Red Tape Blamed for California’s Economic Stagnation
Steve Hilton, a prominent Republican candidate in the race for California governor, has criticized Gov. Gavin Newsom’s administration for what he describes as an overwhelming increase in regulatory burdens. He argues that these obstacles have hindered California from claiming its spot as the world’s third-largest economy.
“To surpass Germany and secure the third-largest economy, we just need to grind up our bloated bureaucracy,” Hilton stated outside the Capitol recently.
According to Hilton, California’s extensive regulatory framework has morphed into an unelected entity, inflating housing, utility, and business costs, and rendering the state less competitive against rapidly growing alternatives.
A report from Hilton’s CAL DOGE initiative reveals that California’s government code comprises over 420,000 regulations. This stands in stark contrast to Texas, Florida, and Tennessee, which have 274,469, 170,321, and 121,620 regulations, respectively.
The estimate of California’s yearly regulatory costs approximates $493 billion in 2007 dollars, translating to about $745 billion today—roughly $55,000 per household, according to the CAL DOGE report.
Hilton expressed frustration, characterizing the current situation as “a nightmare of bureaucracy that is strangling everyone in California.”
“There’s been no response from Gavin Newsom, just a stream of red tape and nonsense,” he added.
Interestingly, CAL DOGE’s findings link California’s regulatory challenges to its housing predicament, suggesting that the state is failing to keep pace with housing construction when compared to its faster-growing neighbors.
From 2018 to 2024, California’s housing stock rose by 4.7%, while Texas and Florida’s growth rates were 13.7% and 11.3%, respectively. Even Tennessee surpassed California in housing construction, despite having fewer regulatory hurdles.
During the same timeframe, California’s population actually shrank by 0.2%, while Texas experienced a 9.4% increase, Florida at 9.5%, and Tennessee saw a 7% rise. Notably, Texas and Florida outperformed California in home construction rates, even as they welcomed millions of new residents.
California’s pace was just 16.9 homes per 1,000 residents, contrasted with Texas’ 53.3, Florida’s 50.9, and Tennessee’s 36.7.
If California had matched Texas’ housing growth rate over the same period, it could have added around 1.3 million more homes. Following Tennessee’s pace would have meant over 500,000 additional homes.
Jenny Ray Le Roux, director of CAL DOGE, highlighted the financial toll of the state’s administrative structure, stating, “Californians are facing rising housing and utility costs, delayed infrastructure, and reduced affordability to the tune of $55,000 annually per household.”
She emphasized that it’s impossible for any leader to tackle Californians’ concerns without addressing these deep-rooted regulatory issues.
The report points to the California Environmental Quality Act (CEQA) as a key regulatory framework affecting various projects, from housing to transportation. It mentions that such projects often become entangled in environmental impact reports, mitigation requirements, and potential legal challenges.
During a news conference, Hilton accused Newsom’s administration and state lawmakers of allowing the regulatory environment to spiral out of control.
“You’ll never meet your goals,” Hilton warned, refusing to soften his stance.
