Tag: cost of living

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Assemblyman Carl DeMaio’s Cost of Living Reduction Act (AB 23): when California prices exceed the national average by more than 10%, state agencies must automatically 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’s diagnosis of Sacramento’s failure is largely correct. The prescription is where it falls apart.

What He Gets Right

The benchmarking concept is intellectually interesting — automatic accountability that doesn’t depend on any individual politician’s will. His examples are real: average ER visit in California runs $3,238 versus $682 in Maryland. Average ambulance ride $2,407 versus $662 in North Carolina. The differential is primarily regulatory.

The $2,500 Per Family Math

California has approximately 13 million households. At $2,500 each, that is $32.5 billion per year. The Greenhouse Gas Reduction Fund historically disburses $3 to 5 billion annually. 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. This is a campaign number, not a policy number. When a politician promises $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 Problem

Suspending state gas taxes “until politicians fix it” has no defined endpoint. It’s either a permanent tax elimination (explain the budget math) or a temporary measure with no exit condition. Meanwhile the roads don’t get maintained.

The Bottom Line

DeMaio mixes legitimate structural reforms with numbers that don’t survive basic arithmetic. 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.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Steve Hilton’s “Cali-ffordability” agenda: 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, and run an anti-fraud crusade called “Cal Doge.” He leads Republican polling and has Trump’s endorsement.

What He Gets Right

Developer fee caps and CEQA lawsuit reform are legitimate policy levers with bipartisan support in principle. The income tax proposal identifies the right problem: California’s tax structure punishes the working and middle class who can’t afford to leave.

The $3 Gas Problem

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. Eliminating every state gas tax component gets you perhaps $0.90/gallon toward that $2+ gap. The rest requires either federal action, massive refinery investment, or overturning California’s own air quality regulations. Hilton has not explained the mechanism.

The 50% electricity cut has the same problem at larger scale. Wildfire liability, grid hardening, and transmission infrastructure are physical costs already baked into the grid. You can’t deregulate your way out of them.

The Funding Gap

“Fraud elimination” and general spending cuts have never come close to closing an income tax revenue gap of this size anywhere. The numbers require either massive service cuts or deficit spending.

The Bottom Line

Hilton is running in a state that hasn’t elected a Republican governor since Schwarzenegger left office in 2011. His platform is designed to sound maximally different. Whether the math holds up is a separate question — and on the specifics, it doesn’t.

Rating: The best Republican salesman in the field. The promises outrun the physics.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Riverside County Sheriff Chad Bianco: deregulation, cutting “excessive fraud,” and the argument that Democratic single-party rule caused 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 and business formation. CEQA has been used to block solar farms, transit projects, and housing developments by parties that have nothing to do with environmental protection. The “excessive fraud” argument has legitimate foundation — California’s EDD paid out an estimated $20+ billion in fraudulent unemployment claims during COVID. Medi-Cal fraud is a documented, recurring problem.

What He Doesn’t Have

“Deregulate” is not a plan — it’s a direction. Which regulations? How? A governor’s executive authority to override CEQA is limited. Substantive reform requires legislative action, and California’s legislature is heavily Democratic. “Rein in excessive fraud” is a campaign line, not a budget — even recapturing every identified dollar wouldn’t dent the structural cost drivers of housing, energy, and water.

There’s also a significant credibility problem. Bianco is in a court battle over his office’s unprecedented seizure of 650,000 Riverside County ballots from last November’s statewide special election. Voters evaluating a law-and-order candidate have standing to ask whether he applies that same discipline to himself.

The Bottom Line

The cost of living is driven by structural supply constraints that don’t care which party is in Sacramento.

Rating: Correct diagnosis. No prescription.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

San Jose Mayor Matt Mahan — the youngest major candidate at 43, the most moderate Democrat, and arguably the most specific on policy mechanics. His platform: suspend the gas tax, cap developer fees, set strict permit timelines, pause new-home taxes for two years, and tie government pay to actual outcomes.

What He Gets Right

California’s gas prices run roughly $2/gallon above the national average. State excise taxes, cap-and-trade costs, and the Low Carbon Fuel Standard are legitimate contributors to that premium. A temporary suspension would provide real, immediate relief to working families who commute.

Impact fees — charges developers pay cities — add $60,000–$100,000 to the cost of a new unit in some California cities. Capping them is not ideological. It’s arithmetic. Mahan’s permit timeline mandate addresses the time-is-money problem. 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. A temporary suspension doesn’t fund a replacement source — it defers the pressure. “Temporary” in California politics often isn’t. The bigger problem: Mahan is polling in the lower tier. His policy platform is among the most credible in the field, and he may not make the runoff.

The Bottom Line

If you want the candidate with the most coherent specific policy platform on costs, Mahan is that candidate on the Democratic side — and it’s not particularly close.

Rating: The best Democratic plan. May not matter.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Katie Porter’s affordability platform: free universal childcare, speed housing permits by nearly two years, a down payment assistance bond for first-time buyers, eliminate state income taxes for households under $100,000, and two years of free college tuition.

The Fiscal Math Doesn’t Add Up

California’s personal income tax is the state’s largest single revenue source — roughly $130 billion annually. Eliminating the tax liability for under-$100K earners blows a hole in the budget that funds schools, roads, Medi-Cal, and every other program Porter wants to expand. Porter admits she “cribbed” this idea from Steve Hilton — the Republican in the race. Add free universal childcare, free college, increased housing production, and a down payment bond — Porter is promising to cut the state’s main revenue source and increase spending simultaneously, with no credible offset beyond wealth taxes on earners who are already leaving the state.

The Housing Plan

Her permitting speedup by nearly two years is actually the most credible item on the list. Time is money in construction — carrying costs accumulate monthly. But she hasn’t committed to overriding the local NIMBYism that actually blocks projects.

The Housing Deal She Gets to Live With

Porter campaigns 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 retained the subsidized housing for years after taking unpaid leave from her faculty position to serve in Congress. She didn’t break any rules. But voters are entitled to notice the gap.

The Bottom Line

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.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Tom Steyer — billionaire, former hedge fund manager, climate activist — wants to build one million homes you can afford in California, partly through surplus public land and prefabricated housing, and wants to return windfall oil company profits directly to residents.

The Problem

In 2018, Gavin Newsom campaigned on building 3.5 million new homes over his two terms. The state is now tracking to fall dramatically short of that goal — despite Newsom signing hundreds of housing bills. The reason Newsom’s promise failed isn’t that he didn’t try. It’s that California’s housing problem is structural, not gubernatorial. Local governments control zoning. CEQA can delay projects for years through litigation that has nothing to do with environmental protection. None of that changes because a new governor has a big number.

Steyer’s surplus public land proposal has 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.

The Windfall Oil Profits Angle

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 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: higher gas prices with a rebate check that doesn’t fully compensate.

The Bottom Line

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.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

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

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 Problem with Rate Freezes

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.

The Problem with “Enforce Existing Laws”

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.

The Bottom Line

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