Payback for Gavin Newsom’s Fiscal Folly

By Will Swaim

Tuesday, June 09, 2026

 

Beset on all sides by regulators, highest-in-the-nation taxes, environmentalists, identitarians, and a political establishment committed to class war, California business owners may want to send thanks and a muffin basket to Representative Vince Fong.

 

Fong, a Bakersfield, Calif., Republican, has introduced HR 8892, the Creating Accountability in Loan Repayment Act. CAL Repayment (you get the acronymic joke) would require states with outstanding federal unemployment-insurance debt to use future flexible federal aid to repay those loans before spending the money elsewhere.

 

At present, California is the only member of that club — which is why some Capitol Hill insiders call Fong’s bill the Gavin Newsom Reform Act.

 

Governor Newsom borrowed $20 billion in May 2020, making him the first governor to tap a Covid-era federal loan program designed to backstop losses on state unemployment insurance funds. By October of that year, 22 other governors also had received loans. But after New York Governor Kathy Hochul crafted a grand bargain to repay her state’s loan last summer, Newsom found himself the program’s only deadbeat.

 

Then came Fong.

 

“What was intended to be a lifeline for unemployed workers during the pandemic has now left California with more than $18 billion in unpaid federal unemployment insurance debt,” Fong said in announcing his bill.

 

What really ticks off Fong is that Newsom’s profligacy — his dishonesty — has injured millions of innocent others. That’s because a federal law requires employers in delinquent states to repay their states’ loans through a surcharge on federal payroll taxes. In 2022, that surcharge on California businesses was $21 per employee. The law automatically raises that surcharge by $21 per year until the debt is repaid. However painful to those businesses, the slow, reptilian squeeze of the federal surcharges doesn’t even keep pace with interest on the principal loan amount. With interest, that original $20 billion federal obligation will grow to about $23 billion by December 31. By then, the surcharge will be $105 per employee.

 

Everyone loses. Billions of dollars that might have gone toward wages, bonuses, capital investments, or the bottom line have flowed instead to the federal government. Fong’s CAL Repayment Act would end the madness.

 

Newsom has studiously avoided the subject. Last month, he declared that he had balanced his final state budget, “proof,” he told the press, “that fiscal discipline and progressive values go hand in hand.”

 

In fact, the “balance” was achieved by record-setting tax revenue from Silicon Valley firms. On the spending side, when it came to repaying the federal loan, Newsom admitted that he had done nothing — but he wants you to know that, man, is he concerned.

 

“It’s gotta be addressed. It’s real,” Newsom said. “It’s incredibly important. I don’t want to leave the next governor without those considerations.”

 

Sure he doesn’t.

 

***

 

Fong’s Newsom Reform Act is only half of the story, of course. Before he defaulted on his federal unemployment insurance loan, Newsom had already presided over the loss of as much as $55 billion to domestic fraudsters and international crime gangs.

 

A bit of background: For years, the state auditor had warned that California’s unemployment system was vulnerable to fraud. But Newsom and his appointed labor secretary, Julie Su, determined that toughening identity-verification processes would (as Su put it) uniquely harm “marginalized communities.” So, when billions of federal dollars hit California’s unemployment insurance fund, the hackers went wild. In the cyber smash-and-grab that followed, they hoovered billions of dollars out of state unemployment offices. Inmates in California prisons each grabbed thousands of dollars from the relative comfort of prison library computers. Government-aligned Russian and Chinese crime gangs did the really heavy lifting, making off with billions more.

 

In 2021, at the height of the scandal, President Joe Biden plucked Su from Sacramento and flew her into the No. 2 spot at the U.S. Department of Labor. In that role, she used her authority in an attempt to forgive California’s federal loan. Like Su, then–California Attorney General Xavier Becerra also ignored the auditor’s warning that Russian and Chinese hackers were probing the unemployment fund.

 

But there’s a literary quality to California politics, an ideological monoculture in which nothing succeeds like failure. Today, Su is deputy mayor in New York City’s Mamdani administration, joyfully pursuing the grim class-war policies she has championed since her days as a nonprofit attorney in Southern California. Becerra has leapt from nowhere to become the Democratic Party’s leading candidate for governor of California. And Newsom, of course, long ago turned his attention to a run for the White House.

 

Newsom, Su, and Becerra leave behind millions of California business owners, workers, and others. Few among those millions will know Vince Fong’s name, much less his bill. He is everything that progressives ought to admire: The son of Chinese immigrants in the state’s conservative Central Valley, he once struggled with a severe stutter. He attended UCLA and Princeton and then launched an improbable political journey that took him from former House Speaker Kevin McCarthy’s district director to state assembly member and ultimately to McCarthy’s own seat in the U.S. House.

 

In truth, Newsom could have repaid the outstanding loan that animated Fong’s legislative efforts at any time.

 

Tax revenue has nearly doubled since he took office in 2019; Newsom has spent much of the increased yield chasing utopian schemes — a high-speed rail system that will likely become a kind of Roman ruin before it’s ever built, the extension of Medicaid coverage to illegal immigrants, billions of untraceable dollars that flowed into nonprofits that were supposed to (but did not) end the shame of homelessness, a massive increase in public employment. His best opportunity to repay the loan came early. In May 2021, confronting a September recall, Newsom somehow found $12 billion for an Oprah-like handout, a “Golden State Stimulus” paid directly to “middle-class” Californians.

 

“Hey, everybody, it’s Governor Gavin Newsom,” he said in a video announcing his plan. “I’m incredibly proud of California’s economic recovery — close to an $80 billion operating surplus that’s afforded us an opportunity to do something no other state in U.S. history has ever done, and that’s provide over $12 billion of tax rebates. . . . Look out for checks either in your mailbox or directly in your account. The Golden State stimulus is on its way!”

 

Leaving the unexploded bomb for the next guy is the Newsom brand.