California’s governance model is undermining its successful economy

At a time when US President Donald Trump and Republicans are recording modest results in most opinion polls, the situation was different in California. Republican Steve Hilton outperformed several Democrats who spent huge sums of money in the gubernatorial race, qualifying for the November elections against Democrat Xavier Becerra.

In Los Angeles, an overwhelmingly Democratic city, Spencer Pratt, a Republican who ran as an independent and a former reality TV personality, looked like a political superstar, finishing third.

California Democrats will dismiss all of this as an afterthought, but the frustration is real and justified. California is one of the most dynamic places on the planet, home to Silicon Valley, Hollywood, world-class universities, exceptional agriculture, ports, talent, and natural beauty. But it is a case study of how a rich society can spend more and more while producing less and less than its average citizens need.

The paradox of California today is that its successful economy is tied to a failed model of governance. Consider the fiscal record. Since 2000, California’s population has grown by about 15%, but the state’s public expenditures have grown by more than 200%, from $78 billion to about $248 billion. Public spending per capita rose from about $2,300 to about $6,300. The number of state employees has increased by more than 50%, according to one statistic.

The question here is: Does anyone believe that California government and its benefits have improved over the past 25 years? There is no doubt that housing is the main failure. California has long spoken the language of compassion, while building a system of exclusion. Alicia Finley wrote an opinion piece in the Wall Street Journal that from 2021 to 2024, the Los Angeles metropolitan area, with a population of about 13 million people, issued only 118,000 building permits for new homes. Atlanta, with a population about half that, has issued 163,000 licenses.

California has made construction extremely difficult, slow and expensive, and the result is predictable: higher home prices and rents. In this situation, workers are forced to move longer distances, the number of homeless people is increasing, and young people are leaving the state. During the past seven years, the state has lost about 1.9 million people due to migration to other states, according to the Center for Jobs and the Economy. For generations, people have been moving to California seeking a better future, but now, many middle-class people are leaving because they cannot afford it.

But what about education? For years, California schools had a plausible excuse: They were underfunded. Total spending on K-12 education had more than doubled since the early 2000s, and per-pupil spending by 2023 was well above the national average. However, the results are still among the worst among the states.

Homelessness tells the same story in a more painful way. A 2024 audit revealed that California spent $24 billion on this problem over five years. However, in 2024, California set a record number of homeless people, reaching nearly 200,000. The number of homeless people fell by about 3% between 2024 and 2025, but the state’s expensive and complex assistance system has not proven its ability to meaningfully solve homelessness.

California’s headline-grabbing boom, due in large part to a few industries such as high-tech, masks underlying weaknesses: Job growth has been slow. In 2025, California has failed to add virtually any significant number of new jobs, and even private sectors outside government and government-subsidized health care have actually shed a number of jobs, according to the Center for Jobs and the Economy. The state uses public spending to cover the deficit and recession in the private sector.

Nowhere is this more apparent than in Los Angeles, where Hollywood, the city’s defining industry, is in slow decline. The effects are felt not by famous actors and influencers, but by carpenters, costume designers, sound engineers, camera operators, editors, drivers, caterers, laundromats, hardware warehouses, and small businesses that once made up one of the world’s largest clusters.

The numbers are stark, as a report showed that the number of filming days in Los Angeles decreased from 36,792 days in 2022 to 19,694 days in 2025. The number of workers in the film industry in Los Angeles County also decreased from about 142,000 people at the end of 2022 to nearly 100,000 people two years later. Another report estimates that jobs in film, television and audio fields will decline by nearly 30% between 2022 and 2025.

Hollywood remains the symbol, the brand, the legend, the major studios that have produced much of the world’s best entertainment for nearly a century, but thanks in large part to high taxes, costs and regulation, the business has moved elsewhere, to Georgia, New Jersey, Toronto, London and Warsaw.

“The big studio complexes now look like ghost towns, with vast expanses of soundstages and recording studios where nothing happens,” Michael Lynton, who ran Sony Entertainment, told me. He added, “Los Angeles has become a copy of Detroit.”

According to Fortune magazine, none of the 10 films nominated for the Best Picture award this year were produced in Hollywood. Los Angeles still hosts the Oscars, but, increasingly, it does not produce the films honored there.

About “Foreign Policy”

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Absence of competition

For years, Democrats governed California without real competition. The results of the recent primaries suggest that voters are worried even in overwhelmingly Democratic areas. They are not turning Republican, but they are asking a logical question: Why does a state with so much money, talent and potential make life so difficult for ordinary people?

. California’s headline-grabbing prosperity, due in large part to a few industries like high-tech, masks underlying vulnerabilities.

. Hollywood is still the symbol, the brand, the myth. It houses the major studios that have produced much of the world’s best entertainment for nearly a century, but thanks in large part to high taxes, costs and regulation, work has moved elsewhere such as Georgia, New Jersey, Toronto, London and Warsaw.

. Jobs in film, television and audio fields fell by nearly 30% between 2022 and 2025.