Bipartisan Interest in a U.S. Sovereign Wealth Fund: Trump and Biden’s Common Ground

The Concept of a U.S. Sovereign Wealth Fund: A Bipartisan Discussion

Former President Donald J. Trump has proposed the creation of a sovereign wealth fund, asserting that such a fund could generate substantial profits that could contribute to reducing the national debt. This idea, while somewhat surprising given the current political climate, highlights a rare point of consensus between Trump and the Biden-Harris administration.

A White House official indicated that a potential fund under Biden’s leadership would emphasize critical areas such as supply chain resilience, technological superiority, and energy security. These priorities reflect a growing awareness of the need for strategic investments to bolster the nation’s economic stability.

Sovereign wealth funds (SWFs) have gained popularity in various regions, particularly in Asia and the Middle East. Countries like China and Saudi Arabia utilize these funds to channel budget surpluses into diverse investments, thus extending their financial clout globally. Although several individual states in the U.S. manage their own wealth funds, the federal government has yet to establish a national SWF despite operating under significant budget deficits.

During a recent speech at the Economic Club of New York, Trump articulated his vision for an American sovereign wealth fund, suggesting it could be leveraged to finance “great national endeavors for the benefit of all the American people.” His comments sparked interest, and shortly thereafter, the White House revealed that senior officials had been exploring the idea of a sovereign wealth fund for several months, with plans for a proposal that could be presented to President Biden and his cabinet.

Despite the newfound bipartisan interest in establishing a national sovereign wealth fund, the path forward is fraught with challenges. Any proposal would require the approval of Congress, where lawmakers may express skepticism about endorsing a fund that could effectively bypass their authority over federal spending. Additionally, the fundamental question remains: how can a nation that consistently runs budget deficits sustainably fund such an investment vehicle?

Mark Sobel, a former Treasury official and the current U.S. chairman of the Official Monetary and Financial Institutions Forum, cautioned that creating a U.S. sovereign wealth fund would involve complex technical and conceptual challenges. He stated, “Establishing a U.S. S.W.F. would raise highly complex technical and conceptual questions and on its face would appear to be a dubious value proposition for America. None of the tough questions has been answered so far.”