Liberal commentators are hailing Gavin Newsom and Zohran Mamdani as proof that socialist governance works, that a government can expand free programs, tax the wealthy, and still balance the books.

Mamdani in particular has been celebrated for a sweeping list of achievements: universal childcare, free city buses, and public grocery stores, all while erasing a $12 billion deficit without cutting services or raising property taxes. Newsom, meanwhile, claims California is on firm financial footing after years of deficit spending. Liberal voices have seized on both as a template every state should follow.

The reality is that most of what Mamdani promised has not been delivered. The grocery stores do not exist, the childcare funding is guaranteed for only two years, and the free buses remain a pilot program. Furthermore, neither budget is balanced in any honest accounting sense. Both relied on one-time transfers, reserve drawdowns, deferred pension payments, borrowed funds, and favorable revenue projections to manufacture the appearance of fiscal health. Both also required massive bailouts from higher levels of government to close gaps created by their own spending.

Both men epitomize what Margaret Thatcher was talking about when she observed that “the problem with socialism is that eventually you run out of other people’s money.”

Gavin Newsom’s May 2026 revised budget proposes a $349.9 billion spending plan projecting surpluses of roughly $4.5 billion in 2026-27 and $2.1 billion the following year. Newsom attributed the projected surpluses to higher-than-expected income-tax revenue tied to the AI boom and proposed corporate-tax increases.

Roger Niello, vice chair of the Senate Budget Committee, was unmoved. He said Newsom “isn’t doing anything about the structural debt” and warned that a stock-market correction would immediately return California to serious deficits.

The current 2025-26 budget makes clear why. It projects $208.6 billion in general-fund revenues against $228.4 billion in spending, a gap of nearly $20 billion. Yet the $12 billion figure repeatedly cited by Newsom and state media counts a $7.1 billion diversion from a reserve account as revenue, a move that violates any legitimate accounting standard.

The remaining gap was closed with on- and off-budget loans from special funds, deferred spending, and accounting maneuvers such as shifting the June 2026 state payroll into the next fiscal year. The Legislative Analyst’s Office described the cumulative result as a new “wall of debt,” noting that the June 2025 budget added nearly $10 billion in new borrowing, pushing total outstanding budgetary borrowing from $12 billion to $22 billion.

The structural problem runs deeper than any single budget year. If LAO projections hold, California will have run deficits for four consecutive years under Gavin Newsom despite sustained revenue growth, with the structural deficit projected to reach $35 billion annually by fiscal year 2027-28. The root cause was a $165 billion revenue-projection error in 2022 that fueled Newsom’s claim of a $97.5 billion surplus and triggered a sharp increase in spending. When that surplus proved illusory, the state was left with a chronic income-outgo gap, and most of the rainy-day fund has since been consumed.

Medi-Cal compounded the damage, reporting a more than $6 billion cost overrun in 2025-26. The overrun was driven in part by an expansion covering immigrants without legal status that enrolled far more people than projected, requiring an emergency cash infusion in March 2025. The program now totals $196.7 billion, including $44.9 billion from the General Fund, and covers approximately 14.9 million people, more than one-third of the state’s population.

The accumulated debt load makes the balanced-budget claim even harder to sustain. California’s total long-term debt has reached $1.37 trillion, or 34.1% of the state’s GDP, with unfunded pension liabilities accounting for $664 billion and retiree healthcare obligations for $175 billion.

Combined, those obligations exceed the state’s $513 billion in traditional bonded debt and are driven primarily by government-union contracts. When state and local obligations are combined with unfunded liabilities, the total reaches approximately $1.6 trillion, or roughly $125,000 per California household.

Truth in Accounting, which grades all 50 states, gave California an F, estimating that each taxpayer would need to contribute an additional $21,800 on top of current taxes simply to cover existing obligations. California’s tax base offers no easy remedy because it depends heavily on the income and capital gains of high earners whose fortunes rise and fall with the stock market. The same volatility that produced a nearly $100 billion surplus in 2022 generated a projected $56 billion deficit within two years. AI-boom revenues have temporarily improved the picture, but they provide no structural solution.

The situation in New York City follows the same pattern. Mamdani unveiled a $124.7 billion budget claiming it would close the city’s deficit without drastic cuts, made possible in large part by a cash injection from Gov. Kathy Hochul. Together, they announced $4 billion in new state assistance, bringing total state aid to nearly $8 billion across two fiscal years.

Vital City, a nonpartisan urban policy publication, headlined its analysis “A State Bailout of New York City,” noting that Hochul provided the funds specifically as “gap-closing support” and that very little of the gap was closed by “taxing the rich,” despite that being Mamdani’s central rhetorical claim. NYC Comptroller Mark Levine confirmed the budget relies on $2.8 billion in one-time measures and $2.3 billion in short-term pension savings, “without solving for the fact that City government continues to spend more than we take in, even in a year of record revenues.”

The Citizens Budget Commission called the pension maneuver a “gimmick,” noting that Mamdani extended the repayment schedule by an additional five years, through 2037, effectively billing taxpayers in the mid-2030s for the 2027 budget.

Fiscal experts also noted that Mamdani did not mention future-year deficits during his budget presentation, something they said they could not recall a mayor ever doing.

The out-year numbers confirm the structural deficit remains intact. Budget gaps stand at $7.1 billion in fiscal 2028, $9.1 billion in fiscal 2029, and $9.8 billion in fiscal 2030, while city-funded spending is projected to grow 28 percent between fiscal 2025 and 2030. The NYC Comptroller’s Office documented that the Mamdani administration increased net spending estimates by $4.14 billion in FY2026 and $5.39 billion in FY2027, with average annual increases of $8.46 billion from FY2028 through FY2030, consistently outpacing projected revenue. Analysts expect Mamdani to return to Albany for another bailout within the year.

The signature programs underpinning his celebrated list of achievements are, in most cases, not yet real. The first grocery store will cost more than $30 million in tax dollars and is not scheduled to open until 2029. Mamdani plans only five stores by the end of his term, offering below-market prices on a limited basket of staples. Experts, including supporters of the plan, warn that the city would need about 25 stores to secure meaningful supplier discounts, meaning even full implementation would require ongoing taxpayer subsidies. The childcare expansion is funded for only two years, with no committed funding for future years, as enrollment is expected to grow rapidly.

Newsom and Mamdani both submitted documents that satisfy the legal definition of a balanced budget for a single fiscal year. Both relied on reserve drawdowns, borrowed funds, deferred payments, and one-time transfers instead of structural reform. Both face multi-year deficits, their current budgets do nothing to resolve. Both are claiming credit for programs either unfunded beyond the near term or not yet operational. The pattern is not a new model of governance.

It is the oldest fiscal illusion in politics, and it has the same conclusion every time. In the end, taxes will go up, and capitalists will be blamed for the problems created by the socialists. Meanwhile, supporters will ignore the obvious fact that giving things away for free, while huge swaths of the population do not work and many pay negative taxes, cannot work mathematically.

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