Trump’s tariffs are working — now comes the ‘marshmallow test’



The Congressional Budget Office released a report Wednesday detailing the budgetary and economic impact of President Trump’s tariffs. The top-line result: Even the Democrat-controlled CBO concedes that tariffs will reduce the deficit over the next decade.

Trump has every reason to celebrate. Tariffs shrink the deficit in one of two ways. They either raise revenue directly — as tariffs are a form of tax — or they do so indirectly, by reshoring industry and expanding GDP.

History suggests both outcomes are likely. But if Trump stays the course and keeps tariffs high and stable, the United States could seize the opportunity of a generation: reindustrialize the economy, grow GDP, and restore prosperity for our grandkids.

The marshmallow test goes national

In the 1960s, Stanford psychologist Walter Mischel ran an experiment on self-control. Children were given a choice: Eat one marshmallow now or wait and receive two later. Those who delayed gratification generally fared better in life. Intelligence and future success correlated with restraint.

The implications extended beyond childhood. Researchers found similar behavior in animals, with more intelligent species — like crows — choosing delayed rewards.

Delayed gratification builds successful investors, entrepreneurs, and nations.

No one pretends tariffs deliver instant gratification. They don’t. They aren’t supposed to.

Tariffs function much the same way. They impose short-term pain in exchange for long-term gain. Like the marshmallow test, this moment asks whether Americans will accept some present discomfort to secure a far more prosperous future.

Fortunately, patience pays. Economic logic and historical evidence both show that tariffs expand the gross domestic product and create jobs over time.

What the trade deficit reveals

In 2024, America posted a net trade deficit of $918 billion. That figure represents more than a statistic. It reflects real, physical production now taking place elsewhere — mostly in China.

The math is simple: If Americans didn’t buy those goods from abroad, they would need to produce them at home.

Reshoring that production would raise GDP accordingly. When demand remains steady and supply shifts from overseas to domestic producers, GDP rises.

Demand drives supply. That’s basic economics.

This principle played out throughout American history. For over a century, high tariffs protected domestic industry. America’s economy grew faster than the global average. Consumption increased. Industrial output soared. Not until the 1970s, when the country embraced so-called “free trade” and abandoned the gold standard, did growth begin to stagnate.

Industrial production also benefits from increasing returns to scale. The more you produce, the cheaper each unit becomes. Part of the reason Chinese goods seem inexpensive lies in our own underproduction. As American firms ramp up supply, the cost gap narrows.

Financing habits support this trend. Americans fund trade deficits by selling assets or issuing debt. Those mechanisms would remain available in a closed trade system. True, consumers might get less “bang for their buck” in the short term, but the willingness to spend wouldn’t change.

Most Americans will continue to consume, no matter where production occurs. That behavior ensures demand will remain steady — providing the economic incentive for supply to shift back home.

Unused capacity, untapped opportunity

America’s industrial potential remains far from exhausted. Millions of citizens remain unemployed or underemployed. Hundreds of billions of dollars in productive capital sit idle.

The infrastructure exists. The labor pool exists. The only thing missing has been the incentive to build again. Or more accurately, the disincentive to rely on foreign labor.

The United States thrived for generations as a self-sufficient manufacturing power. It can do so again.

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Production follows consumption. That truism holds in both individual and national economies. No one works because they love harvesting wheat or running a forge. People work because they want to eat, live, and flourish.

In a globalized economy, countries can consume without producing. But once that system breaks — or gets reshaped by political will — production must rise to meet domestic demand. It cannot work the other way around.

This logic exposes a hard truth: America’s trade deficit reflects lost potential. We haven’t stopped consuming. We’ve just stopped building.

Trump’s tariffs aim to reverse that trend. By shrinking the trade deficit, the policy raises GDP. With production comes employment. With employment comes prosperity.

The patience to win

No one pretends tariffs deliver instant gratification. They don’t. They aren’t supposed to.

Tariffs offer a national test of will. Do Americans want long-term sovereignty, security, and wealth badly enough to endure a temporary adjustment? Or will they flinch the moment cheap consumer goods rise in price?

This question lies at the heart of the national debate. And the outcome will shape whether America reclaims its manufacturing base — or continues hemorrhaging power to rival nations.

The evidence favors success. But only if we stay the course.

Conservatives and nationalists should recognize what’s at stake. Tariffs don’t just serve economic goals. They advance a moral imperative — to rebuild the country we inherited and preserve it for those who follow.

The marshmallow test may sound childish. But its lessons hold: The future belongs to those who can delay gratification today to build something greater tomorrow.

America stands at that threshold now. As I show in “Reshore: How Tariffs Will Bring Our Jobs Home and Revive the American Dream,” reindustrialization isn’t a fantasy. It’s within reach. But it requires courage, consistency, and sacrifice.

Trump’s tariffs have set the stage. The numbers now support the policy. The question remains: Will the American people pass the test?

Let’s hope so. Because this country doesn’t belong only to us. It belongs to our children, our grandchildren, and every generation still to come.

Comparative advantage was built on patriotism. That’s gone.



In a recent Financial Times column, economist Burton Malkiel slammed President Trump’s tariffs as economically “foolish,” arguing they violate the supposed universal truth of comparative advantage. He’s wrong — on both the economics and the reality.

First, comparative advantage only applies when nations trade goods for goods. Today, the U.S. trades goods for assets and debt. That alone breaks the model. Second, comparative advantage only holds when capital stays put. But in the real world — our world — capital moves. Factories relocate, labor follows, and production shifts across borders. That’s not a flaw in the theory. It’s a fatal contradiction.

America doesn’t need more academic theory. It needs factories. It needs jobs. It needs to win again.

Malkiel either doesn’t understand these limitations — or he does and hopes you don’t.

Ignoring the fine print

Comparative advantage, a theory made famous by David Ricardo in his 1817 work “On the Principles of Political Economy and Taxation,” says countries should produce what they’re best at and trade for the rest. This specialization, Ricardo argued, makes everyone richer by boosting global efficiency.

Malkiel trots out the textbook example: If Britain and France each devote 100 hours to making cloth and wine, both benefit more by specializing — Britain in cloth, France in wine — and trading. Total production rises, and both countries gain.

That’s the theory. It’s clean, tidy, and wrong — at least in the modern world.

Ricardo himself acknowledged the theory only works when countries trade goods for goods. If one country, like the United States, trades away past and future production — assets and debt — in exchange for foreign-made goods, comparative advantage fails.

When trade isn’t backed by production, it doesn’t encourage specialization. It incentivizes offshoring. In Ricardo’s own words: “It would undoubtedly be advantageous to the capitalists of England that the wine and cloth should both be made in Portugal.”

In other words, once capital moves, the model collapses. Malkiel conveniently ignores that Ricardo flagged this problem over 200 years ago.

Ricardo also assumed that capitalists would stay loyal to their country. “Most men of property,” he wrote, “will be satisfied with a low rate of profits in their own country.” But what happens when they’re not? What happens when loyalty gives way to margin-chasing?

You get modern America.

Ricardo’s world is gone

When Ricardo wrote, moving capital across borders was almost impossible. Machinery couldn’t be exported. Tariffs hovered above 50%. Capital markets barely functioned. Transportation was slow and expensive. Endemic warfare prevented a large-scale commodity trade. Ricardo’s world had walls. Comparative advantage worked because it couldn’t be easily gamed.

But after his death, many of those barriers fell. By the mid-19th century, British capital was pouring into overseas markets. In 1815, Britain had £10 million invested abroad. A decade later, it topped £100 million. By 1914, Britain held more than a third of its national wealth overseas — while domestic investment cratered.

RELATED: Trump’s trade crackdown may be US Steel’s last shot

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That same trend now defines America’s trajectory. Since 1974, the United States has run a trade deficit every single year. The cumulative value: $25 trillion. We paid for it by selling assets and IOUs. As a result, more than 60,000 factories closed, and seven million well-paying manufacturing jobs vanished.

And what did we get in return? Cheaper toasters. Pricier patriotism.

Tariffs provide the path back

Malkiel says tariffs violate economic law. But tariffs helped build American prosperity in the first place. They protected domestic industry. They ensured investment stayed here, not in Shanghai or Shenzhen. They gave workers stable, high-paying jobs — and gave communities a chance to thrive.

Today, tariffs offer the best chance to reverse the offshoring spiral. They don’t reject trade. They demand fair terms. They recognize that production equals power — and that giving away your manufacturing base in the name of theoretical efficiency leads to real-world decline.

Free trade zealots preach like high priests of a failed faith. They chant comparative advantage like it’s economic scripture. But America doesn’t need more academic theory. It needs factories. It needs jobs. It needs to win again.

And tariffs — not another foolish lecture from the Financial Times — offer the clearest way back.

Trump’s trade crackdown may be US Steel’s last shot



Cleveland-Cliffs, America’s fourth-largest steel producer, stunned West Virginia earlier this month by shelving plans to reopen a shuttered steel mill as an electrical transformer plant.

The project would have restored 600 of the 1,000 jobs lost when the company idled the mill in February. Instead, the cancellation marked just one of several disappointing announcements since March, all driven by the company’s ongoing financial problems. In total, Cleveland-Cliffs plans to idle six facilities across Pennsylvania and the Midwest.

If the choice is between watching Cleveland-Cliffs and US Steel collapse or breathing new life into one through foreign direct investment, Trump won’t hesitate.

And who suffers most? Steelworkers and their families — the people left out of the headlines.

I’ve tracked the steel industry’s decline for decades, first as the lone free-market conservative senior adviser at the Alliance for American Manufacturing, and later through various economic roles in Washington, D.C. Cleveland-Cliffs’ troubles are just the latest symptoms of a chronically ailing American steel sector, burdened by nearly a dozen deeply rooted problems that won’t be solved quickly.

Steelmakers now face skyrocketing costs for raw materials, energy, and labor. At the same time, they compete against a global glut of cheap steel, particularly from Chinese companies that flood markets and drive down prices. Geopolitical tensions, supply shortages, and transportation choke points only add to the chaos. The result: an industry pushed to the brink — and workers left behind.

Some steel companies are taking creative steps to survive. In December 2023, U.S. Steel announced a proposed sale to Japanese rival Nippon Steel. CEO David Burritt had warned just three months earlier that without a strong buyer, he would likely shut down the Mon Valley Works plant near Pittsburgh — an iconic facility employing more than 3,000 workers — and move company headquarters from the “Steel City” to Arkansas.

Nippon Steel emerged as the most financially viable bidder, outpacing Cleveland-Cliffs, which remains weighed down by persistent losses. Despite this, the Biden administration blocked the deal. President Trump initially opposed the sale but has since indicated a willingness to approve it.

For years, I’ve advocated better trade policies — especially deregulation and aggressive action against China. As a former commissioner on the U.S.-China Economic and Security Review Commission, I pushed to crack down on China’s intellectual property theft and ongoing geo-economic abuses. Trump’s trade agenda gives the United States its best shot in decades to protect jobs from Chinese exploitation and reopen long-shuttered paths to profitable domestic manufacturing.

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Photo by Andrew Harnik/Getty Images

On the home front, Trump’s 10-to-1 deregulation initiative — eliminating 10 old rules for every new one — could transform the business landscape. He’s already eyeing 44 regulations that manufacturers want repealed. What critics call a “tariff war” with China is really just Washington’s overdue reckoning with decades of failure to hold Beijing accountable.

These policy reforms won’t take effect overnight. And manufacturers like U.S. Steel can’t afford to wait while neglect and decay continue. Nippon Steel’s $14.9 billion bid offers a direct infusion of capital that could revive this historic company and inject new life into a battered industry.

Look at what Nippon’s latest offer — now exceeding $20 billion — includes:

  • A $1.3 billion commitment to upgrade and modernize two U.S. Steel plants.
  • Guarantees to retain the full U.S. Steel workforce and honor existing union contracts.
  • A $5,000 bonus for every U.S. Steel employee once the deal closes.

President Trump understands business and negotiation. His priority — rightly — focuses on revitalizing American industry and creating jobs that put affordable groceries, including now-cheaper eggs, back on the tables of steelworkers.

If the choice is between watching Cleveland-Cliffs and U.S. Steel collapse or breathing new life into one through foreign direct investment, Trump won’t hesitate. He’ll choose growth — and he’ll be right to do so.

American innovation is dying — and Congress is the culprit



The United States once led the world in manufacturing, producing more than 25% of global industrial output. Today, China holds that title, controlling over 30%, while the U.S. struggles to maintain even half that share.

Plenty of factors drove this decline — decades of offshoring, the collapse of industrial job bases, and an obsession with short-term profits over long-term strength. But if America wants to reclaim its industrial leadership and restore economic self-reliance, we need more than reshoring slogans and infrastructure bills.

Innovation isn’t an expense. It’s an investment — in national security, in American workers, and the future of US leadership.

We must fix and expand the research and development tax credit.

A recent Wall Street Journal analysis focused on our loss of industrial capacity. But capacity starts with innovation. Every new factory, process, and product begins with research — and that remains our greatest untapped advantage.

Yet Congress has punished companies for investing in R&D. Since 2022, the tax code has forced businesses to amortize R&D expenses over five years instead of deducting them immediately. That change has choked innovation, especially among small and midsized manufacturers that depend on near-term tax relief to fund future growth.

The result? Reduced domestic innovation, fewer advanced manufacturing breakthroughs, and an economy less equipped to compete with subsidized foreign rivals.

R&D incentives work

The research and development tax credit was meant to drive economic growth. It helps businesses offset the steep costs of developing new technologies, improving production, and staying competitive.

But today’s credit falls short. It’s too small, too complicated, and — after the amortization change — actively harmful.

Now compare that to China. Beijing offers “super deductions,” direct subsidies, and aggressive industrial policies tailored to national priorities. The results speak for themselves: China leads in semiconductors, solar, electric vehicles, and other strategic industries.

Four immediate fixes

To reverse course and restore American competitiveness, Congress must act.

  • Restore full expensing of R&D investments so businesses can deduct costs in the year they’re made — not years later.
  • Expand the R&D credit to reach startups, family-owned manufacturers, and small tech firms that often drive innovation but struggle to access support.
  • Streamline eligibility rules and reduce audit risks that discourage many companies from claiming the credit at all.
  • Create bonus credits for R&D tied to domestic manufacturing in key sectors like semiconductors, energy, defense, and infrastructure.

R&D as economic infrastructure

American manufacturing won’t come back without innovation. You can’t revive the auto industry, reshore chip production, or scale clean energy without continuous investment in research and development. And without smart tax policy to back it, capital won’t go where it’s needed.

Lawmakers in both parties love to talk about supporting U.S. industry. But support doesn’t come from speeches — it comes from policy. If Congress is serious about restoring American manufacturing, it should start by fixing the one tax tool designed to keep us competitive.

The auto industry didn’t boom just because someone built a car. It took Ford’s innovation of the assembly line and the machines to make it work. Thomas Edison didn’t invent the light bulb — he made it viable. Steve Wozniak didn’t invent the microchip, but he made the personal computer scalable.

Inventors didn’t build the modern economy. Innovators did.

Innovation isn’t an expense. It’s an investment — in national security, in American workers, and in the future of U.S. leadership.

Trump’s UK tariff deal exposes the global free trade lie



President Trump on Thursday announced a new tariff deal with the United Kingdom — the first major agreement to follow the “Liberation Day” tariffs that forced 90 countries to come crawling back to the negotiating table.

Earlier in the week, India offered a zero-for-zero tariff deal — free trade on pharmaceuticals, steel, and auto parts. Trump declined.

America doesn’t just need tariffs to protect jobs and industries. It needs them to defend its sovereignty.

Predictably, the free-trade faithful slammed the U.S.-U.K. deal as “managed trade” that would harm consumers. They rushed to embrace India’s offer instead. They’ve got it backward.

Trump’s “managed trade” with the U.K. will do more to strengthen America’s economy — and serve American workers — than any so-called “free trade” agreement with India. Why? Because developed and developing nations operate in fundamentally different economic worlds. One-size-fits-all trade policy doesn’t work.

Free trade is a myth

This may offend professional economists who worship the rational-consumer model, but it must be said: Different countries are different. These aren’t surface-level quirks. They reshape the entire trade equation and make real free trade — not just difficult — but impossible.

Start with wages. In 2024, the median American worker earned $61,984. The median Briton earned $47,162 — both figures in U.S. dollars for easy comparison. The U.K. lags behind but not by much. If the U.K. were a U.S. state, it would rank somewhere in the middle. Free trade with the U.K. won’t trigger mass offshoring because our labor markets are comparable.

India is a different story. The median Indian worker earned just $3,925 last year. For the price of one American, a company could hire 16 Indians. That wage gap makes offshoring to India almost inevitable in labor-intensive industries. Cheap labor wins.

But wages aren’t the only issue. Legal systems, tax regimes, geography, infrastructure, language, climate, cultural norms, business ethics, and demographics all create market asymmetries that domestic policy can’t overcome.

Take China. American companies operating there face rampant intellectual property theft. Westerners assume legal systems deter crimes like fraud and theft. In reality, cultural norms prevent most bad behavior long before the courts get involved.

China doesn’t share America’s cultural regard for property rights — especially when it comes to outsiders. Since 2001, China has stolen an estimated $5 trillion in American intellectual property. Chinese courts have refused to hold anyone accountable. This isn’t an exception. It’s standard practice.

Doing business in China isn’t like doing business in America, Canada, Australia, or Europe — where common values and legal recourse create a relatively level playing field.

Free-trade advocates can slash tariffs and harmonize regulations all they want, but they can’t fix these deeper, structural imbalances. They can’t rewrite culture or eliminate corruption. These asymmetries make truly free trade impossible.

Spot the differences

In my book “Reshore: How Tariffs Will Bring Our Jobs Home and Revive the American Dream,” I argue that American workers are among the most productive in the world — more productive than their counterparts in Germany, Mexico, or almost anywhere else.

That’s why the U.S. typically runs trade surpluses — or small deficits — with developed countries like the Netherlands, Australia, and the U.K.

So why do highly productive American factories shut down and relocate to China, Mexico, or India — where it takes more labor to produce the same output?

Because productivity doesn’t equal price.

The price of a good reflects more than just labor. If a Chinese manufacturer steals its technology instead of inventing it, it can undercut American competitors who spent years funding research and development.

That’s not a free market. It’s rigged.

Tariffs defend more than jobs

Global free trade is a myth. Nations can’t trade freely while market asymmetries persist. The only way to achieve true parity would be to unify the world’s economies, legal systems, cultures, and political structures. That’s the goal of the European Union, World Trade Organization, and World Economic Forum. Coincidence? Hardly.

America doesn’t just need tariffs to protect jobs and industries. It needs them to defend its sovereignty. Globalism doesn’t level the playing field — it sells it to the lowest bidder.

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Rand Paul’s anti-tariff crusade was doomed — and rightly so



Earlier this week, Sen. Rand Paul (R-Ky.) launched a short-lived attempt to block President Trump’s new tariffs. Fortunately, in this case, he lost. Vice President JD Vance cast the tie-breaking vote.

Paul played all of the libertarian greatest hits, from calling tariffs “taxation without representation” to claiming they represent big-government tyranny. He ignored one key fact: Donald Trump ran, and won, on an explicitly pro-tariff platform. The American people voted for this.

If Paul really wants to reduce the size and scope of government, he has no choice but to support Trump’s tariffs.

The reality is that tariffs are the form of taxation most compatible with small government. That’s why America’s founders — and every president on Mount Rushmore — supported them.

How tariffs promote small government

Tariffs shrink the power of government in three ways. First, they reduce foreign demand for U.S. debt, limiting borrowing. Second, they promote full employment, reducing welfare dependency. Third, they protect American businesses from foreign state interference.

America has run trade deficits every year since 1974. The cumulative total, adjusted for inflation, approaches $25 trillion. In 2023 alone, the trade deficit in goods and services neared $920 billion.

We didn't pay for that deficit with domestic production. Instead, we sold off assets — real estate, stocks, and bonds. China and its trading partners ship us goods, then buy up our future in return.

That includes our debt. Foreign demand for Treasury bonds has exploded because countries like China must recycle their trade surpluses somewhere. This artificial demand makes it easier — and cheaper — for Washington to borrow without raising yields.

Foreign entities now hold $8.5 trillion in U.S. public debt, about 29% of the total. The explosion started in 2001 when China joined the World Trade Organization, and our deficits soared.

The result? Washington spends recklessly. And the cost of servicing that debt — over $300 billion in interest payments to foreign creditors — bleeds out the economy. That’s roughly equal to our annual trade deficit with China.

Higher tariffs would shrink the trade deficit and lower foreign demand for American debt. That would limit Washington’s access to cheap credit — exactly what fiscal conservatives should want.

Long term, if tariffs replaced the income tax as the government’s primary revenue source, federal borrowing would face a hard cap. Unlike the income tax, tariffs are avoidable. If rates rise too high, people buy domestic. That reality places a natural limit on tax revenue and borrowing capacity.

In short: Tariffs enforce fiscal restraint.

Tariffs favor work over welfare

Since 2001, the U.S. has lost more than 5 million manufacturing jobs — along with the service jobs that depended on them.

Offshoring gutted labor’s bargaining power. When employers can threaten to send jobs to China, wages stagnate. Productivity no longer guarantees compensation. Workers take what they can get, or they’re replaced.

This “race to the bottom” helped erode middle-class wages and drive up welfare dependency. Over 10 million Americans now qualify as chronically unemployed, with many dropped from the labor force entirely.

As I explain in my book “Reshore,” mass job loss carries political consequences. Unemployed citizens are more likely to vote for higher taxes, expanded social programs, and even socialist policies. Poverty breeds dependency — and dependency fuels government growth.

Even if you buy the libertarian argument that tariffs “distort” markets, the result still favors liberty. The jobs tariffs protect are real. They preserve dignity, reduce welfare rolls, and shrink government.

Work is cheaper — and better — than welfare.

Good fences make good neighbors

Paul argues that tariffs let government “pick winners and losers.” He wants the market to decide.

Well, sure. That would make sense — if America competed on equal footing. But we don’t. Chinese businesses don’t operate under free market conditions. They’re backed by the Chinese Communist Party, which props them up with subsidies, below-market financing, land-use preferences, and outright theft — up to $600 billion per year in American intellectual property.

U.S. small businesses can’t compete with state-sponsored enterprises. That’s why entire American industries, towns, and families have disappeared.

Tariffs serve as economic fences. They shield American firms from foreign governments — not just foreign competitors. That protection restores actual market competition inside the United States, where private companies can go head-to-head without facing a communist superstate.

And economic competition isn't just about firms. It happens at every level: workers vying for jobs, companies for customers, nations for global influence. Globalism collapses these layers into a single, rigged marketplace where the biggest government wins — and right now, that’s Beijing.

Tariffs restore order by separating national economies enough to maintain fair play. They enhance domestic competition while preserving international boundaries. Most importantly, they keep the CCP — the world’s largest and most authoritarian government — from dominating American markets.

If Rand Paul really wants to reduce the size and scope of government, he has no choice but to support President Trump’s tariffs.

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How California’s crisis could lead to a big political shift



California’s wide range of problems — including declining schools, widening inequality, rising housing prices, and a weak job market — shows the urgent need for reform. The larger question is whether there exists a will to change.

Although the state’s remarkable entrepreneurial economy has kept it afloat, a growing number of residents are concluding that the progressive agenda, pushed by public unions and their well-heeled allies, is failing. Most Californians have an exceptional lack of faith in the state’s direction. Only 40% of California voters approve of the legislature, and almost two-thirds have told pollsters the state is heading in the wrong direction. That helps explain why California residents — including about 1.1 million since 2021 — have been fleeing to other states.

California needs a movement that can stitch together a coalition of conservatives, independents, and, most critically, moderate Democrats.

Unhappiness with the one-party state is particularly intense in the inland areas, which are the only locales now growing and may prove critical to any resurgence. More troubling still, over 70% of California parents feel their children will do less well than they did. Four in 10 are considering an exit. By contrast, seniors, thought to be leaving en masse, are the least likely to express a desire to leave.

In some ways, discontent actually erodes potential support for reform. Conservative voters, notes a recent study, are far more likely to express a desire to move out of the state; the most liberal are the least likely. “Texas is taking away my voters,” laments Shawn Steel, California’s Republican National Committee member.

New awakenings

Given the demographic realities, a successful drive for reform cannot be driven by a marginalized GOP. Instead, what’s needed is a movement that can stitch together a coalition of conservatives, independents (now the state’s second-largest political grouping), and, most critically, moderate Democrats.

Remarkably, this shift has already begun in an unlikely place: the ultra-liberal, overwhelmingly Democratic Bay Area. For years, its most influential residents — billionaires, venture capitalists, and well-paid tech workers — have abetted or tolerated an increasingly ineffective and corrupt regime. Not only was the area poorly governed, but the streets of San Francisco, Oakland, San Jose, and other cities have become scenes of almost Dickensian squalor.

Over the past two years, tech entrepreneurs and professionals concerned about homelessness and crime worked to get rid of progressive prosecutor Chesa Boudin. Last year, they helped elect Dan Lurie, scion of the Levi Strauss fortune, as mayor, as well as some more moderate members to the board of supervisors. Lurie, of course, faces a major challenge to restore San Francisco’s luster against entrenched progressives and their allies in the media, academia, and the state’s bureaucracy.

Similar pushbacks are evident elsewhere. Californians, by large majorities, recently passed bills to strengthen law enforcement, ditching liberalized sentencing laws passed by Democratic lawmakers and defended by Gov. Gavin Newsom (D). Progressive Democrats have been recalled not only in San Francisco but also in Oakland (Alameda County) and Los Angeles, with voters blaming ideology-driven law enforcement for increasing rates of crime and disorder.

Critically, the liberal elites are not the only ones breaking ranks. Pressure for change is also coming from increasingly conservative Asian voters and Jews — who number more than 1 million in the state and largely are revolted by the anti-Semitism rife among some on the progressive left. Protecting property and economic growth is particularly critical to Latino and Asian immigrants — California is home to five of the 10 American counties with the most immigrants — who are more likely to start businesses than native-born Americans.

These minority entrepreneurs and those working for them are unlikely to share the view of progressive intellectuals, who see crime as an expression of injustice and who often excused or even celebrated looting during the summer of 2020. After all, it was largely people from “communities of color” who have borne the brunt of violent crime in cities such as Los Angeles, Oakland, and San Francisco. Minorities also face special challenges doing business here due to regulations that are especially burdensome on smaller, less capitalized businesses. According to the Small Business Regulation Index, California has the worst business climate for small firms in the nation.

The shift among minority voters could prove a critical game-changer, both within the Democratic Party and the still-weak GOP. In Oakland, for example, many minorities backed the removal of Mayor Sheng Thao (D), a progressive committed to lenient policing in what is now California’s most troubled, if not failed, major city.

Latinos, already the state’s largest ethnic group, constituting about 37.7% of the workforce, with expectations of further growth by 2030, seem to be heading toward the right. In the last presidential election, Trump did well in the heavily Latino inland counties and won the “Inland Empire” — the metropolitan area bordering Los Angeles and Orange Counties – the first time a GOP presidential candidate has achieved this in two decades.

Back to basics

After a generation of relentless virtue-signaling, California’s government needs to focus on the basic needs of its citizens: education, energy, housing, water supply, and public safety. As a widely distributed editorial by a small business owner noted, Californians, especially after highly publicized fire response failures in Los Angeles earlier this year, are increasingly willing to demand competent “basic governance” backed by a “ruthless examination of results” to ensure that their government supports “modest aspirations” for a better life.

California once excelled in basic governance, especially in the 1950s and '60s under Democratic Gov. Edmund G. “Pat” Brown. The state managed to cultivate growth while meeting key environmental challenges, starting in the late 1960s, most notably chronic air pollution. In what is justifiably hailed as a “major success,” California helped pioneer clean air regulatory approaches that have vastly reduced most automotive tailpipe emissions as well as eliminated lead and dramatically cut sulfur levels.

All of this starkly contrasts with the poor planning, execution, and catastrophist science evoked to justify the state’s climate agenda. Even Pat Brown’s son, former Gov. Jerry Brown (D), recognized that California has little effect on climate. Given the global nature of the challenge, reducing one state’s emissions by cutting back on industrial activities accomplishes little if those activities move elsewhere, often to locations with fewer restrictions such as China and India.

Rather than focusing on “climate leadership,” Sacramento needs to tackle the immediate causes of record out-migration, including sluggish economic growth and the nation’s highest levels of poverty and homelessness. The great challenges are not combatting global temperature rises but the housing crisis and the need to diversify the economy and improve the failing education system. As these problems have often been worsened by climate policies, there seems little reason for other states and countries to adopt California’s approach as a model.

halbergman via iStock/Getty Images

Fixing housing

California now has the nation’s second-lowest home ownership rate at 55.9%, slightly above New York (55.4%). High interest rates that have helped push home sales to the lowest level in three decades across the country are particularly burdensome in coastal California metros, where prices have risen to nearly 400% above the national average. The government almost owned up to its role in creating the state’s housing crisis — especially through excessive housing regulations and lawfare on developers — earlier this year when Newsom moved to cut red tape so homes could be rebuilt after the Los Angeles fires.

Current state policy — embraced by Yes in My Backyard activists, the greens, and unions — focuses on dense urban development. Projects are held up, for example, for creating too many vehicle miles traveled, even though barely 3.1% of Californians in 2023 took public transit to work, according to the American Community Survey. As a result, much “affordable” development is being steered to densely built areas that have the highest land prices. This is made worse with mandates associated with new projects, such as green building codes and union labor, that raise the price per unit to $1 million or more.

A far more enlightened approach would allow new growth to take place primarily outside city centers in interior areas where land costs are lower and where lower-cost, moderate-density new developments could flourish. These include areas like Riverside/San Bernardino, Yolo County (adjacent to Sacramento), and Solano County, east of San Francisco Bay. This approach would align with the behavior of residents who are already flocking to these areas because they provide lower-income households, often younger black and Latino, with the most favorable home ownership opportunities in the state.Over 71% of all housing units in the Inland Empire are single-family homes, and the aggregate ownership rate is over 63%, far above the state’s dismal 45.8% level.

Without change, the state is socially, fiscally, and economically unsustainable. California needs to return to attracting the young, talented, and ambitious, not just be a magnet for the wealthy or super-educated few.

More than anything, California needs a housing policy that syncs with the needs and preferences of its people, particularly young families. Rather than being consigned to apartments, 70% of Californians prefer single-family residences. The vast majority oppose legislation written by Yes in My Backyard hero Democratic state Sen. Scott Wiener banning single-family zoning in much of the state.

Investment in the interior is critical for recreating the old California dream for millions of aspiring households, particularly among minorities who are being driven out of the home ownership market in the coastal metropolitan areas. The only California metropolitan area ranked by the National Association of Realtors as a top 10 pick for Millennials was not hip San Francisco or glamorous Los Angeles, but the more affordable historically “redneck” valley community of Bakersfield.

The numerous housing bills passed by Sacramento have not improved the situation. From 2010 to 2023, permits for single-family homes in California fell to a monthly average of 3,957 units from 8,529 during 1993-2006. California’s housing stock rose by just 7.9% between 2010 and 2023, lower than the national increase (10.3%) and well below housing growth in Arizona (13.8%), Nevada (14.7%), Texas (24%), and Florida (16.2%).

A more successful model can be seen in Texas, which generally advances market-oriented policies that have generated prodigious growth in both single-family and multi-family housing. This has helped the Lone Star State meet the housing needs of its far faster-growing population. A building boom has slowed, and there’s been some healthy decrease in prices in hot markets like Austin. Opening up leased grazing land in state and federal parks — roughly half the state land is owned by governments — could also relieve pressure on land prices. Until California allows for housing that people prefer, high prices and out-migration will continue into the foreseeable future.

Ultimately, California has room to grow, despite the suggestions by some academics that the state is largely “built out.”In reality, California is not “land short,” either in its cities or across its vast interior. Urbanization covers only 5.3% of the state, according to U.S. Census Bureau data, while parks, agricultural land, deserts, and forests make up the bulk of the area.

Diversifying the economy

Even Jerry Brown has remarked that the “Johnny one note” tech economy the state’s tax base depends on could stumble. This would reduce the huge returns on capital gains from the top 1% of filers, who now account for roughly half of all state income tax revenues. This overreliance may be particularly troublesome in the era of artificial intelligence, where tech companies may continue to expand but have less need for people. Indeed, San Francisco County, which boasts many tech jobs, experienced the nation’s largest drop in average weekly wages, 22.6%, between 2021 and 2022.

To expand opportunity and, hence, its tax base, California has to make more of the state attractive to employers. The best prospects, again, will be in inland areas.Today, when firms want to build spaceships, a clear growth industry where California retains significant leadership, as well as battery plants and high-tech and food processing facilities, they often opt to go to Nevada, Arizona, Tennessee, and Texas. Given lower land and housing costs, San Bernardino and Riverside Counties, as well as spots on the Central Coast, should be ideally situated to compete for those jobs.

The current economic pattern creates a situation where AI developers, elite engineers, and venture capitalists may enjoy unprecedented profits, but relatively little trickles down to the mass of Californians. Not all Californians have wealthy parents to subsidize their lifestyle, and few are likely to thrive as AI engineers. To address the dilemmas facing the next generation of Californians, the state needs to focus not just on ephemera, software, and entertainment but on bringing back some of the basic industries that once forged the California dream. In this way, President Trump’s policies could actually help the state, particularly in fields like high-tech defense and space.

In the 1940s, California played a key role in the American “arsenal of democracy.” Today, it could do the same, not so much by producing planes and Liberty ships, but drones, rockets, and space-based defense systems. Indeed, there are now discussions of reviving the state’s once-vaunted shipbuilding industry that buoyed the economy of Solano County — something sure to inspire the ire of the Bay Area’s rich and powerful environmental lobby.

Photo by Gina Ferazzi/Los Angeles Times via Getty Images

Improving education

Climate and environmentalism are not the only barriers to California’s revival. No problem is more pressing and consequential than the state’s failure to educate California’s 5.9 million public school children. In fiscal year 2023-2024, California will spend about $128 billion on K-12 public education — an amount exceeding the entire budget of every other state except New York. Despite this level of spending, about 75% of California students lack proficiency in core subject areas based on federal education standards.

Two out of three California students do not meet math standards, and more than half do not meet English standards on state assessments. Overall, less than half of California public school students performed at or above grade level for English language arts (reading, writing, etc.), while only 34.62% met or exceeded the math standard on the Smarter Balanced 2023 tests. The failures are particularly clear among minority students. According to the latest California testing results, only 36.08% of Latino students met or exceeded proficiency standards for English language arts. Only 22.69% met or exceeded proficiency standards in math. Latino students, for example, in Florida and Texas do somewhat better in both math and English, even though both states spend less per capita on education than California.

Not surprisingly, many parents object to a system where half of the state’s high school students barely read at grade level. One illustration of discontent has been the growth of the charter school movement. Today, one in nine California schoolchildren attend charter schools (including my younger daughter). The state’s largest school district, the heavily union-dominated Los Angeles Unified School District, has lost roughly 40% of its enrollment over two decades, while the number of students in charters grew from 140,000 in 2010 to 207,000 in 2022.

In addition to removing obstacles to charters, homeschoolers are part of the solution. California homeschool enrollment jumped by 78% in the five-year period before the pandemic and in the Los Angeles Unified School District by 89%. Equally important, some public districts and associated community colleges, as in Long Beach, have already shifted toward a more skills-based approach. Public officials understand that to keep a competitive edge, they need to supply industrial employers with skilled workers. This is all the more crucial as the aerospace workforce is aging — as much as 50% of Boeing’s workforce will be eligible for retirement in five years. In its quest for relevance, Long Beach’s educational partnership addresses the needs of the city’s industrial and trade sectors.

This approach contrasts with the state’s big push to make students take an ethnic studies course designed to promote a progressive and somewhat anti-capitalist, multicultural agenda. They will also be required to embrace the ideology of man-made climate change even if their grasp of basic science is minimal. A “woke” consciousness or deeper ethnic affiliations will not lead to student success later in life. What will count for the students and for California’s economy is gaining the skills that are in demand. You cannot run a high-tech lathe, manage logistics, or design programs for space vehicles with ideology.

More to come

Conventional wisdom on the right considers California to be on the road to inexorable decline. Progressives, not surprisingly, embrace the Golden State as a model while ignoring the regressive, ineffective policies that have driven the state toward a feudal future.

Yet both sides are wrong. California’s current progressive policies have failed, but if the state were governed correctly, it could resurge in ways that would astound the rest of the country and the world. Change is not impossible. As recent elections showed, Californians do not reflexively vote for progressives if they feel their safety or economic interests are on the line.

If change is to come in California, it may not be primarily driven by libertarian or conservative ideologies but by stark realities. Over two-thirds of California cities do not have any funds set aside for retiree health care and other expenses. Twelve of the state’s 15 large cities are in the red, and for many, it is only getting worse. The state overall suffers $1 trillion in pension debt, notes former Democratic state Rep. Joe Nation. U.S. News and World Report places California, despite the tech boom, 42nd in fiscal health among the states. This pension shortfall makes paying for infrastructure, or even teacher salaries, extraordinarily difficult at the state and local levels.

Without change, the state is socially, fiscally, and economically unsustainable, even if a handful of people get very rich and the older homeowners, public employees, and high-end professionals thrive. California needs to return to attracting the young, talented, and ambitious, not just be a magnet for the wealthy or super-educated few.

This can only happen if the state unleashes the animal spirits that long drove its ascendancy. The other alternative may be a more racial, class-based radicalism promoted by the Democratic Socialists of America and their allies. They have their own “cure” for California’s ills. We see this in debates over rebuilding Los Angeles, with progressives pushing for heavily subsidized housing, as with the case of the redevelopment of the Jordan Downs public housing complex, while seeking to densify and expand subsidized housing to once solidly affluent areas like the Palisades.

California has survived past crises — earthquakes and the defense and dot-com busts — and always has managed to reinvent itself. The key elements for success — its astounding physical environment, mild climate, and a tradition for relentless innovation — remain in place, ready to be released once the political constraints are loosened.

Fifty years ago, in her song “California,” Canada-reared Joni Mitchell captured the universal appeal of our remarkable state, not just its sunshine, mountains, and beaches, but also how it gave its residents an unprecedented chance to meet their fondest aspirations. Contrasting her adopted home with the sheer grayness of life elsewhere, she wrote, “My heart cried out for you, California / Oh California, I’m coming home.”

Editor’s note: This article was originally published by RealClearInvestigations and made available via RealClearWire.