For the first time, bipartisan support is growing for the concept of creating a sovereign wealth fund in the United States, with notable advocacy coming from both President Joe Biden's administration and former President Donald Trump. The idea was formally put on the table during Trump's recent speech at the New York Economic Club, where he advocated for such a fund to support "great national endeavors," pointing toward investments aimed at bolstering infrastructure, technology, and overall economic initiatives.
The prospect of the U.S. establishing its very own sovereign wealth fund has been brewing for several months. Reports indicate Biden's close advisors, including National Security Advisor Jake Sullivan and his deputy Daleep Singh, have been working quietly on plans to set up what could be referred to as America's sovereign fund. According to various sources, this initiative aims to give the U.S. the financial muscle to tackle pressing issues, particularly those linked to national security and competition with countries like China.
One of the main attractions of the sovereign wealth fund is the potential funding sources it could tap. While specific details are still hazy, the fund is speculated to support initiatives involving technology, energy projects, and supply chain improvements aimed at strengthening the nation's economic infrastructure. The overarching hope is to generate returns on these investments to help offset the national debt, which has been projected to reach a staggering $28.2 trillion by the end of fiscal 2024.
Historically, sovereign wealth funds are particularly common among countries with significant wealth derived from natural resources, like Saudi Arabia and Norway. For example, Norway's Government Pension Fund Global is currently the largest sovereign wealth fund, boasting more than $1.6 trillion. Last year alone, it made $213 billion profit thanks to smart investments across various sectors, including tech stocks. Similarly, Saudi Arabia’s Public Investment Fund reported earnings of nearly $37 billion this past year, diversifying its investments across prominent global entities, including LIV Golf and Uber.
Interestingly, the U.S. has previously deliberated similar ideas. Discussions have unfolded around setting up funds aimed at financing Social Security through bipartisan dialogue spearheaded by Senators such as Angus King and Bill Cassidy. This type of fund, they argued, could offer low-interest borrowing capabilities, making it easier to invest domestically and even internationally.
A push from leaders on both sides of the aisle suggests a growing recognition of the economic challenges facing the United States—especially as lawmakers express concerns about the increasing influence of China on global markets. Proponents of the sovereign wealth fund argue it could act as leverage against this competition, potentially allowing the U.S. to engage more deeply with innovative technologies and industries.
Yet, the notion has its share of skepticism. Billionaire entrepreneur Mark Cuban recently addressed the proposed wealth fund as "stupid." He highlighted the impracticality of launching such a program amid the nation's substantial deficit, slated to exceed $1.9 trillion soon. Cuban stressed, "If the government had a surplus, maybe. But with a deficit, it makes no sense at all," urging caution about establishing long-term investment plans without first stabilizing the federal budget.
Adding to the complexity of this situation is the federal deficit projection for the next several years, which could lead to additional deficits lasting until at least 2034. Given these tight financial constraints, establishing and funding the proposed sovereign wealth fund could prove to be quite challenging. Biden's team is reportedly still exploring possible funding mechanisms and strategies to effectively deploy the fund if it materializes.
Despite various opinions on the matter, the sheer volume of ideas surrounding this initiative continues to excite many lawmakers. They contend the fund could potentially expedite economic recovery efforts, contribute to funding national security endeavors, and provide financial resources to sectors defined by high barriers to entry.
Should the Biden administration find immediate support for the sovereign wealth fund, it will likely reshape economic conversations leading up to the 2024 presidential election. The idea of pooling national wealth not only speaks to current concerns but influences larger discussions about fiscal responsibility and economic strategy moving forward. If successful, the conversation around the American sovereign wealth fund could usher in new debates on how best to manage national resources and financial markets, encouraging innovative thinking for future prosperity.
