I have my eyes on the campaign to remove Governor Gavin Newsom from office for 2 reasons. The first one is that he is the absolute bonehead who made the government take down the beach volleyball nets for the past year, and he is obviously trying to ruin my summer tan. The second one is that betting markets around Newsom’s potential recall are really heating up.
Pretty much everyone in my bubble despises Gavin Newsom, but I also tend to hang out with people who pay taxes and who are not nearly as physically attractive as him, so I am not sure whether or not that means anything. To find out, I am going to go absolutely ape looking for money in this bet on PredictIt:
First, a word about how a Recall election works in California. It’s a 3-step dance.
Step 1: A petition has to get enough signatures to trigger the Recall. That is all-but-guaranteed to happen at this point.
Step 2: On the day of the election, voters first have to answer the question, “Should Governor Newsom be Recalled”. This is basically the same as asking, “Should he be removed from office?” If more than half of the voters say YES, then we advance to the money round
Step 3: Voters pick who they want to replace Newsom with.
For PredictIt’s bet to payout, we only need to get to Step 3. Who his successor is won’t matter to the bet’s settlement.
HISTORY OF RECALLS IN CALIFORNIA
As most walking vertebrates know, Republican Arnold Schwarzenegger successfully defeated Democrat Gray Davis in a 2003 re-call election.
Ironically, the instigating factors for this election are all things that Californians have surrendered to since then: ridiculously high energy bills, unreliable electricity, bloated finances, and high taxes.
And this is an important point. In 2003, California was considerably more conservative than it is now.
In pop-culture, the Schwarzenegger’s California was basically synonymous with the ’80s and ’90s action hero world he built. White Boy punk and reggae acts like Sublime, Blink-182, and No Doubt led on the music side, and Ryan & Marissa from The OC were basically the face of the Golden State.
Get this: when Gray Davis took office in 1999, Republicans had held the Governor’s office for 45 of of the last 65 years; and 6 of the last 8 cycles. The following year George W. Bush won 44% of the statewide vote to John Kerry’s 54%. Things were starting to flip from the ’70s and ’80s, when California sent 2 Republican presidents to Washington, but we were still a long way from where things stand currently.
Lastly, in 2003, Democrats flinched. The unique dynamics of a Recall Election created a savage Catch-22 and Democrats got absolutely piped by it.
Remember how I said it’s a 2-part question? Do you want to recall the Gov, and if so, who do you want to replace him with?
Well, if there is no serious Democrat listed as a replacement, then the Dems would effectively leave their goal undefended from marauding Republicans.
But on the other hand, if Dems defend their goal and list a backup option, then there is a risk they’ll split their own votes and let the Republicans put the ball on goal anyway. And this is exactly what happened in 2003, when Lt. Governor Cruz Bustamante entered the race late as the alternative to Gray Davis.
Dems split their votes, and Schwarzenegger won a narrow victory.
So really, Schwarzenegger pulled off the win for a few reasons:
- Huge name ID
- Huge financial resources
- Strong state party
- Divided Democratic Party
And yet the 2003 recall petition still only one by a measly 54%. Let’s compare that to…
California has changed a lot since 2003. Look at Arnold and you’ll see why. First of all, there is no way that anyone in Washington would count him as a Republican now. His favorite subjects for discussion are climate change (real), gerrymandering (bad), and trusting science (good), all of which land him in hot water with the GOP rank-and-file.
And his old haunt in Hollywood is pretty different too. Let me put it this way: any movie about a muscular germanic cyborg being sent back in time to find the white male savior of all mankind (Terminator 2) would get absolutely canned on studio lots today.
These days in Hollywood, you either write stories about racially diverse people overcoming discrimination or you get coffee for the people who do.
And as action heroes have aged, so too has the California Republican Party. The GOP there has pretty much been Rock Bottomed in every meaningful statewide election since Barack Obama came around, and actually got blanked in Orange County in the 2018 cycle. This was a stunner on-par with Democrats taking 3 fat Ls in WI, MI, and PA on election night 2016.
Here are some numbers:
- A year after Arnold won the Governor’s mansion, John Kerry carried the state by a 10 point margin over George W. Bush; but…
- A year before Gavin Newsom’s 2021 recall, Joe Biden carried the Golden State by a whopping 30 percentage points over Trump.
This is not a good sign when — once again — the deciding margin in the 2003 recall was 4% of the vote, and one of the most recognizable faces in the world was on the Republican ticket.
THE 1 WAY NEWSOM GETS RE-CALLED
It could happen. But probably only if the Democratic Party turns on itself. California Republicans going toe-to-toe with Democrats is not a winning strategy in 2021. I personally feel like that kind of matchup would be more one-sided than France vs. Germany in 1940. The only way the GOP can win this one is to make the Dems fight on two-fronts.
So if Newsom faces a serious challenger on his side, things might be different. So far the big names are holding the line for him though. Progressives like Kevin de Leon and Ro Khanna are backing Newsom, as is respected company man Antonio Villaraigosa. And other potential rivals like Xavier Becerra and Alex Padilla are now serving terms in DC.
So the question is whether or not a high-profile and well-financed outsider jumps in.
Tom Steyer, the failed presidential candidate and Democratic version of the Koch Brothers, is rumored to be interested. So too is Chamath Palihapitiya, a Bay Area billionaire, whose money could make any pol’s re-election more complicated.
The Republicans also have some moneymen who could get in. Gavin Newsom absolutely smoked money bags businessman John Cox in 2018, but the guy has a lot of name ID now because of it and wouldn’t be a bad option. Kevin Faulconer, former Mayor of San Diego is in the mix, but doesn’t really have a following outside of his hometown.
Rick Caruso, a mega developer in SoCal has long been rumored to have political aspirations, but is no longer a registered Republican. There are any number of wealthy silver foxes from Seth & Ryan’s OC days who could get in, but it’s hard to see a path for any of them to win unless they’re a serious global brand like Schwarzenegger was.
HOWEVER, THERE ARE OPPORTUNITIES TO PROFIT FROM THIS MARKET, BECAUSE IT IS HIGHLY SPOOKABLE
Gavin Newsom has a bullseye painted on his back because of his position as an extremely good looking, highly-elite establishment liberal. There are many people on the Right and Left who would love to see him fall.
Here’s how rumors and half-baked news stories could encourage a competitor, or goose the PredictIt market into thinking he’s doomed:
- A recent poll showed that recalling Newsom is a jump ball for Latinos. About as many favor it as oppose. We’re going to see more bad polls like this and they will influence price & other high-profile Democrats’ choice to get into this race or stay out.
- All politicians want more power, even those who say they’re staying out right now.
- There are too many wealthy, high-profile people in California who might get in on either side, or at least be rumored to — which would stir the market.
- Newsom is constantly rumored to be having affairs. I mean, the guy used to be married to Kim Guilfoyle. But he’s extremely rich and good looking, so I’d probably bang him too.
- Newsom is hated by Republicans, so Righty bettors will probably prop this market up so that YES never drops below 9c.
For these reasons, I’ve bought a YES position on at 17c on Newsom being recalled. I don’t plan to hold it all the way, but it feels like a low-risk way to buy a bet with upside potential that could be as high as 2X.
My hope is that one one of the situations above will occur, I can sell, and then let the Boys fight it out.