Greenberg: California is Not the Global Powerhouse Newsom Claims

California Governor Gavin Newsom never misses the chance to boast that California is the “4th largest economy in the world,” a claim that has become a staple of his administration’s narrative. In 2024, with California’s nominal Gross State Product (GSP), the state equivalent of a nation’s Gross Domestic Product, reaching $4.103 trillion, it surpassed Japan’s GDP, trailing only the United States as a whole, China, and Germany. This an impressive statistic, one Newsom proudly leverages as to project California as an unstoppable global economic force. But this claim obscures a more nuanced reality where we should measure economic size using Purchasing Power Parity (PPP) rather than GDP.

A PPP-based analysis, which accounts for (and balances) cost-of-living differences internationally, reveals California’s economy isn’t the giant Newsom portrays—and his refusal to acknowledge this distorts the state’s status.

Nominal GDP, which Newsom’s claim relies on, measures raw economic output using market exchange rates. It’s a straightforward metric but flawed for international comparisons because it ignores how far money goes in different economies around the globe.

PPP, by contrast, adjusts for price level differences and inflation, showing what goods and services a dollar (and local currency) can actually buy. For example, a Big Mac costs more in California than in Mexico or India, so PPP adjusts GDP to reflect real purchasing power. This is critical for a state like California, where sky-high costs for housing, energy, and services erode the value of its output. A high GDP does not equal a high standard of living nor superior quality of life.

Using PPP, California’s economic ranking slips significantly. In 2021, when adjusted by the Regional Price Parity (RPP) index from the U.S. Bureau of Economic Analysis, California ranked as the 11th largest economy globally, and by 2022, it fell to 12th. And the 2024 California’s PPP-adjusted GDP is around $2.7–$3.0 trillion, placing it behind countries like China ($33.01 trillion), the U.S. as a whole ($25.46 trillion), India ($13.03 trillion), Japan ($6.49 trillion), Germany ($5.69 trillion), Russia ($5.33 trillion), Indonesia ($4.72 trillion), Brazil ($4.02 trillion), the UK ($3.81 trillion), France ($3.77 trillion), Mexico ($3.28 trillion), and Italy ($3.19 trillion). This isn’t the “4th largest” economy Newsom touts, it’s the 12th—certainly respectable but far less lofty a position.

Why does this matter? Newsom’s fixation on this narrative masks California’s economic vulnerabilities. The state’s high cost of living, reflected in its more realistic RPP, means residents and businesses get less bang for their buck, making California’s wealth less impactful than raw GDP figures suggest. Countries like India and Indonesia, with lower costs, leapfrog California in PPP terms because their dollars stretch further.

Newsom’s cherry-picking of nominal GDP also obfuscates and sidelines California’s policy failures. His administration has presided over skyrocketing housing costs, burdensome regulations, and energy policies that drove up prices—factors that hurt affordability. The PPP adjustment exposes this: California’s economic output, while massive, doesn’t translate to prosperity for our residents. By purposefully ignoring PPP, Newsom avoids confronting how his policies contribute to a cost-of-living crisis that pushes middle-class families to flee the state. Businesses continue leaving as well, with many public outcries on the way out.

Worse, Newsom’s rhetoric misleads policymakers and voters. Claiming “4th largest” status fosters complacency, suggesting California’s economy is untouchable while it faces stiff competition. States like Texas, with a lower cost of living and a nominal GDP of $2.7 trillion in 2024, are closing the gap. Globally, economies like India and China, with huge populations and lower costs, outpace California in PPP terms, highlighting their ability to produce more real value locally.

While Newsom emphasizes innovation and environmental activism, California’s unemployment, poverty, drug addiction, homelessness, High Speed Rail fiasco, Antisemitism in schools, crumbling roadways, wildfires, DEI ideology and budget deficits are evidence of a mess of governance. It paints a different picture entirely. Newsom should be confronted, taken to task, to explain such an obvious, palpable discrepancy.

We do know why: He’s probably running for President.

Let’s be real. Newsom’s refusal to address and adopt PPP as an economic measure isn’t an oversight—it’s a deliberate choice—of optics over honesty. By nonstop hyping nominal GDP, he can claim credit for California’s economic size while dodging accountability for its affordability crisis and increasingly ingrained social challenges. A responsible leader would use PPP as a realistic and honest base for comparison. Instead, Newsom’s incessant boasting inflates the state’s image while ignoring the struggles of Californians who feel the pinch of every dollar.