Your eyes on California Government

Back in 2004 California voters passed Prop. 71: $3 billion in bonds for research on embryonic stem cells. The full cost, including interest on the bonds, will be $6 billion. Many people opposed it because of the abortion argument.

But another argument in opposition was that this was “industrial policy” — the government picking winners and losers in business. That’s the main reason Japan has been stuck in a “lost decade,” as the Tokyo government, to deal with a recession, started intervening in industry — inevitably picking the wrong businesses to invest in. The Economist called it “picking losers.”

That’s what’s been happening with Prop. 71. The pro-71 Web site said back in 2004:

Proposition 71 supports stem cell research needed to find cures for diseases and injuries like diabetes, cancer, heart disease, Alzheimer’s, cystic fibrosis, multiple sclerosis, sickle cell disease, Parkinson’s, HIV/AIDS, lupus, ALS, and spinal cord injury. Those cures can save millions of lives and help reduce California’s skyrocketing health care costs.

But as Investors Business Daily just reported:

Five years after a budget-busting $3 billion was allocated to embryonic stem cell research, there have been no cures, no therapies and little progress.

The L.A. Times today reported on the financial follies of the stem-cell funding:

There has been no shortage of controversy at the state’s publicly funded stem-cell research institute, created with $3 billion in bonds authorized by voters in 2004.

Disputes with the Legislature, concerns about potential conflicts of interest in the grant application process, and questions about whether taxpayers will ultimately recoup their investments in the program have dominated news coverage of the California Institute for Regenerative Medicine. The institute drew more unwelcome news coverage last month, when it tripled the salary of its executive director, Art Torres, after just nine months on the job. Torres, who formerly headed the state Democratic Party, saw his pay bumped to $225,000 per year.

Torres, of course, is not a scientist. Those familiar with California politics know him as a fierecly partisan Democrat. His best known statement was made in 1994 after voters passed Proposition 187, when he called it “the last gasp of white America in California.” (187 would have restricted some benefits to immigrants while turning teachers and nurses into enforcers of immigration law; it was thrown out in federal court.)

The Times report added:

Now a committee charged with overseeing the institute’s financial practices is calling for more transparency. The Citizens Financial Accountability Oversight Committee, chaired by State Controller John Chiang, passed a resolution encouraging the institute to adopt new rules that would require more openness about its business practices and grant distribution process.

The committee also passed a resolution urging board members and staff to post their statements of economic interest and travel expenses online.

That’s an obvious reform. But why hasn’t it been happening all along? One thing that should be investigated is the profits made by stem-cell venture capitalists who ponied up about 40% of the campaign cash backing Prop. 71, as was reported at the time in the Sacramento Bee. And how many politicians invested in these firms? Basically, Prop. 71 is just a high-tech pork project sold to voters as miracle cures.

It’s also worth remembering that the 6 billion semoleans sure would have been useful during these tough budget times, especially last year when taxes were increased $13 billion by Gov. Arnold Schwarzenegger, who backed Prop. 71. I’ve always called bonds “delayed tax increases.” There you go.

Now California is well into its own “lost decade.”

– John Seiler