Ronald Reagan is not coming back, but California may be avoiding a trip to the insane asylum. Yes, the GOP’s lackluster gubernatorial candidate, John Cox, lost by almost 20 points, and the only issue in the legislature is whether the Democrats regain their supermajority in both houses. But it could have been much worse.

The GOP lost only two or three congressional districts in southern California and appeared to be holding its own in the interior. In my own district, to my surprise, Mimi Walters, who was out-campaigned and outspent, managed to win. Others, like the more contentious Dana Rohrabacher, did not.

Without a change in approach, Republican growth potential is limited by changing demographics and an increasingly bifurcated state economy. At best, the GOP, running on its traditional anti-tax platform, can get up near 45 percent—as shown in the failed repeal of the gas tax, Proposition 6—but no further. This strategy still works marginally in places like Orange County and the interior but fails overall.

In a sense, California elections are now about how far left the state is willing to go. Proposition 10, a measure to expand rent control, was soundly defeated by a massive ad campaign targeting homeowners fearful of seeing curbs on the prices that they could charge to rent their homes. The outcome suggests that if the business community appeals to the middle-class without the Trumpian baggage, voters will support more moderate positions. Perhaps even more important was the victory of Marshall Tuck, a Democrat running with Republican support for Superintendent of Education against the candidate of the teachers’ union. But the limits of moderation are always evident.  Steve Poizner, a registered Republican running for State Insurance Commissioner, appears to be falling behind Ricardo Lara, a far-left Democrat best known for leading the fight for single-payer health care.

Despite improved earnings by lower-wage workers, Republicans remain in serious trouble in Latino and African-American communities. Simply put, a competitive California needs a racial realignment that adds to the shrinking base of white GOP voters. The best target for that goal is the Asian community, the state’s fastest-growing and arguably most successful ethnic group. Asians may be repelled by Trump’s immigration rhetoric, but they tend to be middle-class homeowners who care about schools and safety, and they won’t be happy if the Democrats move further left in terms of seizing zoning policy from communities or feeding the public sector with ever more middle-class taxes.

Southern California Republicans have worked hard to appeal to Asian voters; there are three Asian-American assembly members, two state senators, and three supervisors (out of five total), all Republicans. A highlight yesterday was the election of Young Kim in a northern Orange County congressional district. Asians now make up about 20 percent of Orange County residents, and Asian Republicans are common. They seem to be able to win in districts where Trump is unpopular. It’s hard to run on a racism charge against someone born in Incheon.

The question is where this potential white-Asian alliance is going. Michelle Steele, the politically aggressive supervisor in Orange County, where the board is majority-Asian, is considering a run for statewide office. If Republicans can pull Asians away from the Democrats, at least at the local level, they could restore a semblance of political competition in the state.

In the years ahead, the most important struggle in California will be within the Democratic Party. Two distinct factions increasingly predominate. One, close to the tech community, adopts the gender, environmental, and race agenda of the Left, but rejects income redistribution and is congenitally hostile to unions. Voters in this group tended to back Tuck for education superintendent, and many supported Poizner for insurance commissioner, but they remained cool to Cox’s gubernatorial bid.

The other, now-ascendant faction, comes from the hard Left, and is backed by public-employee unions, nurses, and other service providers. Their constant campaigning—particularly in the face of gross inequality in the Bay Area—has begun to reach the tech hoi polloi. As recent protests at Google suggest, the hard Left may not be ready to embrace the edicts of “the Brahmin Left,” which is fundamentally devoted to looking progressive while preserving, to use the Left’s terminology, their distinct, mostly white and male, privilege. Silicon Valley oligarchs, who have often funded “woke” activists in their native Bay Area, now face being awakened themselves by rising demands for “social justice.”

California’s Left today is not like that of the past. It is not interested in building usable infrastructure, meeting the aspirations of working- or middle-class families, or creating middle-skill jobs. These are exceedingly difficult tasks if you also want to adopt the state’s draconian green agenda. The new Left’s solutions to state problems, like housing, tend toward ideas like turning single-family neighborhoods into “vibrant” (read: crowded) apartment blocks, boosting housing subsidies, and imposing rent control.

Donald Trump’s presence in the White House and the GOP’s control of the Senate creates real problems for California. Under Barack Obama, greens could hope that the rest of the country would follow the California lead. But for the next two years, at least, other states will be busily picking off companies and individual talent eager to escape California’s high prices and regulatory restraints. As a result, the feudalization of the state will proceed, necessitating ever-more expansive subsidies for everything from housing and energy to education. The demographics certainly are in place for a potential lurch leftward. Proposition 10, for example, may have lost the votes of home-owning Democrats, but it was widely backed by their children, who have little choice, if they stay in the state, but to remain renters for life.

Ultimately, California’s battles over rent control — as well as single-payer health care, restrictions on driving, and expanding racial and gender quotas — will only intensify. These policies can be implemented only with huge tax increases, in a state that already imposes one of the highest taxation rates in the country. (Single-payer alone could double the state budget.) Silicon Valley may hold the purse strings and, increasingly, the means of communication, but the California that it has helped shape may soon choose other priorities besides virtue-signaling while the super-rich get still richer.

Joel Kotkin, a City Journal contributing editor, serves as Presidential Fellow in Urban Futures at Chapman University and executive director of the Center for Opportunity Urbanism.

This article was originally published by City Journal Online