Gov Gavin Newsom discusses reopening California : Planet Money California Governor Gavin Newsom talks with Stacey Vanek Smith about his plans to reopen the fifth largest economy in the world.
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Gov. Newsom On Reopening California

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Gov. Newsom On Reopening California

Gov. Newsom On Reopening California

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UNIDENTIFIED PERSON: NPR.

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STACEY VANEK SMITH, HOST:

Today, California Governor Gavin Newsom announced plans to begin to reopen parts of California's economy. Bookstores, flower shops and sporting goods stores can open for business on Friday as long as they comply with social distancing guidelines. California's economy is a global force. If California were a country, it would have the fifth-largest economy in the world. California also has the largest population of any state in the U.S. But in the last couple of months, California's economy and population have been hammered by coronavirus. So unless California can get billions of dollars in federal aid, it will be looking at massive budget cuts.

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SMITH: This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith. Today on the show, a conversation with California Governor Gavin Newsom. We talk about the state's huge budget deficit, the reopening plan and the future of one of the biggest economies in the world.

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GREG ROSALSKY, BYLINE: Hi. I'm Greg Rosalsky, and I write the Planet Money newsletter. In recent weeks, we've talked with a Nobel laureate about the best way to fight COVID-19, and we've got the story of the economists behind the idea of sending checks to everyone. Check it out and subscribe at npr.org/planetmoneynewsletter.

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SMITH: Just to kind of get a sense of what we're looking at here, would you mind describing - what was California's economy like before the coronavirus pandemic? I guess, eight weeks ago.

GAVIN NEWSOM: Yeah. I mean, just 90 days ago, I was reflecting on the fact that we were projecting a $6 billion budget surplus. We had paid off all of the wall of debt we inherited from the prior downturn. We had 120 consecutive months of net job growth, lowest unemployment, highest reserves in our state's history. Fast-forward today, we're dealing with unprecedented, almost Depression-era unemployment numbers and deficit that's one of the highest in our state's history.

SMITH: Yeah. What was the unemployment rate before coronavirus 90 days ago, as you said, and what is it now?

NEWSOM: It's 3.9%. We anticipate being north of 18%. We conceivably could get as high as 24%, 24.5% in the next few months based upon the current trend lines.

SMITH: Twenty-four-and-a-half percent unemployment, that's a lot.

NEWSOM: Yeah. I mean, these are - the numbers are so staggering when you just consider 4.3 million people have filed for unemployment insurance just since March 12. And since the 15, we've distributed just shy of $12 billion of unemployment support. We're dealing with numbers we have never dealt with.

SMITH: Yeah. I mean, $12 billion is just a staggering amount of money to have processed in unemployment claims. I mean, even with the strong budget position California was in, I mean, from what I understand, California does not have the money to cover all of this going forward. What are you going to do? I mean, obviously, millions of Californians are counting on unemployment, will be counting on unemployment. Where is the money going to come from?

NEWSOM: It has to come from the federal government. And I don't say that as a handout-first frame, meaning I really believe in personal responsibility. I believe the state has a responsibility to get its fiscal house in order. And that's exactly what we've been doing the last decade. That said, we're not immune. And the fact that California is now facing tens and tens of billions of dollars of deficits is the direct result of COVID-19. And that means the federal government has to be a partner in helping us out of this.

SMITH: What happens if you don't get federal support?

NEWSOM: And the reality is we statutorily have to balance our budgets. I have to work with the legislature in the next few weeks. We have five weeks. By June 15, we have to work out a compromise that none of us want to make on our own. Look. We're talking about our police officers, talking about our firefighters. We have fire season coming up. We talk about our teachers. We talk about those we call heroes. And we have to look them in the eyes - our nurses and our skilled nursing LVNs and RNs and folks that are really quite literally saving people's lives and say, well, you know what? We value you rhetorically, but we have to let you go.

SMITH: So in a way, there's like - there's not a plan B right now. It's just the federal government has to come through.

NEWSOM: Yeah. Look. I'll submit a balanced budget. But if you can help me erase my name from any association with it, I'd love to see that happen. Look. I'm required to do that. But there's nothing in there that makes me proud. It doesn't represent my values, doesn't represent the legislature's values. And unlike the federal government, we don't have a printing press. And there is the capacity for the federal government to borrow to help states, so that we can get back on our economic footing sooner and get the economy humming again to pay down those deficits into the future.

SMITH: I mean, speaking of getting the economy humming again, I mean, you are at the head of the fifth-largest economy in the world. And so, of course, the decisions that you make have a global economic impact. You also - there are a bunch of lives at stake. So as you're kind of reopening the economy, starting to think about reopening things, I'm wondering, like, how do you balance the economic costs that you're seeing that come with a shutdown versus the cost of potentially opening things back up too soon? Like, just kind of - I mean, it seems like a very impossible decision in certain ways.

NEWSOM: It is. It's imprecise. And one has to be humble in this. And you have - you can't be ideological about it. You know, we believe in ready, aim, fire, not ready, fire, aim. So you want to be guided first by indicators. And we are guided by indicators, by data. And those data points are primarily health broadly defined, but also those data points include variations for economic activity. And we also recognize this - California is a state whose population's larger than 21 states combined. It really is a nation state, but it's many parts, one body. And what I mean by that is there are variations within this state that we should also accommodate for. There are parts of the state that haven't been impacted directly or even modestly indirectly by the spread of the virus. And those from an economic recovery perspective, we'll look at for variations on our statewide orders as an example of how we begin to process.

SMITH: Yeah. I mean, as we're talking, it just keeps going through my head how suddenly this came on, just like 90 days ago, everything was so different. I'm wondering if there was a moment when you - if there was a moment, either at work or at home when you realized how serious this was going to get.

NEWSOM: When we started seeing unemployment insurance claims come in, averaging 115,000 every day, when prior, we were averaging 2,500 a day - 2,500 to 115,000 in a week we started to see an average number. That's when the red flag came up. And it was obvious to me we were entering that trajectory, Great Depression unemployment numbers.

SMITH: Yeah. What went through your head when you saw those numbers, like, a hundred thousand?

NEWSOM: I just - the enormity of this. And one of the reasons I wanted to be governor was to address our homeless issue and our poverty issues. And so the issue for us was looking at those unemployment numbers through this lens. These are the same folks that were ravaged by the Great Recession. These are the same folks that never fully recovered from '09 and 2010. And they're the same ones now back on the unemployment line, black and brown communities disproportionately impacted. And it just breaks your heart. All this hard work and then, boom, we hit this wall, this cliff, this chasm, this canyon that we're in. And now we have to look those same people in the eye and say, right when you were just getting back on your feet, now you're potentially going to be the source of most of the stress moving into these cuts in this recovery.

SMITH: Yeah. What is it like to be at the helm of such a giant economy, so many people? What is that like?

NEWSOM: You know, it's interesting because you're right. Look. As California goes, so goes the nation. It's not a gross exaggeration. It's really not one at all. We punch above our weight in terms of, you know, number of patents, researchers, scientists, Nobel laureates, in terms of innovation, the entrepreneurial spirit, so many of these sectors of our economy that have really grown in the last decade. So you're right. This weighs heavily because the consequences, if they're not felt immediately, will be felt all across this country. And to an extent, the - America is a tentpole of the world's economy across the rest of the world.

SMITH: Well, Governor, I can't thank you enough for speaking with us today. Thank you.

NEWSOM: Honored to be with you. Thanks for having me.

SMITH: This episode of THE INDICATOR was produced by Darius Rafieyan. THE INDICATOR is edited by Paddy Hirsch and is a production of NPR.

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