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So my older daughter--born in California--has an idea

To wit:

I recently listened to a podcast about how JP Morgan ended the Panic of 1907 using both his money and his clout to get banks to take the necessary action. It got me thinking . . . could this be the model for saving California? What if the Silicon Valley gazillionaires went to the CA legislature and paid off its pension liabilities in exchange for the legislature passing serious pension reform?

Here's what I wrote her back:

Pretty darn interesting. But you know me: confronted by a public policy proposal, I have two questions. First, what do the data say?

In particular, how much do the Silicon Valley gazillionaires have and by how much are the California pensions underfunded? I looked at "These are the Bay Area's wealthiest people in 2018" which lists the top ten Silicon Valley billionaires and their net worth. They're worth about $310.4 billion. Applying Pareto's Law as a rough estimate of the billionaire wealth in the Valley--these ten constitute about 80% of the total wealth available--would make the available wealth $388 billion. This recent piece in the LA Times reports that the two biggest Cali funds, CalPERS and CalSTRS, are underfunded by a total of $223 billion. It says if all state and local pension funds in the state are added up, the total would equal about $333 billion.

So your proposal is potentially doable. The billionaires might even agree to it. The wealthiest on the list is Zuckerberg and he has stated he will give away 99% of his wealth before he dies.

But the second question is what are the public-choice-type consequences that we can expect? Here, we have some serious problems I think. (I'll leave aside how the billionaires write a contract with the legislature that binds them not to simply spend crazily like before. While the billionaires no doubt have some really good lawyers, as the recent experience of Congress's attempts to control the budget suggest, really motivated politicians are more clever and more devious than even the best lawyers.) After proposing to fix the pensions, I'd predict that nearly everyone in California would think: gee, that was easy. Now, let's fix wages. How about funding an increase in the minimum wage to $15/hour? $25/hour? Or funding an end to poverty in California? Wait, why not do that before fixing the pensions?? I'd have to check but I assume that fixing the pensions would benefit mostly male, white, middle- and upper-middle income folks. Shouldn't the billionaires help the poor and minorities first? They're not racist are they? And what about sufficient funding to cut class sizes in the public schools in half? (Oops. They already tried something like that and it was a failure. The linked piece doesn't even mention schools holding classes in closets to "reduce" class size. Never mind.) O.K, what about not one but five $70+ billion high-speed rail lines? Etc. Etc. Etc. ad infinitum.

I've written a couple of times on my blog that government finds it very difficult to even give away money effectively. (Here's yet another recent example.) This would be true again, in spades.