During a recent
public discussion about expected investment returns, the Chief
Investment Officer of a California public pension fund was quoted as
saying that "I would argue, and I have, with people who said it’s going
to be 6 percent or lower that they are basically saying the United
States is going to go in the drain in the next 100 years. I’m not
willing to go there."

By all accounts this CIO is a very smart fellow.  However, in making
that statement he’s up against some tough math because, for the 100
years of the 20th century – not exactly "in the drain" for the USA – an
investor with assets allocated like the typical pension fund would have
earned (you guessed it) around 6 percent.  

Somehow a perfectly good return in the 20th century has become a poor
expected return for the 21st century. How did that happen? As Warren
Buffett explained in a remarkably prescient article
in 1999, sometimes people extrapolate from statistically insignificant
periods to draw invalid inferences about future long-term performance.
For example, many people today came of age during the 17-year
investment boom from 1982 – 1999, but as Buffett pointed out, "The
increase in equity values [from 1982 to 1999] beats anything you can
find in history."

In the 1932 movie, Horse Feathers, Groucho Marx plays Professor Adams Wagstaff, the new president of Huxley College. Professor Wagstaff decides to recruit  two older students, who he mistakenly believes to be professional football players, to enroll in Huxley and help Huxley defeat its rival Darwin. Chico (Baravelli, the iceman) and Harpo (Pinky, the dogcatcher) enroll at Darwin, where they, with Groucho, Zeppo and Connie Bailey, the "college widow",  predictably create chaos at the college.

Cross posted on NewGeography.com

Lately, Texas has been noted frequently for its superior economic
performance. The most recent example is the CNBC ratings, which
designated the Lone Star state as the top state for business

in the nation. Moreover, Texas performed far better than its principal
competitor states during the Great Recession as is indicated in our How Texas Averted the Great Recession report, authored for Houstonians for Responsible Growth.

Would anybody be surprised to see a state budget deal fashioned on an unlikely possibility?

Let me explain. The budget is a couple of weeks late with no outward sign of completion. The governor and Republicans have insisted on a cuts only budget. The Democrats insist on tax increases along with some borrowing and moving around funds.

Both the Assembly and Senate Democrats have supported an oil severance tax that is estimated to bring in $1-billion. However, this tax plan has no support from the Republicans and probably little from the voters since they defeated a similar proposal at the polls a few years ago.

Cross posted on CalWatchdog.com

On July 12, a coalition of school activist groups sued the state of California,
alleging low state funding and low-performance in the state’s public
schools. It cited the California Constitution’s guarantee of a decent
education for every student. Article XVI, Section 8(a)
requires the state to "first . . . set apart the moneys to be applied
by the state for support of the public school system and public
institutions of higher education."

And the coalition cited
Gov. Arnold Schwarzenegger’s Committee on Education Excellence, which
found the state’s schools "not equitable; … not efficient, and … not
sufficient for students who face the greatest challenges." The suit
demands that the state establish a new, equitable financial system.

The suit will be heard in the Superior Court of the City and County of Alameda. The lead plaintiff is the Campaign for Quality Education. Others plaintiffs include the Alliance of Californians for Community Empowerment, Californians for Justice and the San Francisco Organizing Project.

Cross posted at NewGeography.com

Financial reform might irk Wall Street, but the president’s real
problem is with small businesses-the engine of any serious recovery.
Joel Kotkin on what he could have done differently.

The stock market, with some fits and starts, has surged since he’s
taken office. Wall Street grandees and the big banks have enjoyed
record profits. He’s pushed through a namby-pamby reform bill-which
even it’s authors acknowledge is "not perfect"-that is more a threat to
Main Street than the mega-banks. And yet why is Barack Obama losing the
business community, even among those who bankrolled his campaign?

Obama’s big problems with business did not start, and are not
deepest, among the corporate elite. Instead, the driver here has been
what you might call a bottom-up opposition. The business move against
Obama started not in the corporate suites, but among smaller
businesses. In the media, this opposition has been linked to Tea
Parties, led by people who in any case would have opposed any
Democratic administration. But the phenomenon is much broader than that.

In his column this morning, Los Angeles Times columnist George Skelton offers up a deal to resolve the budget crisis. Skelton says the legislature should give Governor Arnold Schwarzenegger the reforms he demands for public pensions and budget in exchange for the governor’s support for Proposition 25, which would lower the two-thirds vote to majority to pass a budget.

Don’t take the bait, Governor.

I say this as someone who has been quoted by Skelton in the past as seeing a way to a majority vote for the budget. However, Proposition 25 is not it.

I have argued for what I called a “Back to the Future” budget vote compromise. Between 1933 and 1962, California allowed for a majority vote budget if the yearly budget increase did not exceed five percent. A budget that leaped up over five percent required a two-thirds vote.

I spend a lot of time comparing California’s tax and regulatory climate with other states. The reason is simple —- people are reluctant to leave a country (especially the U.S.), but they will leave a state. And so will businesses.

The news is not good. Consider California has the:

— Third-worst state income tax in the nation.

— Highest state sales tax rate in the nation.

— Highest corporate income tax rate west of the Mississippi (our economic competitors) except for Alaska

— Fourth-highest capital gains tax.

Cross-posted at RonKayeLA.com.

It was beautiful — the moment of truth when we pushed the button and launched the Clean Sweep campaign to bring all of Los Angeles together to change the political culture, empower every segment of the community and elect better people for a greater city.

Some 200 people gathered Saturday in the heat at the Mayflower Club in North Hollywood to rally behind creating an alternative to failure at City Hall and apathy and defeatism among voters.

A lot of hard work lies ahead that will take the efforts of thousands of people but the enthusiasm Saturday among people who represent political views of the left, right and center, people came from all parts of the city, showed there is a base of committed passionate support for the broad agenda of Clean Sweep.