One such partnership he backed was Proposition 71 back in 2004, which allocated $3 billion to fund stem-cell research. Except that, with interest, the payback amount to taxpayers is $6 billion. Those were the years when Arnold, who was elected to get control of the “crazy deficit spending,” as he called it, instead went on a wild spending binge, for which we’re still paying through tax increases.

In 2013, the Los Angeles Times reported on a study of the Prop. 71 spending by the Institute of Medicine, part of the National Academy of Sciences:

After 17 months of deliberation, the panel, which was chaired by Harold Shapiro, a former president of Princeton University, concluded that the CIRM board members were saddled with ‘almost unavoidable conflicts of interest, whether actual or perceived.’ That’s because by law, 23 of the 29 members must be representatives of California institutions eligible for CIRM grants or of disease advocacy groups with their own interest in steering money toward their particular concerns.

Now this, which the U-T reported on July 9:

The former head of California’s stem cell agency, which is handing out $3 billion of voter-approved funds for research, has joined the board of a major grant recipient one week after leaving his post.

Alan Trounson, the former president of the California Institute for Regenerative Medicine, has joined the board of StemCells Inc., the recipient of $19.4 million from the agency.

The agency has been grappling with potential conflicts of interest, some of which are built into its governance under Proposition 71, approved by voters in 2004. CIRM paid $700,000 for a report last year making recommendations on how to mitigate conflicts.

Trounson’s move has reignited debate over the issue.

“The announcement raises serious and obvious concerns on a number of fronts,” Chairman Jonathan Thomas wrote to his colleagues on the CIRM board. “Under state law, however, it is permissible for Dr. Trounson to accept employment with a CIRM-funded company. Nonetheless, state law does impose some restrictions on Dr. Trounson’s post-CIRM employment activities.

Actually, this is just the typical government-crony capitalist “revolving door.”

Back in 2004, I wrote several editorials for the Orange County Register against Prop. 71, warning that this would happen. The voters instead decided, as his slogan put it, to “Join Arnold.”

Too bad we can’t just repeal everything he did in his seven years as governor.

In Sacramento, Gov. Jerry Brown won passage of a pension reform measure in September 2012. While many thought it didn’t go nearly far enough, its approval showed an acceptance of a new conventional wisdom: that benefits were unnecessarily generous. In San Diego and San Jose, city voters overwhelmingly approved much more sweeping reforms.

But there is a hugely disruptive wild card in the pension debate that is rarely recognized. It is the growing consensus among longevity experts — a large number of whom are based in California — that they are nearing breakthroughs on several fronts that promise to dramatically expand how long humans live.

According to data released in 2009, the California Public Employees’ Retirement System expects public employees with a current age of 55 to live to be 81.4 if male and 85 if female. These actuarial assumptions are built into how much public agencies are expected to set aside for all employees, including new hires in their 20s.

Experts’ life-expectancy predictions far higher than CalPERS

The Golden State’s best-known anti-aging experts — Dr. Aubrey de Grey and Dr. Walter M. Bortz II  — are on the short list of the world’s leading authorities on the topic. Their analyses of anti-aging efforts build off sharply different approaches; de Grey is controversial and Bortz conventional. But both their assumptions suggest CalPERS’ actuarial assessment of its long-term funding needs is comically optimistic.

De Grey, a native of England, oversees the SENS Research Foundation, a nonprofit organization based in Mountain View. SENS stands for Strategies for Engineered Negligible Senescence. His focus has been on the idea that the aging process can be “cured,” allowing humans to live far longer thanks to “regenerative medicine” that stops the deterioration of the body. Initially scorned by many gerontologists, de Grey’s views are taken more seriously with each passing year. He believes that the average life expectancy of Americans who are now alive is likely to be the early 90s, and that in 25 years time, it could be far longer as “regenerative medicine” becomes practical.

Bortz, a native of Philadelphia, is a professor at Stanford University School of Medicine. His research has demonstrated the importance of physical exercise to “robust aging” — living long with full mental and physical faculties. Bortz sees vast progress ahead in gaining an understanding of human metabolism and its relation to longevity. He believes average life expectancy of Americans could reach 100 in coming decades.

California a world leader on longevity research

But de Grey and Bortz are only part of a wide array of longevity researchers in California, supported by a variety of public, nonprofit and private institutions.

The California Institute for Regenerative Medicine — the state stem-cell agency financed by a 2004 bond — has backed dozens of ambitious age-related research projects, and agency officials are particularly excited about prospects for delaying the onset of Alzheimer’s disease, which often reduces life expectancy by six years or more.

Stanford and UCLA each have a Center on Longevity. UC San Francisco is home to some of the most promising longevity research in the world.

The J. Craig Venter Institute in San Diego — founded and run by the scientist who in 2001 became the first to complete sequencing and analysis of the human genome — by itself could change the world. Venter is pioneering the development of synthetic genes, which have stunning potential to remake life as we know it.

There’s also Google’s new “moon shot” — a project called Calico that has as its goal nothing less than “solving death.” It’s expected to be based in Silicon Valley.

A list of California-based longevity research with transformational possibilities could go on at some length. But the point of providing this background isn’t to offer testament to the Golden State’s enduring strengths in the sciences. It’s to lay the groundwork for thinking about what life in our state might be like in a quarter-century if life expectancy does balloon to 100.

The Golden State version of ‘Elysium’

Having a defined-benefit government pension when you live on average until you are 81 or 85 is already an immensely lucrative and reassuring fact of life for public employees. But having such a pension when you live until 100 is a gilded gift, one that makes past complaints about government employees being a special protected class seem simply inadequate.

Barring a change in benefits or a dramatic increase in the minimum retirement age, public employees would enjoy an advantage so pronounced that it would be somewhat akin to that owned by the privileged elite who live in a satellite colony rotating around a decaying Earth in the science-fiction film “Elysium.”

Of course, a huge gain in life expectancy would affect public policy in many other ways as well. Funding for Social Security and Medicare already looks imperiled because of the retirements of millions of baby boomers and the declining birth rate. If life expectancy increased to 100, it is impossible to conceive of a federal budget in anything even vaguely resembling its present form.

The main hope of averting fiscal disaster then might be what economics writer Matt Yglesias and some futurists call the emergence of a “post-scarcity” world — one in which combinations of technology have sharply reduced the cost of material goods.

But if praying for a “post-scarcity” world is the best that most private-sector workers can do in contemplating how they’ll fare in a California with life expectancy of 100, that’s a striking contrast to the outlook of government workers. They can look forward to three or four decades of retired life at 75 percent to 90 percent of their final pay. The rest of us? We can pray our reverse mortgages prop up our lifestyles for a while before we’re forced to mooch off our children or to move into a new urban phenomenon: slums for the elderly.

“Elysium” writer-director Neill Blomkamp has said that income disparities he witnessed in California and Mexico helped inspire him in coming up with the story for his dystopia, a heavy-handed homage to the Occupy movement.

The version of “Elysium” we could be headed for may have California roots of a different sort. The haves vs. have-nots scenario of our future may not be the 1 percent vs. the 99 percent.

It will be the 10 percent or so of public employees who have defined-benefit pensions that last longer than their entire careers vs. the rest of us.

By Wayne Lusvardi 

Now that stem cells have become obsolete, can California’s entrenched stem-cell research bureaucracy be phased out?  Or will it continue as a white elephant as the state’s budget deficit problems worsen? 

Last week it was announced that, for the first time, heart scar tissue resulting from a stroke had been changed back to normal muscle without using stem cells. This new method is called RNA reprogramming.  

Dr. Victor Dzau, a Duke University professor of medicine and chancellor of health affairs, said it this way: “Right now, there’s no good evidence stem cells can do the job” (of regenerating damaged cells).   And RNA reprogramming apparently regenerates tissues without the dangerous side effect of creating tumors as stem cells do. 

The new method developed at Duke uses a simpler way of regenerating cells than using stem cells.  It simply reprograms the RNA in the damaged cells of tissues back into normal cells.   This new method could potentially treat a variety of diseases, injuries and chronic conditions.  

RNA is an abbreviation for ribonucleic acid.  RNA acts as a messenger from the genes (DNA) in the nucleus of the cell to the ribosome, where proteins are refashioned for specific uses in the body.   Using RNA as a messenger to reprogram proteins is like updating the software in your computer.  

Stem cells are master cells that produce all the different cells in the human body.  It is harder to find out what a stem cell is and does or control it than it is for RNA.  

This newer RNA method of tissue regeneration has made stem cell research obsolete. 

Back in November 2011, the Geron Corporation announced it was pulling out of conducting any more stem cell research.  Geron had spent $150 million over 10 years with nothing to show for all its stem cell research.  Geron was the California-based company that the state’s Proposition 71 was especially designed to fund.   

Prop 71 as ‘Irrational Exuberance’  

In 2004 California voters approved Prop. 71 for $3 billion in stem cell research funding over 10 years.  Prop 71 was designed as an amendment to the state constitution to make it difficult to dismantle it.  The father of Prop. 71, Robert Klein, renamed it the California Institute for Regenerative Medicine to give it a private sounding name.  Prop 71 was sold to the public during the “go-go” Real Estate Bubble, promising cures for cancer, heart disease, and paralysis.  

Shirley Tilghman, the president of Princeton University, warned back in November 2004 that stem cell research was a version of “irrational exuberance,” just as the subprime loan mania was. 

The start up of stem cell research was delayed due to lawsuits over the use of human embryos to harvest stem cells.  Soon after the stem cell institute was funded, it erected a large new stem-cell research facility at the University of California-San Francisco campus costing $123 million.  This signaled that the California stem-cell institute had become a permanent part of the state’s bureaucracy.  And with its new building came all the incurable bureaucratic pathologies of self-perpetuation. The California stem-cell institute has become like a stem cell with cancerous bureaucratic growth. 

State-Funded Stem Cell Research Is a Jobs Program 

The $300 million per year in public-funded stem cell research is a mere drop in the ocean of $78.9 billion in bio-med research funding in California in 2008.  State-funded stem-cell research reflects merely 0.4 percent of all bio-medical research in California.  State-funded stem cell research was not only minuscule, but also redundant — and thus unnecessary.  

California Gov. Jerry Brown has cut use of cell phones out for many state employees, saving about $41 million per year.  Why does he not call for voters to rescind Prop, 71 for $300 million of obsolete stem cell research a year?  Instead, Brown has called for cuts in welfare rather than in the provision of luxury public goods and programs such as stem cell research.  

The November 2012 election has a ballot initiative, Proposition 29, that proposes to add an extra $1 tax on each pack of cigarettes purportedly for medical research.  If passed, look for those funds to be diverted to perpetuate California’s stem-cell research bureaucracy funding.  

Science has made stem cell research mostly obsolete.  Will California keep up with science, or perpetuate a jobs program while health and welfare programs are cut?

By WAYNE LUSVARDI

People are upset.

The Los Angeles Times reported that the new chairman California stem cell research center, Jonathan Thomas — an investment banker — will draw a salary of more than $400,000 per year.  Current Chairman Alan Trounson also makes a salary of $490,000.

About 98 percent of more than 150 online comments to the story were outraged at the news.

The stem cell research center — euphemistically called the California Institute for Regenerative Medicine (CIRM) to give it a private-sounding name — was originally authorized under Proposition 71 in 2004 with $6 billion in bonds, including interest. The California stem cell institute has already requested another $6 billion in voter-approved bonds when its funds run out in 2014.

Many of the online newspaper commentators who stated they originally voted for public funding of stem cell research in 2004 vowed that they would not be burned twice and would not vote for it again.

Apparently the commentators did not realize that the father of Prop. 71 and its outgoing chairman of the board — Robert Klein II — already has created two arguably unnecessary and gratuitous state bureaucracies: the California Housing Finance Agency (CHFA) and the California Institute for Regenerative Medicine (CIRM), both of which depend on bond proceeds.  Those who oppose any more government bonds for state-sponsored stem cell research have already been taken to the cleaners twice.  They just don’t realize it.

Klein has been a master of influencing California’s voter initiative system, public opinion, and backstage political wheeling and dealing to create public agencies ex nihilo — Latin for “out of nothing.” California is a state where whole bureaucracies can be created without the approval of the Legislature or governor. Once created, like all bureaucracies, they have a life of their own and are almost impossible to phase out even if their organizational mission no longer exists.

As economist Milton Friedman once quipped, “Nothing is so permanent as a temporary government agency.”

Klein has not only fathered two state bureaucracies in California, he has served since 2004 as the chairman of the board of the stem cell research financing agency with a $150,000 a year salary for half-time work.  He learned how to game the political system to launch the stem-cell agency from his experience in founding the Housing Finance Agency, whose function is for the public sector to capture low-income housing finance away from the private sector.

CHFA Origins and History

The California Housing Finance Agency (CHFA) came into being in 1973 after the Nixon administration ended public housing subsidies and replaced them with block grants. Klein and associate Michael J. BeVier influenced the state Legislature to create the California Housing Finance Agency to subsidize low-income housing developments with tax-exempt bonds. In 1979, BeVier wrote about their exploits in a book titled, “Politics Backstage: Inside the California Legislature.”

In order to avoid any conflicts of interest, Klein reportedly never used CHFA bond monies in his own real estate projects.

In September 1973 — the year the CHFA was formed — market interest rates on a 30-year fully amortized mortgages reached 8.82 percent.  By October 1981, the interest rates had reached 18.45 percent after the 1979 Energy Crisis, the Iranian Hostage Crisis, President Jimmy Carter’s continuation of of price controls on gasoline and natural gas and rampant inflation. Offering a tax-exempt rate on a 19 percent mortgage for low-income housing was useless.

But by October 2003, the 30-year mortgage rate had dropped to 4.23 percent, and together with subprime loans, made low-income housing bond financing effectively superfluous.  At one point during the Real Estate Bubble of the mid-2000s, the effective interest rate on low-income mortgages had reached below zero and Fannie Mae was essentially giving away free money.

Subsidized financing for new construction of low-income housing is a contradiction. Affordable low-income housing is typically old, obsolescent, and located far from amenities such as shopping centers and light rail stations. That is what makes it affordable.  But in California, affordable housing has been redefined as a dwelling that is new, with gyms, spas and pools — and which is located in a mixed-use development with an adjacent supermarket and rail transit station.  Redevelopment and bond financing have mostly contributed to low-income housing becoming luxury housing.

Nonetheless, like all bureaucracies that have long ago lost their original missions, the CHFA continued to provide below-market interest rate financing to low income housing developers.  By 2011, the CHFA was staying out of the bond market altogether for fear that buyers would not buy the bonds.   But the agency still had an overhead of more than a quarter billion dollars per year ($255 million).

Stem Cell Institute History

The rationale used by Robert Klein in 2004 to get Prop. 71 approved by voters was ingenious.  Then-President George W. Bush had issued an executive order to ban the use of new embryonic stem cells in medical research funded by the federal government. (Although federal funding for old embryonic stem cell lines was allowed. And private and state-funded research was not affected.)

Much of the California opposition to Bush for the Iraq War was cleverly redirected into repudiating him by voting for stem cell research for miracle cures promised for paralysis, cancer, and heart disease.  But what it actually did was shoot the state budget and the medically needy in the foot.

In 2009, a Little Hoover Commission report scrutinized Klein’s organizational structure and administration of the stem cell institute. In particular, the Commission was critical that the job qualifications Klein wrote for the position of chairman of the board were essentially reflected in his own resume.  The Hoover Commission commented that Klein often overstepped the boundaries between policy setting as chairman and day-to-day administration, which should have been separated.

The Hoover Commission also became worried that the stem cell agency could become “leaderless” in the event of his departure, which is precisely what happened last year when Klein had to step down under pressure from critics.

Reportedly, Klein was accused of arranging for a crony to succeed him in a proverbial backstage deal.  Eventually, Klein was allowed to stay another six months and now an apparent successor has been found, albeit for a whopping $400,000 salary.

Another point of contention by the Hoover Commission was that the membership of the oversight committee of the stem cell financing agency included those who benefitted from agency grants and loans. The Hoover Commission was concerned that the oversight committee was full of “self dealing.”

Today, the major rationales for why government-funded stem cell research was once thought to be needed have unsurprisingly mostly disappeared:

* Medical researchers discovered that stem cells could be harvested from many different types of human cells, thus rendering the use of embryonic stem cells for research unnecessary, vindicating Bush.

* President Bush’s executive order banning federal funding of stem cell research using human embryos was overturned by President Barack Obama in 2009.

* There is no need for a redundant state financing mechanism for stem cell research to private venture funding and grants from the National Institutes of Health.  The private International Stem Cell Corporation is on track to emerge as one of the first profitable stem cell companies, mainly due to vanity skin care products sold to wealthy customers, although breakthrough skin-burn products have also been notable.

* California’s Medi-Cal program has been deeply cut, resulting in the state funding redundant stem cell research while Medi-Cal patients can’t get kidney dialysis and chemotherapy treatments.

Stem cells can’t cure bureaucratic opportunism.  Bureaucracies such as the March of Dimes continue to exist long after the Salk vaccine eliminated polio.  Such is the case with bond financing for low-income housing and stem cell research.

Infrastructure Financing Districts

State Assemblyman Tom Ammiano, D-San Francisco, has recently proposed Assembly Bill 664, which would authorize dropping the long-standing requirement for voter approval of bonds for Infrastructure Financing Districts (IFDs).

Like Robert Klein, Ammiano uses populist propaganda to sell his proposed legislation to the public.  He asks, “Why should the state general fund subsidize the America’s Cup IFD bonds?”

This is a trick question, because IFD bonds aren’t backed by property taxes outside the project area.  Nor do they rob funds from public schools.  IFDs are revenue bonds backed by the collateral of the land and improvements in the infrastructure district and by revenue stream it is anticipated to generate.  However, revenue bonds are more risky than general obligation bonds and could ruin the credit rating of a city or state.

But if history is any guide to the future, the gullible California public will evidently continue to vote for feelgood voter initiatives and legislation that creates autonomous self-dealing and superfluous bureaucracies funded by bonds. Despite protestations that they may have been fooled once but won’t be twice, California voters have already been fooled more than twice and continue to fall for the propaganda of bond hucksters.

By K. LLOYD BILLINGSLEY

The California Institute for Regenerative Medicine (CIRM), the state stem-cell agency, is looking for a new boss. The quest for a new leader, and possibly more public money, has shifted attention from CIRM’s lack of results.

CIRM was created by Proposition 71 in 2004 to fund embryonic stem cell research the Bush administration declined to support. The prime mover of Proposition 71 was Robert Klein II, a wealthy real-estate developer. The promotional campaign featured actors Michael J. Fox and Christopher Reeve and promised miraculous cures for a host of diseases.

CIRM’s own scientists now acknowledge that no CIRM-produced cures have trickled down to California patients.

Unfulfilled Expectations

“The focus on the California stem cell agency centers on whether it has or is fulfilling the promises of the 2004 campaign,” David Jensen, publisher of the California Stem Cell Report, told CalWatchDog.com. “Those expectations on the part of voters were a tad overblown, as often happens during political campaigns. Nonetheless, the voters’ expectations are certainly an important measure in assessing the stem cell agency. At this point, I suspect most voters would not say that their expectations have been fulfilled.”

In a recent article on CIRM governance, John Simpson of Consumer Watchdog’s Stem Cell Project failed to mention the agency’s dearth of results. But other CIRM critics stuck to the theme.

“It goes without saying that it [CIRM] hasn’t found those cures,” wrote Michael Hiltzik of the Los Angeles Times, “though not for want of spending.” CIRM is spending $3 billion in bond funds, “$6 billion if you count the interest,” as Mr. Hiltzik noted.

California’s stem cell agency is practically off limits to oversight from the legislature. It has also become a landing spot for politicians such as former state senator Art Torres, who pulls down a salary of $225,000, which CIRM tripled from the original $75,000. Chairman Robert Klein II, who wrote Prop 71 to give himself that job, did not take a salary until 2008, when he began to draw an annual salary of $150,000.

Now Klein is out, and so is his first choice to replace himself, Canadian medical scientist Alan Bernstein. Controller John Chiang’s first choice to replace Klein was Art Torres. But Chiang now favors former cardiology professor Frank Litvack. Gov. Jerry Brown favors Jonathan Thomas, an investment banker schooled in biology. Thomas would want some $400,000 in salary, while Litvack would reportedly accept $150,000.

Mr. Litvack has also raised the prospect of weaning CIRM off government funds. That was not the view of Klein, who is on record that he would like another bond issue of as much as $5 billion.

New Bond Measure Would Fail

“If CIRM were to go to the ballot today with a $5 billion bond measure to continue its efforts, it would be nearly certain to fail given the state of the California economy and the budget crisis,” said Jensen. “A major change will be necessary to win approval a few years down the road.”

Change could include more transparency, stronger oversight, a wider research focus, and more integration with the rest of California’s medical-scientific establishment. CIRM’s new chairman, yet to be announced at this writing, will have to deal with all that, and the dearth of promised cures and therapies.

“I passionately believe,” Robert Klein told reporters last year, “that there will be some remarkable new therapies that will save lives and mitigate suffering substantially.”

Recent medical-scientific advances include the construction of a new windpipe for a Colombian woman, and the near total restoration of sight to a man whose eyes sustained chemical damage in 1948. CIRM played no role in these remarkable cases, the result of adult stem cell research.

BY WAYNE LUSVARDI

Last month with Silicon Valley elites, President Obama raised a glass of wine to toast the area’s success. He was repairing his self-damaged image with big business.

But a symbolic Sword of Damocles hovered over the meeting.

Apple Computer employs 30,000 workers, but the subcontractors that assemble its computer products employ more than a million workers in China, or about the same size as the entire population of the City of San Jose.

Less conspicuous than the Obama meeting with Silicon Valley high tech elites was the concurrent release of the 2011 Index of Silicon Valley published by the Joint Venture Silicon Valley Network.

Silicon Valley measures itself by a set of metrics that are a blend of the typical Chamber of Commerce rah-rah promotion, Progressive political correctness and collectivistic values:

* Public school average test scores
* Patenting and attraction of venture capital
* Number of people who have health insurance
* Number of obese people
* Number of miles driven per resident (fewer being better)
* Number of carpools
* Percent of students testing proficient in algebra.
* Number of foreign students attracted to nearby university.
* The amount of solar capacity added last year.
* Less waste disposal due to recycling or presumed less consumption.
* More high-density housing proximate to public transit centers

Some of the data from the Index:

* High unemployment (10 percent) is the “new normal” in Silicon Valley.

* Population is declining as high-tech labor and illegal immigrants flee, legal economic migrants looking for entrepreneurial opportunities have dropped 40 percent, Caltrain’s commuter train between San Francisco and Silicon Valley plans to close 16 stations to plug a budget deficit as California continues its plans for a bullet train, and cities are suffering from budget shortfalls, most notably San Jose, which has run 10-years of deficits for a $110 million debt. The County of San Mateo has $2.5 billion in unfunded pension liabilities, reflecting a tax burden of about $30,128 per household.

Solyndra, a San Jose-based solar panel manufacturer that received a $535 million Federal loan from the Obama Administration and $1 billion in private venture capital, switched plans and will be outsourcing manufacturing to China, where there are a reported 100 companies producing solar panels.

If Silicon Valley had shifted to a fleet of natural gas fueled cars and power plants instead of solar energy they could have been poised to take advantage of the emerging cheap energy produced from new “fracking” technologies and kept the jobs at home.

Severin Borenstein of the U.C. Energy Institute found that, even if solar power tries to compete only in the niche market of high-priced peak power, it won’t lower transmission line costs and it will be economically infeasible even after factoring in the reduction in greenhouse gases. It’s as if Silicon Valley is measuring itself on the wrong set of values.

In his new book “Civilization: The West and the Rest,” economic historian Niall Ferguson argues that Western civilization rose to global power on “six identifiable novel complexes of institutions and associated ideas and behaviors: 1) Competition, 2) Science, 3) property rights, 4) medicine, 5) the consumer society, and 6) the work ethic.”

Ferguson calls the above the “six killer apps,” high tech language for cultural applications. Using Ferguson’s six “killer apps” we can understand why Silicon Valley and California has been in a decade of decline that was masked first by the Dot.com bubble then the Housing Bubble that burst in 2008.

Competition

Silicon Valley CEO’s would rather send green tech manufacturing jobs to China than expand mildly polluting conventional natural gas power plants or cars powered with nat-gas that are several times cheaper than solar power. It’s not only that Silicon Valley energy policy is merely uncompetitive. Wind and solar farms don’t even reduce air pollution in urban smog basins along California’s coastline, such as San Jose.

Let’s take another competitive measure of concern to Silicon Valley: medical care. A recent study found that Northern California hospitals charge 56 percent more because they have fewer hospitals than in Southern California. Fewer hospitals means less competition and higher prices.

Even though Obamacare would stifle innovation in medical technology, Silicon Valley political contributions overwhelmingly went to Barack Obama in 2008, especially from Google, Cisco Systems, Hewlett Packard, Oracle and Yahoo corporations.

Such counterproductive energy, environmental, and health care policies in Silicon Valley are irrational in a social culture that ironically prides itself on being a cognitive elite produced by the best universities in the world. While Silicon Valley out-competes the world in the computer industry, it also seems to have an anti-competitive social culture when it comes to government, public schools, health care and bio-medical research.

Science

The image of Silicon Valley is that it’s the world leader in high tech electronics and computer technologies, referring to the high number of silicon chip manufacturers. “Silicon Valley” is a metonym for the high-tech sector of the economy, accounting for one third of the venture capital in the entire United States.   Silicon Valley has the highest concentration of high-tech workers of any metropolitan area in the U.S., at its peak nearly 300 out of every 1,000 private-sector workers.

Despite the above, how does one explain Silicon Valley’s anachronistic embrace of Medieval energy technologies such as solar and wind power? Put a patina of science on anything in Silicon Valley and they will fall for it. Most of the venture capital funding for renewable energy industries has come from wealthy Silicon Valley computer chip magnates that believe their success could be transferred to green energy.

Or take the hysterical concern about minuscule levels of perchlorate, a natural salt in local drinking water supplies from an old Aerojet Manufacturing Plant in San Jose. High concentrations of perchlorate have been found in local groundwater but pose no threat to drinking water supplies.

The potential risk of infinitesimal levels of perchlorate in drinking water that is hypothesized to cause educational deficits in children was once simply remedied by putting iodine in table salt (iodized salt). Now we spend mega-billions of dollars on high-tech treatment plants that will take more than 100 years to remove underground plumes of perchlorate-laced water that is of no measurable health benefit.

With local and state governments broke, can we continue mega-funding of high-tech groundwater cleanups that result in no measureable benefit to health that low-tech measures could do just as well (e.g., iodized salt, fish diet, lower alcohol consumption, health education)? How long can the U.S. remain competitive if it continues to fund environmental health programs based on junk science that are slick covers for corporate welfare for engineering firms and jobs programs for environmentalists?

New information technologies have produced a new economy in Silicon Valley. But they also have resulted in a lot of get-rich-quick-schemes more reminiscent of the speculative schemes of the California Gold Rush. Some of these schemes appear to be legitimate due to the backing of government regulations and subsidies for the well-connected.

Property Rights

The 2011 Silicon Valley Index is concerned about property rights for its cognitive elites (e.g., patents), but not for small business owners that create most of the new jobs in most communities.

“Property rights” in Silicon Valley are defined as they are in the rest of California: a right for elites to exclude others from building under a de facto policy that has been dubbed by the acronym “b.a.n.a.n.a.”: “build absolutely nothing anywhere near anything.” Silicon Valley is one of the most unaffordable areas for housing in the U.S. due to its many layers of land use controls. In the 2011 Silicon Valley Index, policy makers in the valley prefer “high-density rental housing for thee and low density homeownership for me”; and with plenty of open space and green belts funded by statewide water bonds and government-funded non-profit “open space conservancies.”

In the City of San Jose, 25 percent of the salary and fringe benefits of the mayor and city council and 40 city council staff is funded by redevelopment monies. It is no wonder that elites in Silicon Valley and everywhere else in California are strongly resistant to reforming eminent domain laws or eliminating redevelopment to fund public schools, as proposed by Gov. Jerry Brown.

In Silicon Valley, an overpaid government job with lucrative pension benefits is a property right that can’t be taken away or modified, even if it breaks the state budget and cripples the economy. The only Republican City Councilman in San Jose has been sued by public employee unions for attempting to replace a $70,000-a-year telephone receptionist with modern answering services.  The San Jose City Council is apparently bought and paid for by redevelopment interests and unions.

Silicon Valley property rights are strongly stratified. If you’re an elite, you can use eminent domain, downzoning, and environmental lawsuits to take or block anything you oppose. If you are a small family-owned business or homeowner, your property can be taken with “just compensation” typically based on a low-ball appraisal that keeps a small industry of eminent domain lawyers and appraisers in business. Under California case law, public agencies don’t have the obligation to appraise your property for a legally permissable higher and better use over its existing use.

Medicine

While the 2011 Silicon Valley Index is concerned with such politically correct health issues as obesity and how many of its residents have health insurance, it is seemingly unconcerned about how its backing of Proposition 71 for stem cell research funding in 2004 has ended up crowding out funding for California’s Worker’s Compensation and Medi-Cal funds, both of which are broke.

Silicon Valley resident Robert N. Klein is the “godfather” of Prop. 71 for $3 billion in public funding for stem cell research over a 10-year period, paid for with $6 billion in bonds the taxpayers must pay back. Klein is a Northern California low-income housing developer and is head of the California Stem Cell Institute (Center for Regenerative Medicine). Before birthing the Stem Cell Institute, in 1973 Klein had previously persuaded the state legislature to create the California Housing Finance Agency for financing low income housing with tax-exempt bonds..

Klein’s public funding of formerly private-sector ventures signals a shift from democratic capitalism to state capitalism, where government, not markets, picks winners based on political patronage. State capitalism derives from a Leftist “prizes for all” mentality and an egalitarian worldview.

Prop. 71 might be called the “Silicon Valley bio-medical industry full- employment act.” As I have written previously:

California’s proportionately small $300 million per year in state funding for stem cell research under Prop 71 is duplicative of both private venture capital funding and N.I.H. grants and is not crucial for finding near-term treatments or cures for cancer, heart disease or paralysis.

While $300 million per year is only one third of one percent (0.35 percent) of the State’s $86 billion General Fund budget, it is nonetheless a misplaced commitment when State Medi-Cal and Workmen’s Compensation funds are being drastically cut.

For example, the State Legislative Analyst has recommended that funding for visits to physicians and treatment centers could save $196.5 million per year by limiting visits to 10 per year.

Likewise, imposing a $100 per day co-pay on needy patients per hospital in-patient day would generate a $151.2 million saving to the state budget. But do needy patients or their families have $100 per day? This is a fictional budget saving.

We can no longer afford luxury jobs programs for biomedical professionals for hypothetical research which is already amply funded by both the private sector and the National Institutes of Health, while medically needy people require resources for care in California.

The Consumer Society

Consumerism in Silicon Valley does not mean the touting of the consumer society as Niall Ferguson defines it. Rather it means a conservation ethic of not consuming water or energy and not generating more waste or pollution.

One of those online canned college essays entitled “Silicon Valley – Paradise or Plague” perhaps captures the anti-consumerism found in many of Silicon Valley’s academic and government institutions. Almost literally parroting Karl Marx, the online college essay says that everything bad in Silicon Valley has come from the consumer society and calls for shifting to “tribal businesses organized in non-hierarchical, non-wage fashion”

California newspaper columnist Dan Walters calls this form of non-valued added consumerism “voodoo economics.”

Perhaps Silicon Valley is finally reaping what it has sowed with its anti-consumer ethic, as sales taxes generated by consumers have declined sharply, as have revenues for local governments, public schools, and the unemployed and medically needy.

The Work Ethic

It would probably seem odd to most “techies” in Silicon Valley that Niall Ferguson’s book associates the current economic success of the City of Wenzou in China with its 1,400 churches. While it could be said that Saudi Arabia also has thousands of mosques but no capitalist economic success or work ethic, they aren’t voluntary institutions that are unfunded or uncontrolled by government.

California has gravitated to be more like Italy, where the non-profit sector doesn’t play a role in the public sphere. As sociologist Ted Perlmutter writes in his article, “Italy: Why No Voluntary Sector?”:

In Italy, political parties have a firm purchase on all aspects of public life. Parties usurp space that in other advanced industrialized countries is held by bureaucracies and grass roots organizations.

California unions and government money have co-opted most non-profit organizations and voluntary associations. A classic example is The Utility Reform Network (T.U.R.N.), a so-called consumer organization for electricity ratepayers that is wholly funded by the California Public Utilities Commission and is stacked with union and labor activists.

A work ethic cannot grow or be maintained in the union-dominated government and legal culture of California. A work ethic needs a strong, independent “third sector” for it to thrive, as well as support by law and institutions. A desire to work for its own sake is as much religious as economic. However, this would be totally foreign to most secular elites in Silicon Valley.

There is a “third sector” in Silicon Valley, but it is entirely off the radar screen of community elites who mistake government-funded non-profits and union-controlled consumer organizations as voluntary associations. The true voluntary sector can’t be measured, so it must not exist: that seems to be the thinking in Silicon Valley.

Recap

Silicon Valley pretty much flunks Niall Ferguson’s “Six Killer Apps” that have made Western civilization an economic powerhouse. Unlike the Silicon Valley Index, Ferguson’s book has the courage to tell us that California has lost its monopoly on these six cultural forces. If Ferguson is right, California and Silicon Valley are living through the end of their economic ascendency and not just suffering a long recession to be endured until there is some sort of magical recovery.

Such a hoped for magical recovery won’t be brought about by a wine glass toasting at an exclusive dinner party for elites with a so-called charismatic U.S. President who has done everything he can to undo competition, true science, property rights, medicine, the consumer choice society and the American work ethic.

By WAYNE LUSVARDI

On Feb. 9, the $123 million Ray and Dagmar Dolby Regenerative Medicine Building opened on the campus of the University of California, San Francisco to house the Eli and Edy Broad Center of Regeneration Medicine and Stem Cell Research.

About $25 million of this new facility was funded with bond financing from voter-approved Proposition 71, the $3 billion for stem cell research California voters approved in 2004. The total cost to California taxpayers, including interest on the bonds, will be about $6 billion.

The architecture of the new 80,000-square-foot building, comprising almost two acres of internal floor space, is symbolically appropriate. The structure is precariously cantilevered over a steep hillside. From the street below, only the underside of the building can be seen held up by a spoke-like pattern of posts that are tied to a deep concrete footing that extends into bedrock.

The building design invites us to look at what’s underneath the government of funding of stem cell research.

Purported Cure-All

One anonymous online commenter, who seems to make a career of trolling websites as an advocate, portrays stem cell research as a high-tech race for economic development and says that stem cell research will be a cure-all for our economy and human health:

Education budget being slashed? California Institute for Regenerative Medicine (CIRM) will educate plenty of graduate students.

Infrastructure unrepaired? CIRM will bolster the infrastructure around Giants’ stadium (whatever it’s called).

Tuition shooting through the roof? Federal grants are what fuel universities – once CIRM gets a massive head start on ESC (Embryonic Stem Cell) research, it will dominate NIH (National Institute of Health) grants once federal funding is freed up – these grants may get funneled to the UC system.

How about the long-term investment CIRM will provide? We already have 4 human clinical trials using ESCs or fetal SCs. Imagine in 15 years when we have a dozen treatments using stem cells and the businesses will all be in Cal due to CIRM.

While the salaries at the top are certainly bloated, does that mean CIRM should be shut down? Did that 20% go to construct the hanging gardens of CIRM (California Institute for Regenerative Medicine) – or was it spent on functional space?

It just needs to be reformed in a few areas. In a generation we will reap the benefits of CIRM and the nation will be praising California. It’s ineluctable that human ESCs will be used in therapy.

Based on Redevelopment Model

State-funded stem cell research is based on the same model as state-sponsored real-estate redevelopment. One of its key elements is the creation of the psychology of a race for new biotechnology and the elimination of blight.

The psychology of the redevelopment model and state funded stem cell research goes like this: If you don’t build a new mall, or a stem cell research center, some other neighboring city, or state, will build it and other economies will thrive and yours will not. Just as in land redevelopment, the mission of stem cell research is to “eliminate blight.”

Biological blight is defined as “diseases resulting in sudden conspicuous wilting and dying of parts, especially young, growing tissues” caused by “a causative agent” that results in blight (e.g., cancer, heart disease, paralysis).

In land redevelopment, “blight” is defined as “something that impairs growth or impedes progress and prosperity.”

Is it any wonder that Robert Klein, the godfather of Prop 71, is a real estate developer and investor?

Biological and Redevelopment Concepts Merge

With stem cell research, the biological and the real estate concepts are apparently merged. Stem cell “redevelopment” is like a gigantic oncogene, a viral gene that merges with a normal host cell and turns it into a cancer cell.

The point of erecting a separate research facility apparently is to send the message that public-funded stem cell research is now another permanent fixture in California; another bureaucracy with all the incurable pathologies of self-perpetuation. In other words, it is a sociological version of a stem cell resulting in cancerous bureaucratic growth immunized against any of the risks of private venture fund medical research.

Other Uses of the Funds

In the California Stem Cell Research Institute press release for the opening of the new building, no mention was made of how these funds could just have gone for funding stem cell research within the existing scattered university biomedical programs in the state — without having to build a redundant research facility. Neither is there any report of how this building and the stem cell research center may compete with parallel efforts by biomedical venture funds that don’t risk public capital.

The $300 million authorized each year for state funded stem cell research under Prop. 71 totals $3 billion over 10 years. But in the “California Biomedical Industry 2010 Report” by Price-Waterhouse-Coopers, that doesn’t even amount to a half-percent (0.40 percent) of the total $75.9 billion estimated revenues generated by biomedical research in 2008 in California.

Venture capital investments in the U.S. in all categories totaled $28 billion in 2008 and $17.7 billion in 2009. Of that, 50 percent in each year was captured by California, and 13 percent and 16 percent, respectively, was captured by biotechnology in California.  California has consistently captured the largest share of venture capital funding and biomedical funding.

Biomedical venture capital funding in California was $4.3 billion in 2008 and $3.6 billion in 2009, after the collapse of the national financial system. California’s state-funded stem cell research reflected only 7 percent of biomedical venture funding in 2008 and 8.4 percent in 2009.

The Prop. 71 funding is less than 10 percent of the $3.1 billion in National Institutes of Health biomedical grants awarded California in 2008.

Misplaced Luxury Funding

California’s proportionately small $300 million per year in state funding for stem cell research under Prop 71 is duplicative of both private venture capital funding and N.I.H. grants and is not crucial for finding near-term treatments or cures for cancer, heart disease or paralysis.

While $300 million per year is only one third of one percent (0.35 percent) of the State’s $86 billion General Fund budget, it is nonetheless a misplaced commitment when State Medi-Cal and Workmen’s Compensation funds are being drastically cut.

For example, the State Legislative Analyst has recommended that funding for visits to physicians and treatment centers could save $196.5 million per year by limiting visits to 10 per year.

Chemotherapy treatments can possibly be limited to 10 visits per year, as many patients can be given oral chemotherapy to bring home for some treatments in lieu of intravenous injections. But limiting kidney dialysis treatments may be life threatening and only end up with more patients flooding hospital emergency rooms.

Likewise, imposing a $100 per day co-pay on needy patients per hospital in-patient day would generate a $151.2 million saving to the state budget.  But do needy patients or their families have $100 per day? This is a fictional budget saving.

If voters had to choose between 1) funding duplicative stem cell research that may, or may not, find a treatment or a cure to medical maladies 15 or 30 years from now and 2) helping suffering people today, there is no doubt what their choice would be.

But the self-perpetuating California Center for Regenerative Medicine is standing in the way. We can no longer afford luxury jobs programs for biomedical professionals for hypothetical research which is already amply funded by both the private sector and the National Institutes of Health, while medically needy people are in need of resources for care in California.

De-fund 71…

Prop 71 came into being in 2004 during the height of the real estate bubble and now should be de-funded, or the funds diverted elsewhere. Voter approval of a repeal initiative would be needed. Prop 71 only has symbolic emotional value to families of loved ones who have died or are suffering from cancer, heart disease and paralysis. Religious and other advocacy organizations need to spread the slogan: “De-fund 71.”

…Or Divert Funds to Precancer Research

If Californians nonetheless were interested in continuing to use the Prop. 71 funding for state-funded biomedical research, one of the most promising would be to consider Dr. Jules Berman’s intriguing proposal to fund precancer research, as detailed in his book “Precancer: The Beginning and the End of Cancer.”

Berman’s proposal revolves around the accepted concept that “when you eliminate a precancer you are preventing the occurrence of cancer.” Research into diagnosing and treating precancers would have a more probable near-term benefit than funding nebulous stem cell research.  But according to Berman, there is little research into precancers and how to treat them.

And there is little or no incentive for drug companies and private venture capital funds to put money into precancer research, as the return on investment likely would accrue to the patient and the public purse, not the price of their stock.