California Economy on the Verge of Stagflation -

By Chriss Street, New California State

The non-partisan California Legislative Analyst Office warned that with California facing huge deficits, California Consumer Price Index (CA CPI) that measures the pain from inflation is now 3.49% and expected to trend higher.

“Rumors are beginning to circulate that Governor Newsom is panicking and about to propose a $.50 a gallon tax increase, shutting at least 5 prisons, and slashing funding for law enforcement .”

California inflation for the period between 2013 and 2019 consistently followed the national average to average at about 1.96%. As a result, California enjoyed an economic boom.

SACRAMENTO, CALIFORNIA – FEBRUARY 27: California Gov. Gavin Newsom speaks during a news conference at the California Department of Public Health on February 27, 2020 in Sacramento, California. California Gov. Gavin Newsom joined State health officials to an update to the public about the state’s response to the Coronavirus known as COVID-19 a day after a possible first case of person-to-person transmission was reported in Northern California. (Photo by Justin Sullivan/Getty Images)

But newly elected Governor Gavin Newsom went on a spending spree beginning in 2020 that drove California CPI to a peak of 8.21% by June 2022, about 30% higher than U.S. national average of 5.93%

California CPI rates have come down faster than the national inflation rates, but the average prices paid by California consumers since 2020 are still up substantially including:

Energy prices are up 28%,
Food prices are up 26%,
All items and other services are up 20%, and
All other goods prices are up 15%.

California personal income had been booming until it peaked at about $77,000 in 2021. But with personal income flat for the past two years, California consumers have been getting hit extremely hard by inflation.

Despite the economic stagnation, California Governor Newsom continued to increase spending and has managed to blow through the state’s entire $97.5 billion surplus, and drive consumer price inflation higher.

California now faces a stagflation trap. The combination of an existential -$73 billion deficit for the next fiscal year that begins in July, plus deficits of at least -$30 billion for each of the next four years; coupled with upward inflation is the definition of stagflation.

Rumors are beginning to circulate that Governor Newsom is panicking and about to propose a $.50 a gallon tax increase, shutting at least 5 prisons, and slashing funding for law enforcement.