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REGULATORY NIGHTMARE -
"Banning gas-powered cars was peak dictatorship in California," Steve Hilton
A state once synonymous with innovation, creativity, upward mobility, and productive risk-taking now governs as if economic laws are optional. Sacramento behaves as though capital is immobile, labor costs are irrelevant, energy is inexhaustible, and scarcity is a virtue when used to obtain certain central planning goals. History is unambiguous on this point: systems that ignore incentives and price signals do not muddle through indefinitely. They decay, then break—often suddenly—when obligations exceed reality. Just ask General Secretary Gorbachev.
During the Cold War, Americans mocked centrally planned economies for their blindness to market signals. Five-year plans, political allocation of resources, and moralized production targets were treated as cautionary tales. Yet California has quietly adopted a similar governing premise: that centralized authority knows better than markets, consumers, or entrepreneurs. The results are no longer abstract. They are visible in housing shortages, energy costs, capital flight, population loss, and a growing inability to deliver basic public services.
This is not the result of a single bad policy. It is the outcome of a governing philosophy that treats economic constraints as moral inconveniences rather than binding limits. The State Senate and Assembly believe they can command the economy to adhere to their social justice goals.
California’s Democratic supermajority—93 of 120 legislative seats—has eliminated meaningful political competition. In such an environment, failure does not threaten power. It is explained away, rebranded, and expanded. When a policy underperforms, the conclusion is never that the premise was wrong; it is only that it was insufficiently aggressive.
Democratic systems rely on feedback loops. California’s are broken. There is no corrective mechanism when outcomes worsen, because political accountability has been replaced by ideological solidarity. Bad policy is not reversed; it is doubled down on.
Even rigid political systems eventually confront economic reality. China’s post-1978 reforms under Deng Xiaoping abandoned ideological purity in favor of pragmatic growth. The guiding principle—popularized as “let some people get rich first”—reflected an explicit recognition that wealth must be created before it can be distributed, and that markets, not moral exhortation, generate abundance.
The result was not a liberal democracy, but an economic transformation. Private enterprise expanded, productivity surged, and hundreds of millions were lifted out of poverty while the Communist Party retained political control. Even a one-party state understood that prosperity is a prerequisite for stability.
California’s leadership has drawn the opposite lesson. It treats wealth creation as morally suspect, success as something to be punished, and market signals as nuisances to be overridden. Given the push to create a 5% tax on billionaires’ assets, it might be considered that California now views an abundance of wealth as something to be confiscated to mask the failures of its mismanaged planned economy. Where China embraced economic realism to preserve its system, California rejects it and, in doing so, undermines the very tax base and social programs it claims to defend.
California now maintains roughly 273,000 regulatory restrictions, compared with about 45,000 in Texas. Environmental permitting has metastasized into a litigation-and-delay machine that serves as a de facto veto on development. Projects are stalled not because they are unsafe but because delay, red tape, and an impossible permitting process have become policy tools.
The housing consequences are devastating. Young families are locked out of ownership. Workers leave not for lifestyle reasons but to regain economic viability. These are not market failures. They are policy outcomes. Enabled by the California Environmental Quality Act, which initially was intended to protect ecosystems, the Act has metastasized into a litigation weapon that delays projects by years and adds double-digit percentage costs. The result is a 3.5-million-unit housing shortage, median home prices approaching $1 million, and young families permanently locked out of ownership. Supply is restricted. Demand remains. Prices explode. This is economics 101, yet policymakers behave as if affordability can be mandated without construction.
Hundreds of corporate headquarters have left California in recent years. The departures span technology, finance, energy, and manufacturing. They are often dismissed as symbolic or ideological gestures.
They are neither. Capital relocates when costs rise faster than productivity, when regulatory uncertainty makes long-term planning impossible, and when workforce stability erodes. California’s 13.3 percent top marginal income tax rate, among the nation’s highest corporate burdens, and relentless compliance costs have changed the calculus. Once firms leave, the tax base shrinks—and pressure shifts to those who remain. This is how fiscal strain migrates from the wealthy to the middle class. Translation: higher taxes dead ahead.
Nowhere is California’s denial of reality more apparent than in energy policy. The state demands abundant, cheap, reliable electricity while systematically dismantling the systems that deliver it.
Electricity prices are nearly double the national average, driven by cap-and-trade, renewable mandates, fixed monthly fees, and regulatory overhead. At the same time, policymakers plan to close natural-gas plants that supply roughly 40 percent of in-state power and eliminate nuclear generation that provides another 9 percent—all while electrifying transportation, heating, and industry.
Refinery shutdowns compound the problem. California uses a unique gasoline blend that cannot be easily imported at scale. As in-state refining capacity disappears, supply tightens and prices rise. This is not ideology. It is logistics. Hydrocarbons affect every area of life in the state. Without abundant, cheap energy, people cannot get to work; goods will not be delivered to stores and factories; medicines will not make it to hospitals; and every aspect of life that depends on mobility will suffer. As a consequence of the lack of mobility, dire consequences will eventually follow.
California’s high-speed rail project remains the purest expression of governance without market accountability. Approved at $33 billion and now estimated at roughly $135 billion, it has yet to deliver a single operational mile.
Contracts were issued before land was secured. Utilities were not relocated. Environmental litigation was unresolved. Funding gaps were acknowledged and ignored. In a private market, such a project would have collapsed under its own weight. In California, it continues because taxpayers are captive, and enforcement of non-compliance is highly punitive. When incentives reward spending rather than results, cost overruns become permanent, and corruption, fraud, and theft flourish.
California’s labor mandates are marketed as worker protections but often function as worker eliminations. Wage floors disconnected from productivity accelerate automation, consolidation, and closure. Entry-level jobs disappear first. Small businesses shut their doors. Prices rise.
California spends billions addressing homelessness, yet outcomes continue to worsen. A 2024 state audit found that California allocated $24 billion to homelessness and housing programs between 2018 and 2023 but failed to consistently track the outcomes or effectiveness of these expenditures.
Despite this massive investment, the homeless population did not decrease and, in many areas, continued to grow, with the audit criticizing the lack of performance metrics and data to evaluate whether programs were working. Much of the funding went to NGOs focused on services for homeless individuals with drug addiction and mental illness. Still, the initiatives were deemed ineffective, often rewarding organizations for perpetuating the problem rather than resolving it.
In Los Angeles specifically, a court-ordered 2025 audit found that the city could not fully account for or track approximately $2.3 to $2.4 billion in homelessness-related spending, highlighting major flaws in oversight and raising concerns about unaccountable programs for vulnerable populations, including those struggling with addiction and mental health issues. Programs are funded without performance metrics. Treatment is optional. Accountability is minimal. Organizations are rewarded for managing a problem rather than solving it, ensuring permanence rather than resolution. A perverse incentive that creates the opposite outcome that hand-wringing politicians claim they desire.
The same pattern is evident in healthcare spending. The state’s expansion of full healthcare benefits to undocumented immigrants has added billions in unplanned annual obligations. Over just two years, these commitments have contributed roughly $15 billion to fiscal overruns, forcing borrowing to cover operating costs. An egregious example, as we're putting undocumented people who have never paid into the system first over taxpayers, long-term residents, and veterans who deserve and need to be taken care of first.
Compounding these issues is widespread fiscal mismanagement and fraud. During the COVID-19 pandemic, the California Employment Development Department (EDD) faced massive unemployment insurance fraud, with estimates of improper payments and potential fraud reaching up to $32 billion. However, the state has recovered only a fraction—around $5.9 billion as of late 2025. Recent state audits have continued to flag high-risk programs vulnerable to fraud, with over $500 million in identified fraud in 2024 alone across various agencies, underscoring a broader pattern of inadequate oversight and safeguards that allow billions in taxpayer dollars to be wasted or misappropriated.
The most dangerous denial of reality lies in public pensions. CalPERS, the nation’s largest public pension system, is roughly 79 percent funded—meaning it has about 79 cents for every dollar promised. Even using its own optimistic assumptions, unfunded liabilities approach $48 billion. Using more conservative discount rates, independent estimates place the shortfall far higher.
These obligations are not theoretical. Pension costs are already crowding out spending on roads, policing, fire protection, and schools. In the next downturn, required contributions will spike. Taxes will rise, services will fall, or both. Unions will demand fixes, which will mean higher taxes again.
That governance failure is no longer theoretical. A December 2025 report from the California State Auditor placed eight state agencies on a failing or high-risk list under Governor Gavin Newsom’s administration, citing persistent breakdowns in fiscal oversight, internal controls, and basic management. These are not marginal errors; they are symptoms of an administrative system that cannot perform core functions even as its budget, mandates, and ambitions expand.
When mismanagement becomes routine at the operational level, higher taxes and more regulation do not fix the problem—they compound it, accelerating the cycle of waste spending, probably abundant fraud, public distrust, and fiscal stress that defines California’s penchant for self-harm.
Comrade Newson, you cannot tax your way to prosperity. You cannot regulate your way to abundance. You cannot mandate your way out of scarcity. Deregulate bigly now, drastically lower taxes, streamline permitting, and watch the state become golden again.
(Eliot Cohen has served on the Neighborhood Council for 12 years, served on the Van Nuys Airport Citizens Advisory Council, is on the Board of Homeowners of Encino, and was the president of HOME for over seven years. Eliot retired after a 35-year career on Wall Street. Eliot is a critic of the stinking thinking of the bureaucrats and politicians that run the County, the State, and the City. Eliot and his wife divide their time between L.A. and Baja Norte, Mexico. Eliot is a featured writer for CityWatchLA.com.)
