The following piece by Harold Meyerson originally appeared in The American Prospect. Back when they had policies, Republicans were concerned about China. Under the rule of its Communist Party, they said, China was an increasingly totalitarian power that could come to rival America’s global dominance. As was seldom the case when Republicans stated their positions, this…
The following piece by Harold Meyerson originally appeared in The American Prospect. Exactly one year and six days ago, the Prospect posted a piece I’d just written about Colorado’s Jared Polis, under the headline “The Democrats’ One and Only Union-Busting Governor.” As of a couple weeks ago, that headline is no longer accurate. Polis is still a union-buster…
The following piece by Harold Meyerson originally appeared in The American Prospect. For years, both Uber and Lyft have insisted that their drivers are not their employees, but rather, independent contractors who therefore don’t qualify for minimum-wage and other such laws, and who cannot unionize under the terms of the National Labor Relations Act (NLRA).…
The Hedge | Brutal Honesty Over Hype Since 2008
May has been the most intensely analytical month in The Hedge’s recent history — 56 posts on California’s business environment, covering every dimension from the $800 franchise tax to the venture capital ecosystem, from AB5 to CEQA, from entity structure to exit tax planning. The response has confirmed what we suspected: entrepreneurs are hungry for rigorous, honest analysis that cuts through the noise and gives them actionable information for real decisions.
Several developments are worth monitoring as we enter the second half of 2026. Federal interest rate policy: the Fed’s next moves will affect small business lending costs, commercial real estate financing, and the valuation of businesses considering exit or recapitalization. Any material rate movement in June changes the math on several analyses we’ve discussed. California legislative session: the California legislature is in active session through mid-September, and several bills affecting California businesses are in various stages of consideration. We’ll track any significant legislative developments affecting franchise taxes, PAGA reform, minimum wage extensions, and employment law. Venture capital market signals: Q2 2026 VC activity data will provide a clearer picture of whether the current market represents a floor or a continuing correction, affecting the California-specific analysis for companies whose California rationale depends on VC access.
June’s primary analytical series will cover options trading strategies specifically relevant to entrepreneurs and business owners who have liquidity from partial company sales, secondary transactions, or investment portfolios. The Protected Wheel strategy — using covered calls and protective puts to generate income while limiting downside risk — is particularly well-suited to the risk profile of entrepreneurs who have significant concentration in their own company and need to manage that concentration intelligently. We’ll cover the mechanics, the tax treatment, and the practical implementation with the same rigor we’ve applied to the California business series.
The second half of June covers real estate investment analysis for entrepreneurs who want to diversify beyond operating businesses. Specifically: land banking in high-growth corridors (Barstow and the broader Inland Empire corridor as a specific case study given the BNSF International Gateway development), storage facility development economics, and the use of LLC structures to achieve real estate asset protection without the California franchise tax burden. These topics respond directly to reader questions and represent the kind of specific, numbers-driven analysis that The Hedge does best.
Eighteen years of publishing. Thousands of posts. One consistent principle: brutal honesty over hype. We’ve never recommended an investment we didn’t believe in, never endorsed a strategy we hadn’t analyzed rigorously, and never sugar-coated a difficult conclusion to make it more palatable. That won’t change in June, or ever. The financial world is full of hype. The Hedge is not. See you in June.
The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.
Xavier Becerra wants to be California’s next governor. His big affordability promise? Declare a state of emergency and freeze utility rates and home insurance premiums. Sounds decisive. Here’s the problem.
California’s electricity rates aren’t high because utilities are greedy. They’re high because of wildfire liability baked into balance sheets, mandatory grid-hardening programs, the shift to renewable energy, and transmission costs across a massive state. Those are real costs. Freezing rates doesn’t make them disappear. It just forces utilities to absorb them, defer them, or shift them to other customers.
We already ran this experiment with home insurance. California effectively froze insurance rate increases for years under Proposition 103. The result? State Farm stopped writing new policies. Allstate stopped. Farmers pulled back. When you force a product to be sold below cost, the seller leaves the market. Becerra watched this happen. Now he wants to do it again with utilities.
His second promise is enforcing housing laws against cities that aren’t building. That has more merit. Some California cities are openly ignoring their state-mandated housing requirements. Fining them is reasonable.
But here’s the contradiction. Becerra is a labor ally who insists all housing be built with union labor under prevailing wage standards. That mandate adds fifteen to twenty percent to construction costs. You cannot promise lower housing costs while simultaneously requiring the most expensive labor structure in the country. Those two things cannot coexist in the same budget.
Enforce housing laws plus prevailing wage equals more units at the same unaffordable price. That is not an affordability solution. That is a permitting solution with a press release attached.
Becerra is a skilled coalition builder. His platform is designed for voters who want action and aren’t checking the math. Rate freezes feel powerful. They produce market exits. Enforcement without cost reform produces supply without savings.
The Hedge rating: Polished. Inadequate. Read the full analysis at The Hedge.
Carl DeMaio is a California Assemblyman running a ballot initiative campaign under the banner of his Contract to Reform California. His flagship bill is AB 23, the Cost of Living Reduction Act. The mechanism: whenever California prices exceed the national average by more than ten percent, state agencies are automatically required to cut taxes, fees, and mandates until prices come down.
He’s also promising twenty-five hundred dollars per year in cost-of-living rebates to every middle-class family in California, funded out of the Greenhouse Gas Reduction Fund.
DeMaio is the loudest, most specific, and most relentless critic of Sacramento’s cost failures in this entire election cycle. His indictment of the political class is largely accurate and difficult to rebut. The benchmarking concept in AB 23 is genuinely interesting — automatic accountability not dependent on any individual politician’s will.
His examples are real numbers. Average ER visit in California: thirty-two hundred dollars. In Maryland: six hundred eighty-two dollars. Average ambulance ride in California: twenty-four hundred dollars. In North Carolina: six hundred sixty-two dollars. That differential is primarily regulatory. He’s right about the problem.
Now open the spreadsheet. California has approximately thirteen million households. Twenty-five hundred dollars per household is thirty-two and a half billion dollars per year. The Greenhouse Gas Reduction Fund — the account DeMaio proposes to use — disburses three to five billion dollars annually. That is the entire fund. Emptying it gets you to roughly ten cents on the dollar of his promise.
DeMaio has not addressed this gap in any public forum. The twenty-five hundred dollar figure exists on petition sheets and in press releases. It does not exist in any fundable budget.
When a politician promises thirty-two billion dollars out of a four billion dollar fund, that is not a rounding error. That is the whole ballgame.
The Hedge rating: Best critique of the status quo in the race. The math is theater. Full analysis at The Hedge.
The Hedge | Brutal Honesty Over Hype Since 2008
We close out May with a look at the macro environment that California entrepreneurs — and all entrepreneurs — are operating in. The business analysis we’ve done throughout this month doesn’t exist in a vacuum. The decision of where to build, how to structure, and how to manage costs is made against a specific macroeconomic backdrop that affects every calculation. Here’s the honest assessment of where things stand entering June 2026.
The Federal Reserve’s extended high-rate environment has made small business debt financing meaningfully more expensive than it was two years ago. SBA loan rates, commercial real estate financing rates, and working capital line of credit rates all reflect the Fed’s sustained rate posture. For California entrepreneurs specifically, this matters because California’s high commercial real estate prices — already among the highest in the country — become even more challenging to finance at current rates. A $2 million California commercial real estate acquisition that financed comfortably at 4% in 2021 requires substantially higher monthly debt service at current rates, changing the investment economics materially.
The venture capital market has recalibrated significantly from the frothy 2021 peak. Deal valuations have compressed, due diligence timelines have extended, and the categories attracting capital have concentrated. AI and infrastructure companies continue to attract substantial capital. Consumer technology, social media, and gig economy companies face a much more skeptical investor base. For California entrepreneurs whose California location is predicated on VC access, the practical question is whether your specific company, in its specific category, can realistically raise institutional capital in the current environment — not in the 2021 environment when almost everything funded.
California’s business regulatory environment has continued its trajectory of expanding obligations and costs in 2026. The healthcare worker minimum wage schedule is in its phased implementation. Fast food sector minimum wages remain elevated following AB 1228. CPRA enforcement by the California Privacy Protection Agency has become more active, with investigations and enforcement actions creating clearer compliance standards and clearer consequences for non-compliance. The political environment in Sacramento continues to produce legislation expanding employee rights and employer obligations. The structural headwinds for California business that we’ve analyzed throughout this series are not temporary or cyclical — they are durable features of California’s policy landscape that entrepreneurs should model as permanent rather than as transitory costs that will resolve.
Despite all of this, the fundamental opportunity for entrepreneurs remains extraordinary. AI is transforming every industry in ways that create substantial value-creation opportunities for founders who understand both the technology and their target markets. The productivity improvements available from well-implemented AI tools are real and material — potentially offsetting some of California’s cost premium for knowledge-work businesses that can effectively leverage them. The entrepreneurs who approach their businesses with the analytical rigor we’ve tried to model in this series — understanding costs clearly, identifying advantages honestly, and executing efficiently — will build durable, valuable companies regardless of operating location. That’s the enduring opportunity. California’s costs are a constraint on that opportunity. Understanding the constraint clearly is how you minimize its effect.
The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.
The Pitch
Xavier Becerra wants to be your governor. His campaign is built around two core affordability moves: declare a state of emergency to freeze utility rates and home insurance premiums, and enforce existing housing laws against cities that aren’t building. He’s the frontrunner in Democratic polling heading into the June 2 primary — the name recognition of a former state AG and Biden cabinet secretary will do that for you.
The Problem with Rate Freezes
Let’s start with the freeze because it’s the headline promise and it’s the most dangerous one. California’s electricity rates are among the highest in the nation. Becerra’s implicit argument is that those rates are arbitrary — the product of price gouging by utilities — and a governor-declared emergency can hold them in place.
That’s not what’s driving them. California’s electricity costs are high because of wildfire liability exposure baked into utility balance sheets, mandatory grid-hardening programs, the transition to renewable generation, and transmission costs across a geographically massive state. Those are real costs. Freezing rates doesn’t make the costs disappear — it makes the utility absorb them, defer them, or restructure them onto other ratepayer classes.
We already ran this experiment with home insurance. California’s Proposition 103 effectively froze insurance rate increases for years. The market’s response: State Farm stopped writing new homeowner policies. Allstate stopped. Farmers pulled back. CSAA restricted coverage. The lesson is simple: you cannot administratively price a product below its cost without the seller exiting the market. Becerra watched this happen during his time in California government. He’s proposing to do it again, with utilities, and calling it relief.
The Problem with “Enforce Existing Laws”
The housing enforcement angle has more merit — and to be fair, there are cities in California openly defying their state-mandated housing elements. Fining them is not a crazy idea.
But here’s where Becerra’s coalition eats his policy alive. He is a staunch labor ally who insists California housing be built by union labor under prevailing wage standards. That’s a political commitment to the construction trades that adds 15–20% to the cost of every publicly subsidized unit. You cannot simultaneously promise to lower housing costs and mandate the most expensive labor regime in the developed world. Those two things are in direct opposition, and Becerra has never been asked to reconcile them in a way that produces numbers.
If you enforce housing laws but require every project to use union prevailing wage, you get somewhat more housing at the same price it’s always been. That’s not an affordability solution. That’s a building permit solution.
The Bottom Line
Becerra is a skilled politician from a career in government who understands how to assemble a coalition. His affordability platform is designed to appeal to voters who want relief now and aren’t asking about the structural plumbing. Rate freezes feel decisive and produce market distortions. Enforcement without cost reform produces more supply at unaffordable prices. Neither gets you where you need to go.
Rating: Polished. Inadequate.
The Pitch
Tom Steyer — billionaire, former hedge fund manager, climate activist — wants to build one million homes you can afford in California. He’ll do it partly through surplus public land, partly through prefabricated housing, and he wants to return windfall oil company profits directly to residents. He also supports single-payer healthcare and universal preschool for 3-year-olds, because why not while you’re at it.
The Problem
Let’s start with the million homes promise, because we’ve heard it before. In 2018, Gavin Newsom campaigned on building 3.5 million new homes over his two terms. That number was always aspirational, and the state is now tracking to fall dramatically short of it — despite Newsom signing hundreds of housing bills and pushing billions in state spending.
The reason Newsom’s promise failed isn’t that he was lying or that he didn’t try. It’s that California’s housing problem is structural, not gubernatorial. Local governments control zoning. Homeowner associations litigate every project. CEQA — the California Environmental Quality Act — can delay projects for years through litigation that has nothing to do with environmental protection and everything to do with neighbors who don’t want new neighbors. None of that changes because a new governor has a number.
Steyer’s surplus public land proposal isn’t new. It’s been tried, piloted, and under-executed for two decades. The land exists. The political permission to build dense housing on it at scale — fast, without years of environmental review — does not exist in the current regulatory environment, and Steyer has not proposed to change that environment in any meaningful way.
The “Windfall Oil Profits” Angle
Steyer’s proposal to return windfall oil profits to residents is the kind of idea that polls at 80% because it asks: should greedy oil companies give money back to you? Most people say yes. But the structure matters. If California imposes a windfall profits tax on refiners, the refiners have two options: absorb the cost (unlikely) or pass it forward in pump prices. California already has only a handful of refineries specifically configured for California’s unique fuel blend. Any measure that makes refining California fuel less economically attractive reduces that already-thin supply. The likely outcome of Steyer’s oil policy is higher gas prices with a rebate check that doesn’t fully compensate for them.
The Bigger Picture
Steyer is running with money, a genuine commitment to climate issues, and a platform that is internally coherent if you believe California’s housing problem is primarily a matter of willpower. The evidence suggests it isn’t. The state has had willing governors and hundreds of laws and the problem has gotten worse. Steyer’s platform doesn’t explain why his million homes will materialize when Newsom’s 3.5 million didn’t.
Rating: Familiar fiction with better marketing.
The Pitch
Katie Porter made her name in Congress with a whiteboard, a dry-erase marker, and a talent for making bank executives visibly uncomfortable. Now she wants to run California. Her affordability platform includes: free universal childcare, a plan to speed housing permits by nearly two years, support for a down payment assistance bond for first-time buyers, a proposal to eliminate state income taxes for households earning under $100,000, and two years of free college tuition.
The Problem
Porter’s portfolio has something for everyone, which is usually the sign that the math isn’t going to add up.
Start with the income tax elimination for under-$100,000 earners. California’s personal income tax is the state’s largest single revenue source — roughly $130 billion annually. Households under $100,000 represent a substantial share of that base. Eliminating their tax liability doesn’t just “cost” money; it blows a hole in the budget that funds schools, roads, Medi-Cal, and every other program Porter wants to expand. Porter’s campaign admits she “cribbed” this idea from Steve Hilton — the Republican in the race. That’s a notable concession. It also hasn’t come with a serious offset.
Now add free universal childcare. Free college tuition for two years. Increased housing production. A down payment assistance bond. These aren’t cheap items. Porter is promising to cut the state’s main revenue source and increase spending simultaneously, with no clear mechanism other than making wealth taxes on high earners do the work — earners who are already leaving California at a pace that is shrinking the tax base.
The Housing Plan
Porter’s proposal to speed up permitting by nearly two years is actually the most credible item on her list. Time is money in construction — carrying costs accumulate monthly, and a 24-month approval timeline delay adds substantially to per-unit cost. If she can actually compress that, it would have real impact.
But she’s also pledged to “ramp up housing production” without a clear commitment to override the local NIMBYism that actually blocks projects. Her position on CEQA reform has been cautious. The California YIMBY organization has noted that Porter was willing to “acknowledge the existence of outright NIMBYism” — which is more than most candidates — but acknowledging a problem and proposing to override the political coalition that creates it are different things.
The Housing Exemption She Gets to Live With
This one isn’t a policy critique — it’s a character data point. Porter has been campaigning on California’s housing crisis while living in a below-market UC Irvine faculty housing unit she purchased in 2011 for $523,000 — well below market rate in Orange County — through a program restricted to UC employees. She subsequently took unpaid leave from her faculty position to serve in Congress, but retained the subsidized housing for years, apparently with help from a law school administrator who was also a campaign donor.
She didn’t break any rules. But when the candidate running on housing affordability has personally benefited from an insider housing deal while hundreds of thousands of Californians compete in an open market she helped create through her years of legislating, voters are entitled to notice the gap.
The Bottom Line
Porter is a talented communicator with a genuine talent for accountability politics. Her housing permitting reform idea has real teeth. Her fiscal math doesn’t. You cannot cut the income tax for most earners, expand free services, and close the gap with a wealth tax on a population that’s actively voting with its feet.
Rating: The right instincts. The arithmetic is a mess.
The Pitch
San Jose Mayor Matt Mahan is the youngest major candidate in the race at 43, the most moderate Democrat, and arguably the most specific on policy mechanics. His affordability platform: suspend the gas tax to provide immediate relief, cap developer fees and set strict permit timelines to accelerate housing, pause new-home taxes for two years, and oppose new taxes while tying government pay to actual outcomes.
What He Gets Right
Mahan’s gas tax holiday is the same idea DeMaio and Mahan have both landed on from opposite sides of the aisle — and structurally, the underlying analysis is correct. California’s gas prices run roughly $2/gallon above the national average. State excise taxes, cap-and-trade program costs, and the Low Carbon Fuel Standard are legitimate contributors to that premium. A temporary suspension would provide real, immediate, measurable relief to working families who commute.
The housing fee cap is also smart policy. Impact fees — the charges developers pay cities to fund infrastructure — are one of the least-discussed but most significant drivers of housing construction cost. In some California cities, impact fees alone add $60,000–$100,000 to the cost of a new unit. Capping them is not ideological. It’s arithmetic.
Mahan’s permit timeline mandate addresses the time-is-money problem that Porter also identified. Projects stalled in approval limbo accumulate carrying costs that get passed to buyers and renters. Forcing cities to decide within a defined window is a lever that could actually move prices.
What Doesn’t Add Up
The gas tax is real infrastructure revenue. California’s roads, transit, and bridge maintenance are partly funded by that tax. A temporary suspension doesn’t fund a replacement source — it just defers the pressure and creates a political problem when it comes time to restore the tax. “Temporary” in California politics often isn’t.
The bigger problem: Mahan is polling in the lower tier. California’s top-two primary system means the two candidates advancing to November don’t need to be from different parties, and Mahan’s moderate positioning in a Democratic primary is a real electoral vulnerability. His policy platform is among the most credible in the field, and he may not make the runoff.
The San Jose Record
Mahan points to a 10% reduction in unsheltered homelessness in San Jose during his tenure, and to housing production that’s ahead of state targets. Those are genuine accomplishments at the city level. The question is whether the model scales. San Jose has specific geography, a specific political culture, and a specific industrial base. The levers a mayor pulls are different from the ones a governor can reach.
The Bottom Line
If you want the candidate in this race who has the most coherent specific policy platform on costs, Mahan is that candidate — and it’s not particularly close on the Democratic side. Whether that translates to enough primary votes to reach November is a different question.
Rating: The best Democratic plan. May not matter.
The Pitch
Riverside County Sheriff Chad Bianco is the law enforcement candidate — three decades with the department, elected sheriff in 2018, Trump endorser (“It’s time we put a felon in the White House,” he famously said in 2024). On cost of living, his pitch is: deregulation, cutting “excessive fraud” from state programs, and the implicit argument that Democratic single-party rule has produced the mess and he’s the non-Democrat who’ll clean it up.
What He Gets Right
California’s regulatory environment is genuinely hostile to housing construction, business formation, and infrastructure development. The CEQA litigation machine has been used to block solar farms, transit projects, housing developments, and homeless shelters — by parties that have nothing to do with environmental protection. If Bianco is serious about deregulation in a substantive way, he’s identified the right target.
The “excessive fraud” argument also has some legitimate foundation. California’s EDD paid out an estimated $20+ billion in fraudulent unemployment claims during the COVID period. Medi-Cal fraud is a documented, recurring problem. There is genuine waste to be recaptured.
What He Doesn’t Have
Bianco hasn’t offered a specific enough deregulation agenda to evaluate. “Deregulate” is not a plan — it’s a direction. Which regulations? How? Through what mechanism? Via executive action? Legislative reform? Legal challenge? The difference matters. A governor’s executive authority to override CEQA is limited. Substantive reform requires legislative action, and California’s legislature is heavily Democratic with no sign of that changing regardless of who wins the governor’s race.
“Rein in excessive fraud” is a campaign line, not a budget. Even if California recaptured every dollar of identified Medi-Cal and EDD fraud, the resulting savings wouldn’t put a meaningful dent in the structural cost drivers — housing, energy, water — that make California expensive.
There’s also a significant credibility problem. Bianco is currently in the middle of a court battle over his office’s unprecedented seizure of 650,000 Riverside County ballots from last November’s statewide special election — the sheriff’s department impounded ballots in a move election officials called illegal. Voters evaluating whether to hand a law-and-order candidate the governorship have standing to ask whether he applies that same law-and-order discipline to himself.
The Bottom Line
Bianco is the cultural-conservative candidate in this race — the one for voters who believe California’s problem is fundamentally political and that swapping the party in power will produce different outcomes. That may be part of the answer. But the cost of living is driven by structural supply constraints that don’t care which party is in Sacramento, and Bianco hasn’t shown he’s thought through the structural problem.
Rating: Correct diagnosis. No prescription.
The Pitch
Steve Hilton — British-born political commentator, former Fox News host, former adviser to UK Prime Minister David Cameron — is running on what he calls the “Cali-ffordability” agenda, and he is not shy about the numbers. His platform: eliminate state income taxes on the first $100,000 earned, deliver $3/gallon gasoline, cut electricity bills by 50% through deregulation, cap developer impact fees, restrict CEQA lawsuit standing to speed housing, and run an anti-fraud campaign he’s calling “Cal Doge.”
He is currently polling at or near the top of the Republican field and has Trump’s endorsement. In a top-two primary where Democrats may split their vote across six serious candidates, Hilton has a plausible path to the November runoff.
What He Gets Right
The impact fee analysis is solid. Developer fees in California are among the highest in the nation, and capping them would directly reduce construction costs without touching environmental protections. CEQA lawsuit reform — specifically limiting who can sue to delay projects — is also a legitimate policy lever that has bipartisan support in principle and almost no political will to execute.
The income tax proposal for under-$100,000 earners (no state income tax) identifies the right problem: California’s tax structure punishes the working and middle class who can’t afford to leave. The high earners who fund the state’s revenue are leaving anyway.
What Doesn’t Add Up
$3/gallon gas. Let’s do this one directly. California gas is expensive because of a thin, California-specific refinery market, state-mandated fuel blend requirements, cap-and-trade costs, the Low Carbon Fuel Standard, and the highest per-gallon state excise tax in the nation. A governor can influence the state tax component. The refinery capacity problem, the fuel blend requirements, and the infrastructure deficit are not solved by executive will. The gap between current prices ($5+ average) and $3 is roughly $2/gallon. Eliminating every state gas tax component gets you perhaps $0.90. The rest requires either federal action, massive refinery investment, or California importing out-of-state fuel blends — which would require overturning California’s own air quality regulations. Hilton has not explained the mechanism.
The electricity bill cut of 50% has the same problem at larger scale. California’s electricity rates are high because of wildfire liability, grid hardening costs, and transmission infrastructure — not primarily because of policy ideology. You can’t deregulate your way out of physical costs already baked into the grid.
The income tax cut for the first $100,000: Hilton proposes to fund this with spending cuts and fraud elimination. But the income tax revenue from that bracket is enormous. “Fraud elimination” and general spending cuts have never come close to closing that size of a budget gap anywhere. The numbers would require either massive service cuts or deficit spending.
The Political Reality
Hilton is a newly naturalized U.S. citizen running in a state that hasn’t elected a Republican governor since Schwarzenegger left office in 2011. His path requires either two Democrats in the November runoff imploding against each other, or enough crossover voters who want something that sounds different. The platform is designed to sound maximally different. Whether the math holds up to governorship-level scrutiny is a separate question — and on the specifics, it doesn’t.
Rating: The best Republican salesman in the field. The promises outrun the physics.
The Pitch
State Assemblyman Carl DeMaio isn’t running for governor — he’s running a 2026 ballot initiative campaign under his “Contract to Reform California” banner, with his flagship proposal being the Cost of Living Reduction Act (AB 23). The core mechanism: when California prices for major household items exceed the national average by more than 10%, state agencies are automatically required to reduce taxes, fees, and mandates until prices come down. He’s also promising $2,500 per middle-class family annually in cost-of-living rebates, funded out of the Greenhouse Gas Reduction Fund.
DeMaio is the most aggressive, loudest, and most specific critic of Sacramento’s cost-of-living failure — and the diagnosis portion of his argument is largely correct. The prescription is where it falls apart.
What He Gets Right
The benchmarking concept in AB 23 is intellectually interesting. Comparing California agency costs to lower-cost states and requiring automatic reform when the premium exceeds 10% creates institutional accountability that doesn’t depend on any individual politician’s will. His own example is compelling: the average ER visit in California runs $3,238 versus $682 in Maryland. The average ambulance ride costs $2,407 in California versus $662 in North Carolina. Those numbers are real, and the differential is primarily regulatory and structural.
His core argument — that Sacramento politicians created the cost crisis through mandates and have no incentive to fix it — is difficult to rebut. The history of California cost legislation supports his position.
The $2,500 Per Family Math
Here’s where we have to stop and open a spreadsheet. California has approximately 13 million households. At $2,500 per household, that is $32.5 billion per year.
The Greenhouse Gas Reduction Fund — the source DeMaio proposes to raid — historically disburses $3 to 5 billion annually. That is the entire fund. Emptying it doesn’t get you to $32.5 billion. It gets you to 10 cents on the dollar.
DeMaio has not explained this gap. The “$2,500 per family” number exists in campaign materials, on petition signature sheets, and in press releases. It does not exist as a fundable budget. This is a campaign number, not a policy number, and if you run for office promising $32.5 billion out of a $4 billion fund, you either don’t understand the math or you’re hoping voters won’t check.
The Gas Tax Suspension
Suspending state taxes on gas and utilities until politicians “fix the price gouging they caused” sounds punitive and satisfying. The problem: those taxes fund road maintenance, transit, and environmental programs. You suspend $0.90/gallon in state gas taxes, the roads don’t get maintained, and when the suspension ends — if it ends — the political pain of restoring it is enormous. “Suspend until politicians fix it” also has no defined endpoint. This is either a permanent tax elimination (in which case, someone explain the budget math) or it’s a temporary measure with no exit condition.
The Broader “Contract” Problem
The Contract to Reform California bundles legitimate cost-reform ideas with voter ID requirements, penalties on politicians for signing unconstitutional laws, and other items that have nothing to do with cost of living. The packaging is designed to move signatures, not to govern. Initiatives that bundle ideologically heterogeneous content tend to either fail at the ballot or pass in fragments that don’t deliver the promised outcome.
The Bottom Line
DeMaio is the most effective communicator in California politics on the cost-of-living issue. His indictment of Sacramento is largely accurate. His solution set mixes legitimate structural reforms (benchmarking, regulatory accountability) with numbers that don’t survive a basic arithmetic check. When a politician tells you a $32.5 billion annual promise will be funded by a $4 billion fund, that is not a rounding error. That is the whole ballgame.
Rating: The best critique of the status quo in the race. The math is theater.
The Hedge — timothymccandless.wordpress.com — Brutal Honesty Over Hype Since 2008
Primary election: June 2, 2026. Top two advance to November regardless of party.
The Hedge — Brutal Honesty Over Hype Since 2008
Xavier Becerra wants to be your governor. His campaign is built around two core affordability moves: declare a state of emergency to freeze utility rates and home insurance premiums, and enforce existing housing laws against cities that aren’t building. He’s the frontrunner in Democratic polling heading into the June 2 primary.
California’s electricity costs are high because of wildfire liability exposure baked into utility balance sheets, mandatory grid-hardening programs, the transition to renewable generation, and transmission costs across a geographically massive state. Those are real costs. Freezing rates doesn’t make them disappear — it makes the utility absorb them, defer them, or restructure them onto other ratepayer classes.
We already ran this experiment with home insurance. Proposition 103 effectively froze insurance rate increases for years. The market’s response: State Farm stopped writing new homeowner policies. Allstate stopped. Farmers pulled back. The lesson is simple: you cannot administratively price a product below its cost without the seller exiting the market. Becerra watched this happen during his time in California government. He’s proposing to do it again, with utilities, and calling it relief.
He is a staunch labor ally who insists California housing be built by union labor under prevailing wage standards — a commitment that adds 15–20% to the cost of every publicly subsidized unit. You cannot simultaneously promise to lower housing costs and mandate the most expensive labor regime in the developed world. If you enforce housing laws but require every project to use union prevailing wage, you get somewhat more housing at the same price it’s always been. That’s not an affordability solution. That’s a building permit solution.
Rate freezes feel decisive and produce market distortions. Enforcement without cost reform produces more supply at unaffordable prices. Neither gets you where you need to go.
Rating: Polished. Inadequate.
— Timothy McCandless | The Hedge | timothymccandless.wordpress.com
The Hedge | Brutal Honesty Over Hype Since 2008
This is the last post in May’s California business series — 56 posts over 28 days covering every significant dimension of what it costs, what it takes, and what it delivers to build a business in California. Let me close with the most honest and direct assessment I can offer, based on everything we’ve covered.
I want to be completely clear about this: California is genuinely the right choice for some companies, and the entrepreneurs running those companies would be making a mistake to leave. If you are building an AI company that needs Stanford and Berkeley research connections, OpenAI or Anthropic alumni networks, and Bay Area institutional venture capital, California is not just acceptable — it is superior to every alternative. If you are building a biotech company that needs UCSF research partnerships, Torrey Pines biotech cluster relationships, and life sciences venture capital, San Diego or South San Francisco is where you need to be. If you are producing film, television, or streaming content at scale, Hollywood’s production infrastructure is not optional.
For these companies, the $800 franchise tax is a rounding error. The PAGA compliance cost is a manageable overhead. The cost of commercial real estate is offset by the value of proximity to co-founders, investors, and customers who are only in California. The analysis is straightforward: California-specific advantages exist, they are material, they justify the California premium.
The harder truth, delivered with the same honesty: most companies don’t have these California-specific reasons. Most companies are in California because their founders grew up there, went to school there, or started the business there before they understood the cost implications. These companies are paying the California premium — $500,000 to $1 million per decade for a ten-person company — for advantages they are not actually accessing. That is not a political statement. It is a cost analysis.
The Hedge’s job is to give you the information and the analytical framework to make your own decision — not to make it for you. What this series has tried to do is replace the default assumption that California is fine with the deliberate analysis that your business deserves. California may be fine for your business. It may be excellent. It may be expensive and unnecessary. But you should know which of those is true based on rigorous analysis, not optimistic assumption.
Run the numbers. Identify the genuine California advantages your specific business accesses. Compare the total California premium to the value of those advantages. Make the decision deliberately. Then build the best business you can, wherever you build it.
That is the Hedge’s approach to every financial and business decision. It’s the right approach to this one too.
The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.