprenticeship programs, and other forms of workforce development.

Fourth, we should encourage lifelong learning. The incoming governor is right to stress the need for more investments in early childhood education. But the state should also raise K-12 spending, improve teacher pay, encourage local residents and current paraprofessional staff to become instructors, and make more progress on altering the school suspension policies that have often steered juveniles into hands of the criminal justice system. Moreover, if job churn is part of the “new normal,”—indeed more than 11 percent of state residents are separated from their job every quarter—California can help support continual reskilling by expanding access to higher education (particularly community college). 

Fifth, we must promote financial security. Half of California workers are projected to have serious economic hardship when they retire because they don’t have sufficient savings, and over half have no access to a pension or 401(k) plan at work. To partially address this challenge, a new “CalSavers” program is being piloted that automatically opts in workers to contribute 5 percent of their income to an IRA; the program will eventually expand to include nearly all employers who do not currently offer their own retirement plans. The state should build on this by requiring employer contributions, piloting other universal savings funds (including “baby bonds”), expanding the State’s EITC, exploring universal basic income (UBI) programs, and developing portable benefit programs, including universal health insurance. Also needed: a reworking of unemployment insurance and the development of wage insurance for those who experience transitions in the labor market. 

Sixth, we need to support all of California’s regions and communities. The state has a sharp divide between a prosperous coast, which hosts high-tech, bio-tech, and entertainment industries, and an inland California marked by a low-wage agricultural sector and a high-pollution logistics industry. The parallels to the national divergence by geography are obvious, and the political risks this could induce to a progressive state should be obvious as well. California’s development dollars should be driven to inland California to close the gap, particularly since this is where young families are settling as high housing costs drive people further away from Los Angeles and the Bay Area. Special efforts should also be made to bring resources to distressed communities within metropolitan areas.

Seventh, we must ensure successful de-incarceration and reentry. The racial disparities in California’s sprawling criminal justice system have finally spurred large-scale action, such as the state’s decision to de-felonize drug use and the more recent elimination of money bail. While we need to reverse the criminalization of Black and Brown communities, a pattern that contributed to an explosive growth in state prisons, we also need to support those who are departing the system and seeking to gain employment. We can improve upon on the “Ban the Box” legislation that was signed in late 2017, providing more bundled and complete reentry services, and eliminating the court imposed fees and fines that sometimes trap individuals in the system. 

Eighth, we should embrace and integrate immigrant California. Over a quarter of Californians are immigrants, and roughly half of California’s children have at least one immigrant parent. How the current generation of arrivals fares in the economy will determine the future of their kids and of the state. Workforce development and kindred systems should be reworked to provide assistance and training for immigrants, regardless of status, and policies that promote entrepreneurship by immigrants (such as removing status requirements for certifications) should be furthered. Governor Brown was reluctant to establish an Office of Immigrant Affairs to coordinate such efforts; setting up such an Office would be a quick win and nod to immigrants by soon-to-be Governor Newsom. 

Ninth, we must ensure affordable housing for all. California faces an acute crisis for both renters and those seeking to buy into markets in which housing costs have run away from the average person’s reach. The state needs to dramatically increase the supply of affordable housing, using both dollars and rule changes to do so. The recent defeat of Proposition 10—which would have expanded local rent stabilization options—is a setback, but limited forms of rent control on older buildings are still available to local authorities, and state legislators could enact a more modest reform to permit the expansion of rent ordinances. The state could also consider new forms of social housing, including both public housing and community land trusts.

Tenth, we should seek to improve the movement of people, goods, and services. A state that famously embraced cars and sprawl is now rebelling against hellish commutes. Californians are ready to invest in a modern transportation system: voters rejected a Republican effort to repeal an increase in the gas tax, and in Los Angeles County alone, taxpayers have agreed to raise and spend roughly $160 billion on transit improvements, with a significant emphasis on new rail systems and buses. This is a key area for job generation, not only in construction but also in manufacturing railcars and buses, and in maintaining the new systems. Goods movement is also a major job generator, but often comes with with low pay and high pollution. The state could and should work to drive up labor and environmental standards in the logistics industry.

Eleventh, we must secure our environmental futureThe fires recently burning across the state are only the most recent sign that accelerated action on addressing climate change is necessary, particularly when it can also yield new jobs in the green and clean energy economies. Some naysayers have given up on climate denial and instead argue that environmental restrictions will unfairly drive up unemployment in communities of color; aside from the dubiousness of that economic claim, a long series of state polls suggests that that Blacks, Latinos, and Asians in California are far more likely than whites to recognize the seriousness of the threat of climate change and support aggressive policy action. 

Twelfth, we should align fiscal and governance systems for an inclusive economy. Some of what California needs to do in this arena is controversial. For example, taxing services would stabilize revenues, but the regressive nature of that shift could need to be addressed through exemptions, tweaks in an already progressive income tax, and the implementation of a state inheritance tax. The state’s infamous Proposition 13 should be changed to require that property taxes be leveled on the current market value and not the historical value of commercial property; this would yield revenues, promote fairness, and lead to the more efficient use of land. Also key: the state should restore democratic (small d) rule by permanently reversing Prop 13’s requirement of a two-thirds majority in the legislature or local elections to raise revenues. 


Making Change

In claiming his landslide win as governor-elect, Newsom boasted that “this is not just a state of resistance. California is a state of results.” For many, however, results have been scarcer than promises—and while communities of color and working class Californians have been relatively patient with the slow march to political power, they are more than aware that Democrats now hold all statewide offices and have a super-majority in both houses of the state legislature. 

Progress has been made: California was one of the first two states to embrace a path to a $15 an hour minimum wage, and legislation like the California Values Act—the 2017 law that limited the state’s cooperation with Immigration and Customs Enforcement—has enabled immigrants to breathe more freely and work more securely. De-incarceration, promoted by a 2014 ballot measure, has also provided relief to communities experiencing criminalization, excess policing, and challenges with re-entry.

But there is so much more to do—and California’s progressive advocates, community-based organizations, and labor and other allies now have an opportunity to offer not just a new vision but a new program for the state and for the nation. For California, it’s time to move from resistance to renewal.

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