Things are not always what they seem on the surface.  For example, take the recent effort by California Republicans to turn part of CalPERS into a 401(k)-style plan.
 The Republicans’ stated reasons are faith in the stock market
and the ability of individuals to invest.  Deeper, it does some
other, very different, things.  Here are three, off the top of my head:

[more on the flip]

1.  Reducing CalPERS’ holdings reduces CalPERS’ ability to act as
an active investor in American corporations.  CalPERS has around $235 billion under investment [must download PDF ‘Investment Facts’]  and demands good governance
from the companies in which it invests.  By contrast, imagine the
collective action required for thousands of California State employees
to require good governance from the companies in which they invest.
 Is it any wonder that big-corporation financed Republicans want to
reduce CalPERS’ influence?

2.  It’s a swipe at the California State employees’ unions, just
like Proposition 75 was.  It’s intended to reduce their security,
increase their risk, make them more fearful and pliable.  That’s
the effect of increasing risk on individuals, and is one of the reasons
that unions are important.

3.  It enriches the various investment management entities,
another important Republican constituency.  According to the
latest financial statements from CalPERS, their administrative overhead
in fiscal 2005 was $208 million on assets of over $235 billion,
for a management burden of 0.09%.  CalPERS’ return on investment
in fiscal 2005 was 12.3%.  By way of comparison, the management
burden on an S&P 500 tracking stock with zero active management is
likely to be twice that (though that’s still fairly low) and the return
for the S&P 500 over the same period was just over 8.1%.   And
do we really have to get into the performance record of most managed
funds?

The underlying dynamics here are almost exactly the same as they were for the failed Social Security privatization push at the national level. And the outcome would be just as likely to be bad for ordinary working people.

I like the way Phil
Angelides is thinking:

Vowing to be “pro-business and pro-environment,”
Democratic
gubernatorial hopeful Phil Angelides unveiled a “Clean California” plan
Thursday that seeks to cut the state’s oil consumption by 25 percent
over 10 years.
…
Angelides said that if he is elected governor, he will introduce
legislation to mandate all new vehicles sold in the state be flexible
fuel cars, capable of running on any mix of gasoline and bio-fuels,
such as ethanol.

He said he would also require major oil companies to supply
bio-fuels
at filling stations to match the number of flexible fuel vehicles on
the road.

In addition, Angelides said he would require state and local
governments to purchase vehicles that use alternative fuels, or to buy
efficient vehicles, such as hybrids, when replacing or expanding their
fleets.

Angelides also said he would:

* Seek to shorten commutes and pollution through
smart-growth plans
that place housing near work and transit. He said he would use state
grants, loans and bonds to rebuild and improve neighborhoods in hopes
of avoiding more sprawl. And he would urge the adoption of laws
requiring regional and local general plans that limit sprawl.

* Propose changing sales tax collections to discourage the
practice of
approving large shopping malls and other tax-producing developments to
help cities and towns pay their bills. Angelides said he would seek to
collect and share sales taxes regionally to eliminate competition
between adjoining cities for development and tax revenues.

* Increase partnerships and investments to encourage the
creation of
clean fuels and technology. He said he would provide incentives to
encourage fuel-efficient choices by business and consumers.

California is a huge market for any business, including the
automotive industry.  They can’t afford to ignore the
California market, so changes in the kinds of vehicles they can sell in
California will also change the vehicles they sell throughout the rest
of the United States.

A statewide emphasis on smart development and public-private
development partnerships would be great, and the change in the tax
distribution model is genius.  One of the perverse outcomes of
Proposition 13 is that every locality wants businesses because they
generate tax revenue for the local governments.  Residential
development, by contrast, is a dead-weight loss — under Proposition
13, it’s almost impossible to pay for the services (schools, police,
fire, roads, water, etc.) that residential development needs.

Some market fundamentalists will protest the state’s intervention in the market. They are of course missing two important issues:

1. The state has already intervened in the market by building roads with tax dollars and encouraging sprawl with its development policies. There’s no inherent reason that further policymaking is inappropriate.

2. Sometimes the market is stupid. In particular, the market is impatient, and wants to externalize as many costs as possible. In the case of energy, it’s not obvious that the market will respond to the long-term needs of the American people, as long as the costs of supplying the market (like the military, pollution, and carbon dioxide) can be externalized to the population at large.