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What Newsom’s recall victory means for businesses

September 15, 2021, 4:45 PM UTC

California Gov. Gavin Newsom prevailed in the state’s recall election on Tuesday, presenting a major blow to the millions of small-business owners in California who took issue with Newsom’s restrictive policies.

During the latest recall cycle, many small-business owners came out against Newsom, saying his strict stay-at-home policies issued early in the pandemic hurt their operations. Additionally, the governor’s visit to the French Laundry restaurant in the middle of these orders last November caused many to cry foul. Six months into the pandemic, almost 40,000 California small businesses closed, the highest level in any state, according to data released from Yelp last year. Tesla CEO Elon Musk famously moved to Texas in 2020 after fighting with the state over lockdown measures.

On the whole, Newsom took his victory at the polls as a mandate on his pandemic policies, noting in a statement on Tuesday that while people voted no on the recall, it was a yes vote, too: “We said yes to science. We said yes to vaccines. We said yes to ending this pandemic,” Newsom said. 

Exit polls conducted by NBC on Tuesday found that 45% said Newsom’s public health measures were right, while 32% found the policies too strict. Those who voted to oust Newsom were split on the most important reasons to do so, with about 27% reporting the economy was the top issue; 23% saying homelessness was a top priority; and 17% pointing to crime as the reason for their vote against the governor.

Many of those in Silicon Valley and Hollywood, as well as Democratic leaders, threw their support behind Newsom. For instance, Netflix CEO Reed Hastings, philanthropist George Soros, and Dr. Priscilla Chan, wife of Facebook’s Mark Zuckerberg, all donated to help Newsom beat back the recall. Meanwhile, both President Joe Biden and Vice President Kamala Harris stumped for the California governor. 

Yet many still see issues with Newsom’s policies. “What’s ahead for small business? Higher taxes, more crime in the streets, more homelessness—and all of that remains despite Gavin Newsom’s victory,” Tom Del Beccaro, chairman of Rescue California, a PAC in support of the recall, told Fox News on Wednesday. Small businesses are left with the brunt of the problems facing California, Del Beccaro said.

Currently, there are no statewide social distancing restrictions in California, but the state has implemented vaccine requirements for state employees, health care workers, teachers, and school employees in recent months. Some speculated that like San Francisco and some Los Angeles municipalities, California will move to require restaurants, bars, and other businesses statewide to require proof of vaccination in the wake of the recall vote.

Del Beccaro and others have criticized Newsom regarding the level of business formation in the state, which has been relatively low prior to the pandemic. For example, in July 2019—six months into Newsom’s term as governor, the number of new business applications declined by 3.3%, according to the U.S. Census Bureau. However, by the end of the year, applications were trending up, and throughout the pandemic, new business creation has been volatile month to month, but the overall trend is on the rise. 

Throughout the pandemic, Newsom has made some moves to help small-business owners, including extending tax breaks to those who received federal loans and issuing billions in grants to small businesses and nonprofits.

And while Tuesday’s results mean that Newsom will get to keep his position, the governor is up for reelection next year. Already, some of his opponents during this recall race, including leading Republican candidate Larry Elder, are gearing up. “Let’s be gracious in defeat,” he said Tuesday during his concession remarks. “We may have lost the battle, but we are going to win the war.”

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